Sabic among top R&D spenders
Dubai, October 31, 2012
Saudi Basic Industries Corporation (Sabic) is the only company from the GCC region to make it to the list of world’s top innovation spenders since 2008, ranking 416th out of the 1,000-strong list, said a report.
This is a major improvement from last year’s 471st position for Sabic which spent about $219 million in research and development (R&D), up 26 per cent compared to $174 million in 2010, according to the 2012 Global Innovation 1000 study by global management consulting firm Booz and Co.
Overall, the chemical and energy companies in the "Global Innovation 1000" list maintained their R&D spend during the course of the year.
Globally, the total R&D investment among the world’s top innovators reached an all-time high of $603 billion during the year, up from $550 billion in 2010, said the report.
This is an increase of 9.6 per cent over 2010 and is the second consecutive year of growth. This rebound comes after spending dropped 3.5 per cent between 2008 and 2009 during the height of the recession, the study added.
After growing almost 10 per cent for the second consecutive year, the total R&D investment continues to grow robustly, Booz said in its annual analysis of corporate R&D spending.
The study, which examined the 1,000 public companies that spent the most on research and development in 2011, said the R&D spending had returned to the pre-recession levels.
“Sabic is the only company headquartered in the GCC to make it into the Global Innovation 1000 list since 2008” said Chadi Moujaes, the partner with Booz & Company.
“This year, Sabic ranked 416th out of the 1,000-strong list of innovative companies and is one of the world's top spenders in R&D, outperforming many of its competitors. Moreover, the company’s ranking this year is an improvement over last year’s 471 position," he added.
According to Moujaes, Sabic’s R&D intensity remained at 0.43 per cent for a second consecutive year.
Booz & Company also surveyed nearly 700 innovation leaders from companies worldwide to determine which companies those leaders see as the most innovative companies in the world.Apple, Google, and 3M topped the list for the third consecutive year.
The most innovative companies are seldom the biggest spenders, the study confirms. When compared to the 10 companies that spent the most on R&D, the Top 10 most innovative companies outperformed across key financial metrics, including revenue growth, market cap growth, and profit as a percentage of revenue.
“Consistent with our study findings from previous years, there is no long-term correlation between the amount spent on innovation and an organization’s overall financial success,”said Barry Jaruzelski, senior partner at Booz & Company and global leader of the Engineered Products & Services practice.
He said, “what really matters is not the amount spent, but how those R&D funds are invested in talent, process, and tools.”
“R&D spending does not ensure increased financial gains, nor does it guarantee innovation success,” added John Loehr, Partner at Booz & Company and global leader of the firm’sInnovation practice. “Case in point: Apple, Google, and 3M ranked 53rd, 26th, and 86th, respectively, in R&D spending among the Global Innovation 1000 companies.”
According to the study, India and China-based firms again increased R&D investment at the highest rate overall across regions (27 per cent on average), although from a small R&D spending base.
“In addition to the R&D spendingdata trend analysis, this year’s study also examined the early stages of innovation, specifically looking at the tools, processes, and mechanisms companies use to generate ideas and how they take those ideas to market”, said Rasheed El Tayeb, the principal with Booz & Company.
Nearly half of those surveyed said their organizations were just average or marginally effective at generating new ideas and converting them into potential future products.
Meanwhile, the 25 percent of companies that reported being “highly effective” at both idea generation and conversion outperformed their peers on three important financial measures—revenue, market cap growth, and Ebitda as a percentage of revenue.
“Companies’ reliance on traditional sources for the majority of new ideas, despite the attention paid in recent years to more open innovation processes, is one of the more interesting discoveries from this year’s study,” said Richard Holman, partner at Booz & Company.
“The key takeaway for businesses is that the most successful innovators in all industries employ ideation practices that are wellaligned with their innovation strategies,” he added.-TradeArabia News Service