73 percent of companies worldwide will increase spending on innovation in 2005, up from 64 percent in 2004, according to a senior management survey conducted by The Boston Consulting Group (BCG). The findings are based on responses from more than 500 senior executives in 47 countries and all major industries. Most respondents defined innovation in terms of creating new products, services or processes - or, as one CEO said, "turning ideas into profits."

On average, executives said that their companies plan to boost spending on innovation by 15 percent in 2005. In addition, more than 90 percent said that generating growth through innovation has become essential for success in their industry.Yet fewer than half of the executives surveyed said that they were satisfied with the returns on their investments to date.

Other notable highlights from the BCG research include the following:

  • The consumer products and technology industries had the highest percentage of respondents reporting plans to increase innovation spending in 2005, at 80 percent and 79 percent respectively. Telecommunications had the lowest, with 61 percent.
  • The Asia-Pacific region led with 78 percent of companies planning increases, although North America (73 percent) and Europe (70 percent) were close behind.
  • More than 60 percent of the respondents said that globalization is having a major impact on the way their company approaches innovation.  However, only 35 percent reported plans to increase R&D investments in China, India, or other "low-cost" locations in 2005. Notably, presidents and CEOs were even less likely than other executives to anticipate increased R&D investment in "low-cost" locations - only 25 percent of the presidents and CEOs said that their company planned to do so.
  • While 67 percent of executives ranked innovation as one of their company's top three strategic priorities for 2005, only 49 percent said that they were satisfied with the financial return on their investments to date.  Respondents ranked as the three biggest problems in innovation: moving quickly from idea generation to initial sales; leveraging suppliers for new ideas; and appropriately balancing risks, timeframes, and returns.
  • Presidents and CEOs reported being satisfied with the return on their investments in innovation more frequently than did other executives (57 percent vs. 49 percent overall); they were also more likely to anticipate increased innovation spending in 2005 (80 percent vs. 73 percent).
  • Executives ranked Apple, 3M, GE, Microsoft and Sony as the "most innovative" companies.  Apple rose to the top spot from No. 5 last year.


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