In a time of uncertainty with Brexit and questions over a potential decline in the economy companies will be looking over spend and working out where their money is best placed to future proof their business.
While investing in R&D itself doesn’t necessarily mean your company profits will soar, it does send signals to your staff and investors that you are serious about the future of your company.
And while Forbes make a compelling case for why R&D spend doesn’t necessarily indicate innovation, sighting other required factors like understanding your customers and business model, a quick double take at what Apple is currently up to blows that out of the water.
A look at Apples R&D spend
Strategy& at Price Waterhouse Cooper publish their Global Innovation 1000 Study each year in October, which investigates trends at the world’s 1000 largest corporate R&D spenders.
Apple is the leader of innovation, with the number one slot, and although they are 11th in the R&D spend table for 2016, their recent spend may see them edging higher up the spend charts when Strategy& release their 2017 report in October this year.
Over the last 9 months Apple spent $8.58 billion on R&D, 15% higher than the same period last year. Last quarter alone Apple spend $2.94 billion on R&D, making it one of the largest spenders in tech.
Now we don’t need to explain Apple products to you, I’m sure in your office a large percentage of your colleagues are Apple disciples. People who have Apple products love Apple with a fervour that’s not always found in consumables.
Apple know that to stay ahead of the competition, they need to develop products, create software, and ever faster manufacturing processes.
So has Apples increasing R&D spend resulted in more profit? Apple just released their Q3 earnings a few days ago and their profits have jumped by 17%.
And we can see here that as Apple's R&D spend grew, their income grew exponentially. And Apple argues that even though it's R&D spend is massive, it is still more efficient than all its competitors.
R&D spend Vs. profits
We took a look at the top 3 R&D spenders in the Strategy& report and compared their spend with their current profits.
Volkswagen are the highest R&D spenders with a price tag of $13.2bn. Their announced first quarter profits are €4.4bn up from €3.4bn at the same time last year.
Samsung are second in the list with a R&D spend of $12.7bn and are expecting a 72% jump in profits for the last quarter. If true they will have overtaken Apple in profits for smartphones.
Amazon are third with a R&D spend of $12.5bn. Their story is a little more complex, while profits fell by 77% in the last quarter, Jeff Bezos temporarily became the worlds richest person, leap frogging Bill Gates (just for a little bit). So, Amazon is clearly making money somewhere!
R&D spend equals higher profits
Now we know that not all companies are the Apples, Samsungs, Volkswagens and Amazons of the world, but if we take these examples we can see that investing in your business does equal profits.
We’re not suggesting that upping your R&D spend is going to magically increase your profit share. These are big businesses, with lots of facets to why they are successful, but a common denominator is their high investment in R&D.
We'd love to talk to you if you're thinking about investing in R&D for your business. We're in a unique position as we're engineers and product designers, who also have experts in R&D, so we can take you through the whole process. Talk to us about R&D opportunities for your company.
2017 Global Innovation 1000 Study
We’re looking forward to Strategy& findings for 2017 when they release their next report in October. Keep checking back at our blog for our response.
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