Investment in Innovation: Economic Downturn has Companies Rethinking Their Plans

Two surveys show how firms are addressing innovation as global economies falter.

Experts contend that it is imperative for companies to remain committed to innovation in times of economic downturn. To do otherwise leaves them unprepared for better times when those better times eventually emerge.

But is making the commitment to innovation easier said than done? Two recent surveys shed some light on what companies are thinking about innovation in the current economic climate and how they are responding. For example, according to a recent global survey of 2,700 senior executives conducted by Boston Consulting Group, in conjunction with BusinessWeek:

  • 14% of respondents are planning to reduce their innovation investments in 2009. On the plus side, 58% said they would increase innovation spending this year, although that figure is down from 63% last year and 72% in the previous year.
  • U.S. firms are less bullish than their global counterparts. Among U.S. companies, 44% said they would increase their innovation spending in 2009.
  • Innovation is slipping as a priority for some firms, although it remains among the top three. Nearly two-thirds (64%) of respondents identified innovation as a top-three priority at their company. That compares with 66% in 2007 and 2008.
"Companies remain firm believers in the importance of innovation, but they can't ignore what is happening in the economy," says James P. Andrew, lead author of Boston Consulting Group's report on innovation, Innovation 2009: Making Hard Decisions in the Downturn. "So they are increasingly orienting their innovation efforts toward the here and now, emphasizing immediate sales and the reduction of costs and risk. And, for the most part, those moves make sense."

Innovation Website InnovationTools also recently released results of its Innovation Climate Survey, conducted in March 2009 of innovation practitioners. Among these respondents, 49% reported that the innovation climate had improved since the global downturn began, and 28% reported that innovation funding had increased since the economy began its downturn. As opposed to sinking those dollars into new products, however, slightly more than half of respondents reported to InnovationTools that one of their strategies to weather the downturn was to improve or extend their existing products. Improving collaboration to drive more opportunities also scored high.

Among respondents to the Boston Consulting Group survey, 88% of respondents identified new products to existing customers as important or very important contributors to their future success. However, 73% said cost reductions to existing products was important or very important to their future success.

What do any of these results mean? They provide good benchmarks for companies that are simply looking to find out what their fellow innovators are doing to weather the current economic storm. They also clearly mean -- particularly if you peruse the complete survey results -- that there is no single means by which companies are finding a clear path to success in the current economy.


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