Metrics Matter

April 14, 2008
The top R&D metric used in 2008 is R&D spending as a percentage of sales.

The U.S. path to the R&D of the future is emerging from a slowing economy with total funding for R&D expected to increase just 3.3% from the $355 billion funded in 2007 to the $367 billion expected for 2008. Contributing factors start with the globalization of R&D wealth, says the annual Battelle/R&D Magazine study. Other factors include:

  • Restructuring of the major corporate R&D approaches in industry,
  • Significant growth of the practice of offshore outsourcing of R&D,
  • Shift in federal government priorities as a result of world events, and
  • Growth of the federal deficit.

"There is little doubt that there are some basic problems facing the U.S. research environment, not the least of which include consideration of energy, environment and the economy," says Battelle's senior researcher and study co-author Jules Duga. "And to a degree not seen in recent years, the average person on the street is calling for long-term relief from high energy costs, improved (but not intrusive) security and resolution of environmental problems."

The researcher's estimate for global R&D spending is expected to reach $1.2 trillion in 2008, 7.6% higher than 2007. Worldwide spending exceeded $1 trillion in 2006, Duga reports.

China is a noteworthy performer with growth of 24% expected for 2008, to total $216.8 billion. That's about 18% of global spending, up from 14% as recently as two years ago, Duga notes.

In the U.S. study industrial performance of R&D in 2008 is expected to reach $258.7 billion in 2008, an increase of 3.4% over 2007 levels of $250.3 billion. Offshore outsourcing has become a game-changer. The study describes the growing practice as a complex weave of relationships, facilities, practices, opportunities and threats.

Increased funding is expected for the following industries: biological and diagnostics, pharmaceutical preps and chemicals and allied products.

Declining support is anticipated for such industries as motor vehicles and car bodies, electronic measurement and testing instruments, other electronics and agricultural chemicals.

Evolving Corporate R&D Metrics

Top 10 R&D Metrics Used by Industry, 1998
1. R&D spending as a percentage of sales 76%
2. New products completed/released 68%
3. Number of approved projects ongoing 61%
4. Total active products supported 54%
5. Total patents filed/pending/awarded 51%
6. Current-year percentage of sales due to new products released in past x years 48%
7. Percentage of resources/investment dedicated 46%
8. Percentage of increase/decrease in R&D head count 43%
9. Percentage of resources/investment dedicated to sustaining products 39%
10. Average development cost per projects/product 39%
Source: Goldense Group Inc.; based on 1998 product development metrics survey
Top 10 R&D Metrics Used by Industry, 2008
1. R&D spending as a percentage of sales 77%
2. Total patents filed/pending/awarded/rejected 61%
3. Total R&D headcount 59%
4. Current-year percentage sales due to new products released in past x years 56%
5. Number of new products released 53%
6. Number of products/projects in active development 47%
7. Percentage resources/investment dedicated to new product development 41%
8. Number of products in defined/planning/estimation stages 35%
9. Average project ROI -- return on investment or average projects payback 31%
10. Percentage increase/decrease in R&D headcount 31%
Source: Goldense Group Inc., based on 2008 product development metrics survey

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