Innovation is not proportional to money spent David 15 Mar 2006

29 comments Latest by Greg

TheStreet.com tells us that Apple’s relative spending on R&D has been declining for the past five years. They quote analysts running scared that Apple is “approaching minimal levels”. Hu?!

When has innovation ever simply been a function of money spent? Which of the big two operating system companies are most often characterized as pushing the envelope and who spends the most on R&D in dollar amounts? (hint: they’re not the same)

Innovation more often than not comes from constraints. From not being able to blow billions without immediate needs for returns.

One of the first things Jobs did when he returned to the helm at Apple was to slaughter the unprofitable product lines and focus the ship. Not launch a ton of initiatives on top of what was already there.

So Apple, please don’t change a thing. (Not that I think you would just because you don’t fit into the spreadsheet of a few analysts).

29 comments so far (Jump to latest)

Dana O 15 Mar 06

I agree 100%.
I “love” the comments analysts make — like they know what’s best. Let that analyst run Apple with his methodologies and we’ll see if he’d suggest we invest in the company more. :)

Morons…

Dana O 15 Mar 06

I agree 100%.
I “love” the comments analysts make — like they know what’s best. Let that analyst run Apple with his methodologies and we’ll see if he’d suggest we invest in the company more. :)

Morons…

a scientist 15 Mar 06

“When has innovation ever simply been a function of money spent?”

of course cash ~= innovation. as you’ve stipulated, if anything, the inverse. at my poorest i figured a way to open locked public toilet paper gadgets so i could fleece free rolls. necessity is the mother of investion, etc.

FredS 15 Mar 06

*Yawn* They still spent $534 million. Not exactly chump change.

well 15 Mar 06

innovation often comes from rediscovering or slightly modifying ideas from 20-30 years ago that were either poorly executed, impossible to realize at the time, or too far ahead of their time for industry blockheads to appreciate.

that’s why python, ruby, and other dynamic languages that consist of a C-style language with piecemeal components of Lisp/Smalltalk are so “innovative”.

it’s not fair comparing apple and microsoft in this regard because microsoft’s product lines are so much more diverse than apple’s. and anyway, apple has had a few lousy products in its time: WebObjects and all versions of Mac OS prior to Mac OS X come to mind.

finally: blowing billions without the expectation of immediate applications/useful results is a big part of why America is so wealthy and advanced. that’s just a fundamental part of research. and don’t tell me research isn’t useful, you make a living off the fruits of DARPA work, David.

nate 15 Mar 06

Are you trying to say DARPA’s work didn’t fill immediate needs at the time? The need for a secure, redundant communications network in the event of a nuclear strike comes to mind…

hp 15 Mar 06

I have to diasgree with the above statement claiming WebObjects to be a lousy product. It is not marketed at all and appears, when looking from otuside, to be not all that important. On the other hand, iTunes Music Store was built with and runs on it as do many massive systems (a number of banking applications come to mind as does the US Navy logistics management system, among others).


Best,

hp

Hubris Sonic 15 Mar 06

rationalize much?

Shrikant Joshi 16 Mar 06

On a personal note:

“Innovation comes when you have exhausted everything with your current project and still want to do more.”

As for the money spent, that equation wil never balance. Of the 100 ideas that you come up with, 90 are crap, 5 are unfeasible, 4 are too futuristic. The one idea that remains is your shot at innovation-stardom.

If you have the knack of pinning down that one idea, bypassing the rest 99, you are a winner in all respects. However, most of us have to trudge through the 10, at least, to arrive at ‘The One’.

Those who have to go the whole hog, deserve to be signing delivery documents and pushing files in some bureaucratic office. That said, I would also like to stress that the AHA moments are often worth the wait.

:)

Regards,
Shri.

Rimantas 16 Mar 06

Reminds me Semler’s piece about Gillette repeatedly spending
600 mln. (IIRC) just to add one more blade :)

Samo 16 Mar 06

Four words: Toyota Formula One Team.

edddy 16 Mar 06

I think you are distorting the story. Apple has risen the R&D budget, but the revenue has skyrocketed. You don’t need to spend more on R&D just because you’re successful

James AkaXakA 16 Mar 06

It means they don’t have to spend a load on G5 development - and indeed with higher revenue (driven by a few select products) it’s not so wierd that R&D as a percentage goes down.

