Big Australian companies boost R&D spending

The global downturn has not stopped Australia’s biggest companies ploughing money into research and development, new research has found.

A study of 1,000 large global companies by consulting group Booz & Company, found that six of Australia’s biggest firms – including mining giant BHP Billiton, blood products group CSL and bionic ear maker Cochlear – increased R&D spending by a total of 37.9% during 2008.

BHP Billiton was ranked 341 on the list as Australia’s largest R&D spender (with spending of $US244 million up from $169 million) followed by CSL (spending of $US201 million, up from $171 million) and steel company OneSteel ($US130 million).

Aristocrat Leisure (spending of $US98 million, up from $US87 million), Cochlear ($US72 million, up from $US59 million) and Computershare ($US65 million, up from $US43 million) also made the list.

Sydney-based principal of Booz & Company’s strategy practice, Bernadette Howlett, says the report is further evidence how well the Australian economy had withstood the global economic downturn, although R&D spending has held up remarkably well around the globe.

R&D outlays for the top 1,000 companies followed in the report rose by 5.7% to $US532 billion in 2008, despite the fact that sales at these firms increased by only 6.5%. The 2008 growth rate was only slightly lower than the 7.1% rate seen over the past five years.

The survey also found that more than 70% of companies were either maintaining or increasing their spending on R&D in 2009, although nearly half of the respondents reported becoming more risk-averse in their approach to innovation, changing the filters they applied before giving new R&D projects the green light.

Howlett says large corporates are also getting far better at killing off exploratory projects that don’t show signs of early success, and redeploying these resources into getting their more advanced projects to market.

She says it is a key lesson that SMEs should learn.
“SMEs definitely face the issue of budgeting and resources they need to focus on their area of specialisation and really ramming home their advantage,” she says.

“The challenge that a lot of them face is around being more discerning and killing off the weak projects. Because they are so customer focused, if they see a process of developing something for a client…then it’s much harder for them to kill off that project.”

“If you can learn one lesson from the large corporate then it is yes, you need to move with your customers, but you need to be able to kill off those projects that aren’t going to work.”