Does R&D Spending Correlate to Innovation?
I came across some very insightful data flipping through Evangelos Simoudis’ slide deck on Corporate Innovation.
If you look at the 2013 data, in the auto sector for example, Tesla invested $0.3B in R&D compared to incumbents Volkswagen ($11.4B), Toyota ($9.8B), Honda ($6.8B).
Evangelos concludes that the traditional approach of R&D-driven innovation is no longer sufficient. Which is absolutely right. No one would argue that the incumbent auto manufacturers for example are more innovative than Tesla, even though they have significantly outspent Tesla in R&D.
Incumbents typically spend much of their R&D budgets on sustaining innovation, not disruptive innovation. Sustaining innovation advances the current technology (cheaper, faster, better) but does not fundamentally reinvent or reimagine it. That is the role of disruptive innovation. The reason incumbents have a hard time with disruptive innovation is because disrupting themselves will cannibalize their existing revenue generating business and new ideas that negatively impact existing P&Ls lose momentum in large organizations.
At Venture Scanner, we believe the insights for disruptive innovation reside outside the four walls of incumbents and in order to create cultures of innovation, knowledge workers across these corporations have to keep abreast of trends and insights from the startups in their sector. Having a corporate DNA where everyone is encouraged to keep a pulse on where their sector is heading will create an environment where teams will alter plans in concert with the early stage innovation forces in their sector. This can’t be assigned to one group like a corporate venture group or a corporate innovation group or a new business development group. It has to be ingrained into the daily roles of all knowledge workers. The pace of innovation in all sectors requires that all knowledge workers be dialed in on innovation trends and companies exhibiting them in their respective sectors. This will enable corporations to take action well ahead of a rising disruptive wave.