MIT Sloan Management Review Article on The Promise of Targeted Innovation

Who are the kings of R&D spending? High tech and health care, of course. These sectors each account for nearly one-quarter of global R&D.1 Consumer goods companies? They’re near the bottom, at just less than 3%.2 But what they do spend is hardly trivial. The largest consumer goods companies each lay out more than $1 billion annually. Spending by one of the biggest, Procter & Gamble, has averaged about $2 billion per year for the past decade.

What have these behemoths gotten in return for their hefty R&D outlays? Virtually nothing from a sales perspective. In an industry analysis, we found that the consumer packaged goods sector’s biggest R&D spenders saw no appreciable impact on revenue. That’s troubling for companies whose growth has plateaued over the past five years, as new competitors have challenged established brands.