Research and development remains a strategic priority for executives, even in turbulent times, a McKinsey survey finds.1 We asked respondents about the relative importance of R&D in their companies, the changes those companies have so far made to R&D spending and strategy in 2009, and the expected results of the changes.
Forty percent of the respondents say their companies are actively seeking to reduce R&D costs—far fewer than are cutting operational costs overall, according to other McKinsey research—and about the same proportion say these companies are trimming the number of R&D projects. Some 34 percent of the executives report that R&D budgets are lower in 2009 than they were in 2008. Further, a large majority indicate that their companies are taking a new approach to R&D in the current economic circumstances; many are turning to shorter-term, lower-risk projects or focusing on minor changes to existing products.
While this tendency toward caution is understandable, other findings indicate that many companies may be overlooking longer-term opportunities to innovate. Notably, the companies that get the greatest benefit from innovation appear to be taking a different approach. Executives at such companies are far likelier to say that they are increasing R&D budgets, expanding...