Marketers that spend heavily on research and development (R&D) to bring new products ranging from computer software to pharmaceuticals have been hurt as much as other companies during the recession.  Yet the majority of large public firms with track records of research and development activity continued to invest in innovation.  According to a new report by Booz & Company, these companies, on average, added 5.7% to their R&D budgets despite extreme profit pressure. This type of forward thinking prompted  Barry Jaruzelski, Partner at Booz & Company, to remark, “[n]ow is an opportune time to build advantage over competitors, especially weaker ones that may have to skimp on R&D for financial reasons.”

In 2008, significant R&D spending occurred in the following industries:

• Computing and electronics (28%)
• Health (23%)
• Automotive (16 %)

The study focused on industry leaders such as Toyota, Nokia, Roche Holding and Microsoft.  Results also indicated that R&D spending continued in the face of profitability problems. Here are the percentages of firms that increased R&D spending when viewed through the lens of income and profitability:

• Companies with net income: 52% (increase in R&D spending)
• Companies with net loss: 16.5%
• Net income increased: 26.7%
• Net income decreased: 42.7%

Senior managers also indicated that in addition to funding more R&D, they are quickly shutting down  “bad projects” and paying close attention to customer requirements. The results of this study also suggest that as companies refine the new products they have developed, they will also be launching new marketing campaigns to support sales.

[Source: Company release, Booz & Co. 10.27.09]