Mike 16 Mar 06

I wonder if the analyst’s skittishness is linked to enhanced expectations. Apple is known for blockbuster releases and maybe the latest release (the big white speaker) was disappointing to the analysts, so all of the sudden they start running around saying R&D is too low. Shows you the analyst’s attention span (nevermind that little release of Intel’s chips ahead of schedule).

FredS 16 Mar 06

Edddy wins.

Aaron Blohowiak 16 Mar 06

I aggree with Fred.

Additionally, I wonder how much the transition to more conventional technology (x86) is freeing up resources.

I am not a shareholder of Apple (directly) but I can say that the fruits of their R&D have lead me to spend an increasing percentage of my modest income on Apple products.

Moderate me! 16 Mar 06

Warning: This post is deliberately off-topic.

I’ve been trying to reach anyone at 37signals to cancel my ‘Getting Real’ workshop reservation. Over the last several weeks I’ve sent emails, left messages, and even sent certified mail. Not a single response and the deadline for cancellation is tomorrow. So, Jason, David, Ryan, Sam, Marcel, Matt or Jamis - somebody - moderate me.

Bottom line: Cancel my reservation and refund my $895.

ML 16 Mar 06

Moderate me, please send an email to gettingreal at 37signals dot com and we’ll help you out. Thanks.

niblettes 16 Mar 06

Dollars may not translate into innovation, certainly. However they are often an index of management priorities. So falling investments in R&D often signal a deprioritization of R&D within an organization.

Is this is perhaps the case with Apple, or are they yet again and exception to what is a rule for many other companies?

Rod Boothby 16 Mar 06

Is innovation directly proportional to the quality of internal communication?

Is innovation directly proportional to the diversity of thought and ideas shared across departments and silos?

Is innovation inversely proportional to the number of problems being solved at once?

JF 16 Mar 06

Innovation can come in a heartbeat. A mistake. A flash of brilliance. Money and time doesn’t always buy it.

Steve R. 16 Mar 06

One million monkeys typing randomly for one million years will probably produce a line or two of Shakespeare.

Apple has some of the smartest monkeys around. I bet they can do more, better and faster, than the million random monkeys.

Phil 16 Mar 06

Hypercard may have been unprofitable, but it didn’t deserve to die… (Still bitter.)

Michael Ward 17 Mar 06

“Focus the ship”?!? _Less_ mixed metaphors please!

Michael Ward 17 Mar 06

R&D… it’s all about the future. It’s good to have it because without it we don’t look into the long term - but too much, and we lose focus on the here and now.

Look at MS - how many times do they promise us grandiose visions of the future, and then fail to deliver. Remember Cairo? Remember the original feature set of Longhorn?

MS sees the rosy vision of the future through their billions spent on R&D? Can they then turn these visions in to real products? Not very often.

Apple meanwhile concentrates more on the here and now, whilst not neglecting the benefits of R&D. The result? Real products that have better features and work - fewer missed promises.

10/10 for effort MS - but you really must keep your feet on the ground.

detroit 17 Mar 06

actually, one million monkeys typing randomly produced the internet.

i particularly love it when those monkeys analyze analysts.

Ed 18 Mar 06

Question:

Has the spending on product design increased proportionatly to the decline in research and design?

Could this be more of a focus on making it look and work better rather than introducing heaps of new features?

Victor Lombardi 19 Mar 06

Here’s some alternate financial analysis:
http://noisebetweenstations.com/personal/weblogs/?p=1867

Greg 20 Mar 06

Your comments are right on the mark. Look back at all the new software/online products that have come out over the last five years. Which companies have brought us the most useful and timesaving products? Not Google or Microsoft Labs. I would say small companies are the clear winners: 37 signals (Ruby on Rails, Basecamp), delicio.us, Technorati, bloggers, etc…

P.S. I have no financial interest in 37 signals.

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