Mouli Cohen on the R&D Competition

R&D Competition in the Post-Recession Economy

In the current economic climate, companies want more bang from their research buck. Executives are under pressure to cut costs, but need innovative products to spur post-recession growth. So the reaction by many has been to protect research spending, to scrutinize projects more carefully, and to reorder priorities to favor high-potential markets.

A recent study by Booz & Co. of 1,000 of the world’s largest R&D spenders found that the majority are focusing on products with quick revenue opportunities, and cutting less promising projects. Nearly 50 percent claimed to have tightened criteria for approving new projects.

The survey also saw a shift away from traditional research and toward applying existing technology to new products. This shift has been a longstanding trend that has been accelerated by the recession, says Booz partner Barry Jaruzelski.

Another informal survey conducted by the Wall Street Journal found that many large corporate research spenders had cut budgets this year, but some companies, such as Intel and 3M, are spending as big a share or more on research than last year.

I believe it is more important to innovate during an economic downturn than it is during good times. Scotch tape, for example, was introduced by 3M in 1930 and was used by people to repair things they couldn’t afford to replace during the depression. Like 3M, Caterpillar introduced a now-signature product during those tough times – a diesel engine for earthmoving machines in 1931. Caterpillar took the risk to spend $1 million on its earthmoving engine, and clearly the company’s predecessors felt the same pressure executives are feeling in today’s crunch. Ultimately, if you don’t invest in R&D during the downturn you’ll feel like a hero during the day because you’ve saved money, but you’ll end up a heel in the history books.

About Mouli Cohen

	Mouli Cohen is a lifelong entrepreneur who has founded and developed successful ventures in the biotech, hitech, digital media and healthcare. He has balanced his success in business with extensive philanthropic work supporting children's charities, food programs, medical research, the arts and education. He is married to author Stacy Cohen.