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Growth Team Membership™:2010 Priorities

R&D/Innovation and Product Development Americas Survey Results

May 2010

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Table of Contents

Page

Section 1: Survey Purpose and Respondents 4

Section 2: External Factors Shaping R&D/Innovation and Product Development Strategies 5

Section 2.1: By Business Model 8

Section 3: Key R&D/Innovation and Product Development Challenges 9


Section 4: R&D/Innovation and Product Development Effectiveness and Expenditures 14


Section 5: Respondent Demographics 25

The content of these pages are © 2010 Frost & Sullivan. All rights reserved.


Survey Purpose and Respondents

There were 94 survey

respondents

Research ObjectiveTo understand the most pressing external and internal challenges shaping R&D/innovation and product development executives’ 2010 planning.

MethodologyWeb-based survey platform

Survey PopulationTarget respondents were Manager level and above R&D/innovation and product development executives from companies throughout North and Latin America.


External Factors Shaping R&D/Innovation and Product Development Strategies


Top Three External Factors

36%

20%

17%

0% 25% 50%

Need for product/service innovation and capabilities

Tapping into global market opportunities

Intensifying competition

N = 84

KEY TAKEAWAY: Innovation strategies are heavily influenced by the need to find new opportunities—via markets or products.

Survey Question: Please indicate the three business environment factors that have the most impact on your 2010 R&D/innovation and product development strategies.


External Factors Impact on R&D/Innovation and Product Development

72% 69%77%

0%

50%

100%

Need for product/service innovation and capabilities

Tapping into global market opportunities

Intensifying competition

N = 84

Survey Question: Please indicate the impact that each of the following forces have on your 2010 R&D/innovation and product development strategies.

KEY TAKEAWAY: For 2010, two of the top three external factors impacting strategies are seen as overwhelmingly positive.

Negative ImpactPositive Impact


B-to-B B-to-C Hybrid

Need for product/service innovation and capabilities (31%)



Tapping into global market opportunities (24%)

Tapping into global market opportunities (25%)

Need for green/sustainability initiatives (16%)

Intensifying competition (19%)

Need for green/sustainability initiatives (25%)

Changes in customer /government regulation (16%)

External Factor 1

KEY TAKEAWAY: There is a considerable overlap in external challenges regardless of business model.

Top Three External Factors (By Business Model)

N = 84

External Factor 2

External Factor 3


Key R&D/Innovation and Product Development Challenges


Key R&D/Innovation and Product Development Challenges Snapshot

All CompaniesTop three challenges:

Identifying and developing breakthrough innovation ideas

Allocating portfolio spend across short-, medium-, and long-term horizon projects

Embedding the voice-of-the customer in innovation processes

B-to-B CompaniesTop three challenges:


Creating and implementing metrics to measure innovation portfolios’ performance

Finding suitable external partners with complementary technologies

B-to-C CompaniesTop three challenges:


Managing an open innovation process effectively

Allocating portfolio spend across short-, medium-, and long-term horizon projects

1

2

3

1

2

3

1

2

3


Top Five Key R&D/Innovation and Product Development Challenges

Challenge 1 Identifying and developing breakthrough innovation ideas (26%)

Challenge 2 Allocating portfolio spend across short-, medium-, and long-term horizon projects (10%)

Challenge 3 Embedding the voice-of-the customer in innovation processes (12%)

N = 69

Survey Question: Please indicate the top five challenges shaping your R&D/Innovation and Product Development decision-making in 2010.

KEY TAKEAWAY: Respondents’ concerns range from identifying breakthrough innovations to maximizing the value of Intellectual Property.

Challenge 4 Creating and implementing metrics to measure innovation portfolios’ performance (9%)

Challenge 5 Maximizing the value of Intellectual Property (commercializing, protecting, licensing and partnering) (11%)


Root Cause of Top Five R&D/Innovation and Product Development Challenges

Process61%

Process57% Process

50%

Process66%

Process67%

Staff39% Staff

43% Staff50%

Staff17%

Staff33%

0%

50%

100%

N = 69

Survey Question: For the top five challenges you selected above, please indicate whether the root cause of the challenge is staff, technology, or process.

KEY TAKEAWAY: Process or Staff are the primary root cause of R&D/Innovation and Product Development’s top challenges.

