World Monitor Mag, Industrial Overview WM_November_2018_WEB_Version | Page 90

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What the top Innovators
get right
With careful attention to six key areas, companies can make the most
of their R&D investment and outpace the competition.
by Barry Jaruzelski, Robert Chwalik, and Brad Goehle
A project team from Stanley Black &
Decker, a US$12.7 billion diversified
manufacturing firm, noticed something
problematic when observing customers
using the company’s products at
construction sites. Tools such as miter
saws and table saws needed higher
voltage than the 20-volt systems
commonly used for hand tools such
as drills and circular saws. As a result,
contractors were using extension cords
or gasoline generators. But the former
were inconvenient and created hazards,
and the latter brought noise and pollution.
After making these observations, Stanley
Black & Decker developed the DeWalt
line of “FlexVolt” cordless power tools
and battery packs. They’ve been quickly
embraced by professional contractors —
generating $300 million in incremental
sales since the line’s 2016 introduction.
“Cords are one of the biggest pain points
on a construction jobsite,” says Stephen
M. Subasic, vice president of human
resources at the company’s global tools
and storage unit. “Our customers were
telling our teams they wanted more
cordless options.” But end-users had an
additional constraint: They had made
large investments in existing 20-volt
tools and were unwilling to give them up.
The FlexVolt system solved the problem.
“We were able to marry some emerging
technologies in motors and batteries so
that the FlexVolt system automatically
adjusts to the voltage of the tool,” says
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world monitor
Subasic. “It’s a single-battery platform
that addresses the pain point, and spans
both the next generation and the current
generation of tools.”
Few companies are able to bring this
kind of rapid breakthrough innovation
from concept to market success. But
Stanley Black & Decker has consistently
developed winning products for years, and
has been doing so while spending its R&D
dollars more efficiently than its industry
peers. In this year’s Global Innovation
1000 study — our annual analysis
of the 1,000 publicly held companies
that spend the most on research and
development (R&D) — we look at a
subset of companies like Stanley that we
call “high-leverage innovators.” These
are companies that outperformed their
industry groups on seven key measures
of financial success for the previous five
years, while at the same time spending
less on R&D as a percentage of sales.
Achieving high performance is difficult in
any given year, and remarkably difficult to
sustain. But the success of these high-
leverage innovators reaffirms a finding
of our study that has held true over time:
There is no long-term correlation between
the amount of money a company spends
on its innovation efforts and its overall
financial performance. Instead, what
matters is how companies use that money
and other resources to create products and
services that connect with their customers.
Also important is the quality of companies’
talent, processes, and decision making.
R&D spending among the Global
Innovation 1000 overall increased 11.4
percent in 2018, to a record high of $782
billion, reflecting R&D spending increases
in all regions and nearly all industries
(see “Profiling the Global Innovation
1000”). If we carve out the high-leverage
innovators, we see that the 88 companies
that earned that classification in 2017
had sales growth 2.6 times as high as
other companies on the Global Innovation
1000 list from 2012 to 2017 and growth
in market capitalization 2.9 times as
high, while their R&D intensity (R&D
expenditures as a percentage of sales)
was lower than their industry median.
These high-leverage innovators can be
found in all regions and industries. They
include household brands such as Apple,
Adidas, and Stanley Black & Decker, and
companies that may be less familiar
to readers, such as Amadeus IT Group,
a global provider of travel solutions
and software based in Spain, and DIC
Corporation, a Japan-based specialty
chemicals company.
Profiling the Global Innovation 1000
The companies in the Global Innovation
1000 spent US$782 billion on R&D in
2018. This represented record-high
spending, and an increase of 11.4 percent
over 2017. Year-on-year growth in 2018
was nearly four times as high as growth