New Survey Among R&D Managers Identifies Innovation As Key Business Objective For 2005 And Beyond

CLEVELAND, OH and MENLO PARK, CA – January 12, 2005 – In a survey of corporate R&D managers conducted by NineSigma, Inc., an innovation sourcing firm, and Analysis Group, a strategy consulting firm, 84 percent of respondents clearly identified “innovation” as a top priority in their company. This is up from 75 percent in a similar study last year. Ninety-one percent expect innovation to be a top priority within their organizations in 2005, and 96 percent expect innovation to be a top priority in the next five years.

When asked about the sources of innovation, respondents said they expect that 35 percent of innovation will be found externally; yet only half (54%) said they have a system in place for identifying such sources, and most (by a margin of 50%) said that no one individual at their company is responsible for sourcing innovation externally.

The majority of respondents cited their two most important business objectives as, “Increasing the rate of new product innovations” and “Accelerating time-to-market.” Innovation was identified as the primary driver for both of these priorities. Only nine percent listed “Reducing R&D costs” as the most important objective, which is down considerably from last year’s response of 22 percent.

“Clearly, organizations have shifted their focus away from cutting costs and are now focused on building top-line growth,” said Paul Stiros, President and CEO of NineSigma. “The role of R&D managers has become more tightly integrated with business development programs and external innovation has become an effective strategy for bringing new technologies to market faster than ever before.”

When asked, “What is your greatest impediment to new product introductions or line extensions,” 23 percent said they do not have an adequate process for evaluating commercial success of new technologies, 21 percent said there is an insufficient understanding of customer needs, and 18 percent said they experience limitations on out-of-the-box thinking.

“This indicates how important it is for companies to address impediments to finding and leveraging valuable sources of innovation from outside their organizations if they are to achieve the growth they seek,” said Adrienne Kardon Crowther, Vice President of Analysis Group. “We have observed increasing innovation activity, such as technology in-licensing and acquisition, within our client base and these survey results reaffirm this observation.”

In addition to the focus on innovation as a key business objective, the survey results indicate overall R&D spending will increase in the near future. Thirty-eight percent of respondents expect their R&D spending levels to increase slightly in 2005, while 48 percent expect spending to increase slightly over the next five years, and 18 percent expect spending levels to increase significantly in five years.

The survey was distributed to 7000 corporate R&D managers at small to large corporations. Respondents were commonly the most senior level executive responsible for R&D activities at their organizations. For a detailed summary of the results, visit www.ggcomm.com/ninesigma/images/OpenInnovationReport .

NineSigma serves the global research and development industry by facilitating open innovation strategies for clients seeking to acquire technical innovations developed outside their organization. Through its proprietary Managed Exchange (M:X) capability that utilizes Ph.D.-level program managers, web-based tools, and a database of global solution providers, NineSigma matches technology seekers with unobvious or disruptive innovations faster, more effectively, and at a lower cost than conventional means.

Analysis Group, Inc. provides business strategy, economic, and financial consulting to Fortune 500 companies, leading law firms, and government agencies. Analysis Group helps corporations create strategies for innovation and growth. Analysis Group advises corporations and government clients on business issues that require expert analysis and interpretation of economic and financial data and assists law firms with all aspects of litigation. Founded in 1981, with more than 300 professional staff, the firm has offices in Boston, Dallas, Denver, Los Angeles, Menlo Park, Montreal, New York, San Francisco and Washington. For more information on Analysis Group, visit www.analysisgroup.com .