High Growth Markets magazine series: Trends in …...1 High Growth Markets magazine series: Trends in Global Innovation October 4, 2012 Disclaimer The information contained in this

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High Growth Markets magazineMarkets magazine series: Trends in Global Innovation

October 4, 2012

Disclaimer

The information contained in this webcast, entitled Trends in Global Innovation, is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

© 2012 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 104919

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Mark Barnes, Partner in Charge, High Growth Markets practice, KPMG LLP

Martin Grueber, Research Leader, Battelle

With You Today

Adam Bates, Partner, Global Head of Innovation, UK Head of Foresight & Innovation KPMG LLP

Gary Matuszak, Partner, Global Chairman Technology, Media & Telecommunications

© 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

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Global R&D Investment & Emerging MarketEmerging Market Challenges

China – Emerging as a Significant “Outlier” In World of R&D


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Gross Expenditures on R&D (GERD) is Stable Relative to GDP in Most Economies

Billions, Current US$ PPP 2010 2011 2012

Regions/Key Countries GERDGERD as % of GDP GERD

GERD as % of GDP GERD

GERD as % of GDP

North America 446.8 2.5% 460.5 2.5% 471.4 2.6%

U.S. 415.1 2.8% 427.2 2.8% 436.0 2.8%

South America 30.1 1.1% 34.6 1.2% 37.9 1.2%

Brazil 23.9 1.1% 27.5 1.2% 30.0 1.2%

Europe/Russia 351.7 1.8% 366.6 1.8% 377.1 1.9%

Germany 82.9 2.8% 87.9 2.8% 90.6 2.9%

France 47.4 2.2% 49.2 2.2% 51.1 2.2%

United Kingdom 39.1 1.8% 40.3 1.8% 41.4 1.8%

Russian Federation 32.8 1.5% 35.1 1.5% 36.0 1.5%

Asia 410.6 1.8% 453.1 1.8% 492.7 1.8%

China 149.3 1.5% 174.9 1.6% 198.9 1.6%

Japan 148 3 3 4% 152 1 3 5% 157 6 3 5%


Japan 148.3 3.4% 152.1 3.5% 157.6 3.5%

South Korea 82.9 3.4% 87.9 3.4% 90.6 3.5%

India 32.5 0.8% 38.0 0.9% 41.3 0.9%

Oceania 20.9 2.1% 22.1 2.1% 23.4 2.2%

Rest of the World 40.5 1.7% 43.4 1.7% 45.2 1.7%

South Africa 4.9 0.9% 5.3 1.0% 5.5 0.9%

World Total 1,300.6 1.7% 1,380.2 1.7% 1,447.7 1.7%

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Source: Battelle/R&D Magazine 2012 Global R&D Funding Forecast-Revised Data 9/2012

GERD in Emerging Market Countries Dramatically Outpacing Developed Countries

Regions/Key CountriesGERD Growth

2010-2012

Global GERD Share

2010 2012

North America 5.5% 34.4% 32.6%

U.S. 5.0% 31.9% 30.1%

South America 25.9% 2.3% 2.6%

Brazil 25.5% 1.8% 2.1%

Europe/Russia 7.2% 27.0% 26.0%

Germany 9.3% 6.4% 6.3%

France 7.8% 3.6% 3.5%

United Kingdom 5.9% 3.0% 2.9%

Russian Federation 9.8% 2.5% 2.5%

Asia 20.0% 31.6% 34.0%

China 33.2% 11.5% 13.7%

Japan 6.3% 11.4% 10.9%


South Korea 9.3% 6.4% 6.3%

India 27.1% 2.5% 2.9%

Oceania 12.0% 1.6% 1.6%

Rest of the World 11.6% 3.1% 3.1%

South Africa 12.2% 0.4% 0.4%

World Total 11.3% 100.0% 100.0%

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Source: Battelle/R&D Magazine 2012 Global R&D Funding Forecast-Revised Data 9/2012

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Growth in Key Emerging Markets Associated with Significant Growth in GERD

Billions, Current US$ PPP 2010 2011 2012

Market Economy GERDGERD as % of GDP GERD

GERD as % of GDP GERD

GERD as % of GDP

Developed 917.1 2.6% 947.1 2.6% 973.8 2.6%

Emerging 356.0 1.2% 404.0 1.2% 443.5 1.3%

World Total 1,300.6 1.7% 1,380.2 1.7% 1,447.7 1.7%

Billions, Current US$Growth Rate

2010-2011Growth Rate

2011-2012Growth Rate

2010-2012

Market Economy GERD GDP GERD GDP GERD GDP

Developed 3.3% 3.5% 2.8% 1.9% 6.2% 5.4%

Emerging 13 5% 8 6% 9 8% 7 1% 24 6% 16 3%


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Source: Battelle/R&D Magazine 2012 Global R&D Funding Forecast-Revised Data 9/2012; Economist/MSCI Market Country Definitions

