A new study released by PwC last week shows R&D spending by companies reached record levels in 2018.
By far, companies headquartered in North America were the biggest spenders, accounting for almost half of the total spend with an eight percent increase overall year over year – a massive increase by any measure.
The rise in R&D spending is an indicator of a company’s commitment to future growth, but the study shows that it does not correlate to an ability to innovate.
As Barry Jaruzelski, a partner at PwC’s strategy consulting business development, explains, “For the entire 14 years that we have conducted this annual study, we have consistently found there is no statistically significant relationship between how much you spend on R&D and how well you perform. What does matter is the depth of your customer insight, the quality of the talent assembled, and rigor of the processes you employ.”
While R&D spending is at an all-time high, businesses don’t just need more reliable ongoing insight, they need it quickly. Innovation today is iterative and ongoing, and insight should be mined and delivered in the same manner.
In recent years, the innovation process has shifted away from the traditional waterfall model toward agile models, not just in tech but across non-digitally native industries as well. Agile models compress timelines and increase the need for focused, actionable customer insights: agile insights.
Companies like GoDaddy are in the midst of this transformation. They are not only embracing agile development models but also adhering to a customer-first ethos – a combination that requires customer-validated feedback at every step of the innovation cycle. The ability to deliver agile customer insights has accelerated product development and reduced the risk of costly mistakes.
To innovate more effectively, companies must generate deeper customer insights in lockstep with the development teams. The problem for many is that the traditional tools used to generate customer insights are too slow and cumbersome.
Focus groups, for example, are expensive and time-consuming, and the results are too subjective and open to interpretation. Customer interviews are also very expensive, and it’s challenging to interview a statistically relevant sample. What’s more, both of these methods rely on the skill and ability of the interviewer.
Notwithstanding the perils of purchasing customer lists or email lists to spam potential “customers” with surveys, online surveys require a significant amount of time to create, distribute, collect and analyze (far longer than the two-week development sprints). Furthermore, response rates are often very low. In fact, research suggests that as many as 75 percent of online surveys fail to garner the minimum expected survey response rates. What’s more, the influx of bots and paid survey respondents makes it very difficult to determine whether your survey is even reaching the correct audience.
Generating insights by using transactional, loyalty, or CRM data also has its challenges. This type of data is often siloed and hard to access. Additionally, it’s difficult to uncover the motivation behind purchase behaviors by looking at large swaths of transactional data. While this data can reveal the “what,” it can’t reveal the “why.”
While there is no magic bullet, the most immediate and impactful opportunity for leaders looking for a way to accelerate (and de-risk) the innovation process is to provide their teams with on-demand access to a group of highly engaged, opted in customers – known customers – who can be engaged at scale.
Want to know more? Here are the three product innovation trends changing the business world.