Benchmarking Your R&D: Results from IRI/CIMS Annual R&D Survey for FY '97

This sixth compilation of year-to-year information on U.S. industry R&D spending and performance reveals that revenue from both new products and R&D investment is increasing. OVERVIEW: Data from the annual survey for fiscal year 1997, when added to that of the previous five years, suggests that Industrial Research Institute member companies have restructured their R&D efforts in ways that have increased innovation performance, as indicated by an upturn in the New Sales Ratio, and that their R&D expenditures grew more rapidly than sales revenues in FY '97-the first time in six years. The increase in the NSR is clearly good news, while the increase in R&D intensity sends a mixed signal in that R&D expenditures grew by 17 percent as sales revenues declined by an average of 1.5 percent. Company participation in the survey increased, with 81 firms providing usable data in FY '97 compared with 78 in FY '96. However, reporting on business segments declined from 141 to 137, and the diversity of business segments reported upon also declined. As a result, fewer business segments met the "five-firm minimum" than in prior years. On the other hand, laboratory reporting increased from 49 in FY '96 to 57 in '97. CIMS and the IRI are beginning a concerted effort to increase the depth of coverage of research/technology management issues in specific business segments. For the first time in six years, the results of the IRI/CIMS Annual Survey indicate an upward trend in the average R&D intensity of IRI member firms. This increase in R&D intensity, a significant contributor to productivity growth, resulted from a substantial increase in R&D expenditures and only a slight decrease in sales (1). Last year, we also reported the first increase in the IRI membership's "New Sales Ratio." The NSR is the percent of total annual sales that can be attributed to new and improved products commercialized in the last five years. We are pleased to report that the increase in NSR continued again in FY '97 for our sample of IRI companies. The increase in R&D intensity, along with the increase in the NSR, suggest that IRI companies have become more effective at product innovation and in capturing the resulting benefits in the marketplace. The average R&D intensity of 57 IRI member companies that reported data in both 1996 and 1997 increased from 2.6 percent in 1996 to 2.9 percent in 1997. Thirty of these companies actually reported data over the last five years (from 1993 to 1997). Their average R&D intensity declined from 3.1 percent in 1993 to 2.8 percent in 1996. In 1997, the average R&D intensity of these 30 companies recovered to 3.1 percent! The average NSR of 18 IRI member companies that reported new sales data in both 1996 and 1997 increased from 19.2 percent in 1996 to 21.2 percent in 1997. Only eight of these companies reported their ratios for each of the last five years (from 1993 to 1997). The average NSR for these companies dropped from 18.8 percent in 1993 to 14.8 percent in 1995. By 1997, their average NSR increased to 16.4 percent. Source of the Data This information derives from six years of data collected by the IRI/CIMS Annual R&D Survey, established by the Database Subcommittee of IRI's Research-on-- Research Committee. The original intent was to build a unique database that would allow R&D executives and general managers to benchmark and track information on R&D spending and the performance of firms, laboratories, and business segments in specific industries. The resultant database is also a valuable source of data for anyone wishing to study the impact of R&D management decisions and practices on the financial performance of industrial firms (see "How to Access the Data," below). The survey has now been carried out for six years and contains IRI company data for fiscal years 1992-1997. The survey is done in cooperation with the Center for Innovation Management Studies (CIMS) at Lehigh University. …