BOSTON, Dec. 2, 2015 /PRNewswire/ -- Tech company CEOs regularly tout innovation as a critical factor in improved financial performance and competitive position. Comparisons are often made with industry leaders like Apple, Facebook, Intel, Qualcomm, Google, and Microsoft. Most companies will fail to make significant improvements in performance because of confusion between evolutionary improvements and disruptive behavior.
A recent study from the Strategic Competitor Intelligence service (SCI) at Strategy Analytics (http://www.strategyanalytics.com/) in conjunction with nu-Angle Consulting (http://www.nu-angle.com/ ) has explored the relationships between R&D, innovation, and financial performance in the high tech, digital products and services sector.
"Most high tech companies rely on their R&D efforts to yield evolutionary, incremental improvements in value propositions. While important to maintaining current profitability, these improvements have a poor track record for significantly improving financial performance" said Harvey Cohen, President of Strategy Analytics and an author of this report." With Net Margins in the 5% to 9% for typical high tech manufacturers, attempting to improve performance through R&D alone against the performance of Intellectual Property-rich firms like Apple with a Net Margin of 23%, without examining the risk-taking culture of these firms leads to erroneous conclusions and misaligned strategies".
Bob Wasson, Senior Consultant at nu-Angle Consulting, said that "Firms must constantly upgrade their technology to maintain their competitiveness, making effective R&D activity a crucial key success factor. However, even the effects of these upgrade R&D investments will not generally be seen in financial performance for several years. Investing in evolutionary technology R&D will not necessarily lead to significantly improved financial performance. Managers should be careful not to create investor expectations that R&D investment can provide quick benefits to financial results. Managers must avoid creating confusion regarding which investments are likely to maintain business competitiveness versus those that have the potential for dramatic improvements in profitability through disruption with higher risks."
"SCI focuses on the impact of disruption as a factor potentially leading to extraordinary returns in high tech as a result of innovation in business models, technology, distribution, or ecosystems" said Richard Guppy, Director of SCI.
About Strategy Analytics
Strategy Analytics, Inc. provides the competitive edge with advisory services, consulting and actionable market intelligence for emerging technology, mobile and wireless, digital consumer and automotive electronics companies. With offices in North America, Europe and Asia, Strategy Analytics delivers insights for enterprise success. www.StrategyAnalytics.com
SOURCE Strategy Analytics