The good news? Despite today's tough times, many firms are demonstrating their commitment to innovation by fiercely protecting Research & Development budgets. The bad news? The siege-like mentality driving the decision might inhibit the effectiveness of R&D investments.
Innovation has never been more important. Hyper-competition coupled with ever-accelerating technological improvements means competitive advantage that took years to build can disappear in the blink of an eye. Companies that stop innovating to "ride out the storm" are sowing the seeds of their own destruction.
An article in Monday's Wall Street Journal suggests that many executives understand this dynamic. The Journal found that R&D spending at 28 large U.S. companies dropped a mere 0.7 percent in the dismal fourth quarter of 2008.
One interesting example the article cited was glassmaker Corning. The company put R&D in its innermost "ring of defense." While the company has temporarily shut factories and slashed more than 3,000 jobs, it hasn't touched its $600-million R&D budget.
What's not to like about companies continuing to spend on R&D? It's entirely possible that companies are protecting the exact wrong investments.
For example, Corning's Chief Technical Officer described how the company was focusing on "products with a proven track record." Too much focus on existing products runs the risk of improving products beyond what most customers really need — the disruptive literature calls this "overshooting" — and are willing to pay for.
Read the rest at Scott's Harvard Management blog, Innovation Insights.
