QUESTION: What are the most effective strategies for commercialisation of a company’s ideas, products, R&D and intellectual property?
ANSWER: “It is the approach that best suits – and is most closely aligned with – the company’s overall corporate strategy and the competitive environment in which the company operates.”
This quote is the conclusion of a major study by management consultants, Booz Allen Hamilton, titled The Customer Connection: The Global Innovation 1000. In a phrase Booz Allen calls it “strategy alignment”. Unsurprisingly the study confirms that patents generally don’t drive profits.
The study appears well-researched is grounded in statistics. Here are some highlights.
- Where are Australian companies? In the global 1,000 Booz Allen included four Australian companies as among the top 1,000 corporate spenders on research and development. CSL Limited spent the most of any Australian company, at US$121 million it came 499th in the list. Behind it were BHP Billiton, ROC Oil and Aristocrat Leisure.
- Falling just outside the global 1,000 spenders were the Australian companies Telstra, Cochlear, Onesteel, Orica, Computershare, Amcor, BlueScope Steel and Pacifica Group.
- Commenting on the study, the Australian Financial Review on 18 October 2007 noted that business spending on R&D in Australia has risen consistently over the last seven years, totalling A$10.1 billion in 2005-06 according to the Australian Bureau of Statistics.
- What are the global R&D expenditure figures? Australian R&D expenditures pale into insignificance against global figures. The total amount spent on innovation by the global 1,000 in 2006 was US$447 billion. According also to Booz Allen, this “represents fully 84% of worldwide corporate R&D spending (which is estimated to be US$540 billion”. These global expenditure figures draw on data from the World Bank, OECD and IMF.
- Which industries spend big on R&D? R&D intensity is defined as R&D spending as a percentage of sales. The R&D intensity was highest in health care, software and internet, aerospace and defense, and auto. They were respectively 13.3%, 13.3%, 7.0% and 3.8% of sales.
- Which country leads? China, India and the rest of the developing world only accounted for 5% of R&D expenditure in 2006. America held the lead with North American companies such as Pfizer, Ford, Johnson & Johnson, General Motors, Microsoft and IBM all being in the top 10 list of R&D corporate spenders. Leading the list is Toyota, spending US$7,691 billion in 2006, which was 3.7% of its sales.
Importantly Booz Allen emphasise that “the most effective innovation is often not the most expensive.” Booz Allen adds that cost-effective innovators listen closely to their customers across the entire innovation cycles, particularly as regards ideas generation, project selection, product development and commercialisation.
The action plan then for your company is to align your innovation or intellectual property strategy to suit your competitive environment.
Your call is welcome if you want to discuss necessary legal elements and documentation for such a strategy. Our accompanying innovation graphic illustrates our long-held view that for innovation legal and management considerations go hand in hand.
Contact us with any questions or requests.