📈 Chartpack: Research and Development (R&D) spend
How much are tech companies spending, what are they spending it on and what lessons can you learn for driving innovation?
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Hi product people 👋,
I recently watched a talk given by the former UK Prime Minister Tony Blair on the future of Britain. The talk was part of a series created by his venture, the Tony Blair Institute, which outlines global policy and thought leadership across a number of sectors - including technology.
Politics aside, there was one stat in particular that stood out to me: Amazon spends more on research and development than the entire UK state.
This got me thinking. How much are Amazon and other tech companies spending on R&D, what exactly are they spending it on and how might other companies benefit from their R&D efforts?Â
Coming up in this 📈Chartpack:
What is R&D and why do companies invest in it?
How much are companies spending?
What product innovations are they building with R&D funding?
How you can apply lessons to drive innovation and R&D principles in your own business
What is R&D and why do companies invest in it?
Research and development is a distinct category of investment that companies decide to invest in. There are 3 broad categories of R&D:
Basic research - incubators and accelerators where corporations invest in startupsÂ
Applied research - typically staffed by engineers and teams who build new products. The goal of applied research is the practical application of knowledge to solve real world problems.
Development research - typically takes place after applied research with a focus on bringing new innovations to market
The key driver behind a company’s decision to invest in R&D is the product innovation it drives. For large companies this means dedicating billions of dollars to R&D to stay ahead of competitors. Amazon was granted over 2000 new patents across new technologies in 2020 alone, for example.
But there's another incentive for R&D investment, too. Tax credits are often granted by governments for a percentage of the expenditure associated with the costs of research. This is typically paid either as a lump payment or as a write down on corporation tax.Â
The lure of reduced taxes and the pressure to stay ahead of competitors means R&D spends can end up being a significant percentage of a company’s revenues.
Here are the world’s biggest spenders on R&D. Amazon spends a massive $73 billion a year on R&D, far more than its nearest competitors. Alphabet, Facebook, Apple and Microsoft make up the rest of the top 5 spenders.