Big Business Dissatisfaction with Internal R&D
In an article entitled ‘Big Business Outsources Innovation to Start-ups’ Crain’s New York Business focuses on an increasing tendency of large companies to outsource their R&D to smaller and nimbler players. The principle reason is the failure of in-house R&D teams to deliver.
According to the article, this new practice is increasingly driving the biggest venture capital deals in New York City. Firms have become frustrated that the returns from internal R&D have not been as high or as cutting edge as expected.
Evidence that smaller companies are winning big from open innovation comes from a number of deals in recent months. They include a $20 million investment led by Cox Media Group and Samsung Ventures in ad-tech company Collective. Other key investments by big players are Google’s $17 million funding of financing site OnDeck Capital and an $11 million investment by Intel Capital and others in email company Movable Ink.
The article also highlights a 2012 Booz Allen study, “Making Ideas Work”. Of the 1,000 companies surveyed about their R&D spending, only 43% said that efforts to generate ideas were highly effective, while 36% reported that converting ideas to products was highly effective. Only 25% reported that they were highly effective at both.
Big Money Investments
Due to the unsatisfactory returns from internal R&D departments, large companies are now investing their money at earlier and riskier stages of the product development cycle. And New York is a hub of innovation investment.
According to analysts 14% of the money that corporations invested in start-ups in the second quarter of 2013 was invested in New York,
To read the full article, click here.
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