I met with a former client last week to get caught up on life and his work in innovation. He leads the innovation and product development program office for a large, global life sciences corporation. The primary responsibilities of the group are management and execution of the portfolio management and program review processes, resource allocation, and innovation performance reporting.
Yesterday, I spoke at Planview’s Horizons 2014 Annual Customer Conference. The objective of the event is to inspire leaders in portfolio management. Planview sells a great set of software tools that enable a company to manage its pipeline of innovation initiatives and make investment allocation decisions.
As an industry, high tech spent an average of 8.3% of revenue on R&D over the four year period from 2008 - 2011. This compares to a spend rate of only 4.8% in a diversified set of other product-driven industries. Meaning that on average high tech spent 73% more on R&D as a percent of revenue than other industries.
In the thirty year period from 1981 to 2011 the share of US R&D investment made by companies with more than 25,000 employees fell by more than half. Yes, the total investment in R&D rose substantially during this period, as did the number of companies with this many employees, but all of the growth in investment came from smaller enterprises. Startups and companies with fewer than 1,000 employees grew their share by almost six fold.
The primary rationale for naming a Chief Innovation Officer is to improve business results from innovation. The main obstacle to improved results is the need to orchestrate activity across business functions. In large organizations, innovation is naturally difficult because it is inherently cross-functional.