Systems Technology

17%

Identifying and developing

breakthrough innovation ideas

Maximizing the value of

Intellectual Property

(commercializing, protecting,

licensing, and partnering

Allocating portfolio spend across short-, medium-, and long-

term horizon projects

Embedding the voice-of-the customer in innovation processes

Creating and implementing

metrics to measure innovation portfolios

performance


B-to-B B-to-C HybridIdentifying and developing breakthrough innovation ideas (27%)

Identifying and developing breakthrough innovation ideas (39%)

Identifying and developing breakthrough innovation ideas (22%)

Creating and implementing metrics to measure innovation portfolios performance (15%)

Managing an open innovation process effectively (23%) Managing an open innovation

process effectively (18%)

Finding suitable external partners with complementary technologies (15%)

Allocating portfolio spend across short-, medium-, and long-term horizon projects (16%)

Finding viable new applications for existing products/capabilities (25%)

Finding viable new applications for existing products/capabilities (12%)

Creating and implementing metrics to measure innovation portfolios performance (15%)

Finding suitable external partners with complementary technologies (19%)


Maximizing the value of Intellectual Property (commercializing, protecting, licensing and partnering) (23%)


Challenge 1

KEY TAKEAWAY: Regardless of business model, respondents’ primary challenge centers on identifying and developing breakthrough innovation ideas.

Top Three R&D/Innovation and Product Development Challenges (By Business Model)

N = 69

Challenge 2

Challenge 3

Challenge 4

Challenge 5


R&D/Innovation and Product Development Effectiveness and Expenditures


R&D/Innovation and Product Development Expenditures and Effectiveness SnapshotAll Companies

Rank their R&D/innovation and product development effectiveness as “above average”

Allocate approximately 1% of their annual revenue to R&D/innovation and product development budget

Expect to increase their budget for the development of short-term horizon or incremental projects

Expect their staffing levels to stay the same in 2010

Expect their budgets to increase moderately in 2010

B-to-B CompaniesRank their R&D/innovation and product development effectiveness as “above average”

Allocate approximately 1% of their annual revenue to R&D/innovation and product development budget

Expect to increase their budget for the development of short-term horizon or incremental projects



B-to-C CompaniesRank their R&D/innovation and product development effectiveness as “above average”

Allocate approximately 3% to 5%of their annual revenue to R&D/innovation and product development budget

Expect to increase their budget for the development of long-term and medium-term horizon projects




Below Average17%

Average30%

Above Average45%

Exceptional8%

Below Average12%

Average38%

Above Average38%

Exceptional12%

Below Average25%

Average27%

Above Average39%

Exceptional9%

All Companies B-to-B Companies

Hybrid Companies

R&D/Innovation and Product Development’s View of Its Effectiveness (By Business Model)

N = 64

Survey Question: Please assess the overall effectiveness of your R&D/innovation and product development function compared to those in other firmswithin your industry.

KEY TAKEAWAY: Regardless of business model, executives are likely to rank their function’s effectiveness as “Above Average.”

B-to-C CompaniesAverage

9%

Above Average91%


23%

13%

7%

3%

13%

3% 3%

10%

25%

20%

30%

20%

30%31%

15%

8%

46%

20%15%

11%6%

13%

2%4%

2% 2%

9%16%

0%

25%

50%

1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% or more

B-to-B B-to-C Hybrid All Companies

2009 R&D/Innovation and Product Development Budgets(By Business Model)

N = 55

Survey Question: Please provide your 2009 total R&D/innovation and product development budget as a percentage of total company revenue.

KEY TAKEAWAY: B-to-C companies are more likely to allocate over 1% of their annual revenue to their R&D/innovation and product development budget than companies from other business models.

The red percentages are for all respondents.

Percentage of Total Company Revenue


2009 vs. 2010 R&D/Innovation and Product Development Project Pipeline (All Companies)

18%8% 8% 10% 9%

27%

32%23% 22% 27%

37%37%

40%48% 42%

16%20%

17%

12% 19%

2% 3%12% 8% 3%

0%

50%

100%

N = 59

Survey Question: In comparison to 2009, your 2010 R&D/innovation and product development budget for each of the following project categories will:

KEY TAKEAWAY: Companies are allocating more resources to short-term innovation projects in 2010.

Decrease Substantially

Decrease Moderately

Increase Moderately

Increase Substantially

Stay the Same

Short-term horizon incremental technology innovation

projects: adoption within 2 years

Incremental improvement

projects

Medium-term horizon incremental

technology innovation projects:

adoption within 2 to 4 years

Long-term horizon technology innovation

projects: adoption in 4 to 10+ years

Disruptive technologies


2009 vs. 2010 R&D/Innovation and Product Development Project Pipeline (By Business Model: B-to-B Companies)

15%9%

3% 6% 9%

33%

24%

12%

25%31%

37%

37%

49%

44%

41%

15%

24%

18%

16%13%

6%18%

9% 6%

0%

50%

100%

N = 36


KEY TAKEAWAY: B-to-B companies are less likely to increase budget allocations to long-term innovation projects.


Decrease Moderately

Increase Moderately


Stay the Same




projects








2009 vs. 2010 R&D/Innovation and Product Development Project Pipeline (By Business Model: B-to-C Companies)

30%

10%20%

30%

50%40% 20%

20%

60%

30% 30%40%

40%

10% 10%

40%

10% 10%

0%

50%

100%

N = 10


KEY TAKEAWAY: B-to-C companies are increasing their spend on medium-term innovation project in 2010.


Decrease Moderately

Increase ModeratelyIncrease Substantially

Stay the Same




projects








2009 vs. 2010 R&D/Innovation and Product Development Project Pipeline (By Business Model: Hybrid Companies)

15% 15%8% 8%

31%

46%

46%

23%31%

31%

54%31%

69% 53%

15%

8% 8%8%

0%

50%

100%

N = 13


KEY TAKEAWAY: The majority of hybrid companies are increasing their budget for long-term innovation projects.

Decrease SubstantiallyDecrease Moderately

Increase Moderately


Stay the Same




projects









9%

Increase Moderately

31%

Stay the Same40%

Decrease Moderately

18%


2%


8%

Increase Moderately

39%

Stay the Same46%

Decrease Moderately

7%


9%

Increase Moderately

34%Stay the Same41%

Decrease Moderately

13%


3%

2010 vs. 2009 Staffing Plans (By Business Model)

N = 59

Survey Question: In comparison to 2009, your 2010 R&D/innovation and product development staff will:

KEY TAKEAWAY: Staffing levels will largely remain unchanged from 2009.


Hybrid CompaniesIncrease

Moderately20%

Stay the Same50%

Decrease Moderately

30%

B-to-C Companies



7%

Increase Moderately

30%

Stay the Same41%

Decrease Moderately

17%


5%


7%

Increase Moderately

39%Stay the Same

39%

Decrease Moderately

8%


7%


10%

Increase Moderately

30%Stay the Same

42%

Decrease Moderately

15%


3%


Hybrid Companies

2010 vs. 2009 Budgets (By Business Model)

N = 60

Survey Question: In comparison to 2009, your 2010 R&D/innovation and product development budget will:

KEY TAKEAWAY: The majority of respondents’ 2010 budgets will stay the same or increase.

Increase Moderately

20%

Stay the Same60%

Decrease Moderately

20%

B-to-C Companies



21%

Increase Moderately

52%

Stay the Same24%

Decrease Moderately

3%


10%

Increase Moderately

70%

Stay the Same20%


19%

Increase Moderately

58%

Stay the Same20%

Decrease Moderately

3%


25%

Increase Moderately

67%

Decrease Moderately

8%


B-to-C Companies

Anticipated Company Performance in 2010 (By Business Model)

N = 59

Survey Question: In comparison to 2009, your company’s performance by the end of 2010 will:

KEY TAKEAWAY: The majority of respondents are optimistic, expecting a moderate increase in their company’s 2010 performance.

Hybrid Companies


Respondent Demographics


18% 21%10%

30%18%

0%

30%

60%

Below $100 million $100 to $499.99 million

$500 million to $999.99 million

$1 billion to $11 billion

More than $11 billion

Demographics

Private35%

Venture Capital

4%

Public61%

N = 87

Over half of the respondents work in a public company.

Survey Question: Please indicate the type of enterprise best represents your organization.

Respondents tended to be from public, B-to-B companies whose 2009 revenue ranged from $1 to $11 billion.

Enterprise Type Business Model

Company Revenue

N = 89

N = 85

B-to-B Company

52%Hybrid

Company28%

B-to-C Company

20%


Demographics: Top Five Participating Industries

23%

23%

16%

16%

14%

0% 15% 30%

Healthcare and Life Sciences

Chemicals, Materials, and Food

Information and Communication Technologies

Automotive and Transportation

Electronics and Security

N = 93

Survey Question: Please indicate which of these Industry categories best describes you organization (please indicate all that apply).


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