Emerging 13.5% 8.6% 9.8% 7.1% 24.6% 16.3%

World Total 6.1% 3.7% 4.9% 3.2% 11.3% 7.0%

Developed Countries Still Dominate R&D, But Emerging Markets Include Some Leading Players


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Similarities and Important Differences in Research Challenges Between Developed and Emerging Market Countries

Developed Countries Emerging Market CountriesMost Important Challenges Most Important Challenges

Limited External Funding Skilled Worker ShortagesLimited Internal Budget Interdisciplinary Research EffortsDevelopment Time Demonstrating Acceptable R&D ROIDemonstrating Acceptable R&D ROI Technology SolutionsSkilled Worker Shortages Collaboration with External Organizations

Least Important Challenges Least Important ChallengesProduct Safety Legal IssuesP d t Q lifi ti I t ll t l P t M t


Product Qualification Intellectual Property ManagementInflation Costs Product Safety

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Source: Battelle/R&D Magazine Global R&D Funding Forecast; Economist/MSCI Market Country Definitions

Different trends in innovation outlook oninnovation, outlook on strategies for western companies

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*Source: The Economist, April 16 2011

Average number of years a company spends in the S&P 500 index*

© 2012 KPMG International Cooperative ('KPMG International'), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

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World isWorld is changingchanging

Corporate Impact & Corporate Impact & ResponsesResponses

faster than everfaster than everit’s time to startit’s time to start

thinking thinking differentlydifferently

World is World is changingchanging

DemographicsDemographicsSocial values Social values & & BehavioursBehaviours

Ethical Business & Ethical Business & GGT h lT h l


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GovernanceGovernance

EnvironmentEnvironment

TechnologyTechnology

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Changing customer preferences

FreemiumInstant, easy &always works

Quality / personalised & willing to pay

24/7 ultra-high speed connectivity is a human right


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Leadership

“To keep pace in this industry, you need to change at least as fast as consumer expectations That’s renovation To maintainexpectations. That’s renovation. To maintain a leadership position, you also need to leapfrog, to move faster and go beyond what consumers will tell you. That’s innovation”

Peter Brabeck, Chairman Nestle


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Peter Brabeck, Chairman Nestle

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Innovation is executing strategy

MARKET FORCES


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2012 2013 2014 2015 2016

In summary …

20202020Winners

Challenge businessmodels

Data Synthesis


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Quick &

Agile

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Technology Innovation Markets

U.S. and China Most promising countries to drive technology breakthroughs

29%U.S.

9%

13%

29%

Japan

India

China


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0% 5% 10% 15% 20% 25% 30% 35%May not equal 100% due to

rounding

Source: KPMG Technology Innovation Survey 2012.

Which country shows the most promise for disruptive breakthroughs that will have a global impact?Q

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U.S. and China Most promising countries to drive technology breakthroughs

25%26%

34%

71%

17%

22%

39%

29%

29%

China

US

2%

7%

17%

35%

7%

12%

8%

28%

6%

8%

11%

21%

0%

4%

4%

71%

6%

10%

12%

4%

9%

13%

Israel

Japan

India

China


20

2%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Global (n = 668) US (n = 165) China (n = 92) Americas (n = 229) EMEA (n = 156) ASPAC (n = 283)

May not equal 100% due to

rounding


Which country shows the most promise for disruptive breakthroughs that will have a global impact?Q

Likelihood for world’s technology innovation center to move from Silicon Valley to another country in the next four years

39%

23%

32%

34%

28%

44%

U.S.

Global

13%

22%

35%

17%

5%

33%

34%

34%

30%

35%

54%

44%

31%

53%

60%

0% 25% 50% 75% 100%

ASPAC

EMEA

Americas

Israel

China


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Unlikely Neutral LikelyMay not equal 100% due to

rounding


What is the likelihood that the technology innovation center of the world will move from Silicon Valley to another country in the next four years?Q

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If so, China was voted to take the lead over the next four years

48%36%

43%

6%

84%

12%

50%

22%

44%

India

China

1%

11%

7%

26%

2%

6%

13%

21%

10%

7%

10%

15%

0%

1%

5%

6%

2%

8%

13%

4%

9%

10%

Canada

Korea

Japan

India


22

1%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Global (n = 515) US (n = 100) China (n = 87) Americas (n = 148) EMEA (n = 121) ASPAC (n = 246)


rounding


Which country is most likely to become the leading innovation center of the world over the next four years?Q

Innovation Management

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Responsible function to drive innovation

20%

29%

Chief innovation officer

CEO

Other responses include: Chairman

5%

5%

6%

15%

15%

O h

Think tank committee

Corporate development

Individual product units

Chief information officer

Research & development Chairman Chief Architect Chief Strategy Officer Collective Approach CEO COO CTO Director Distributed Entrepreneur Everyone General Manager Marketing President-COO


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5%

0% 5% 10% 15% 20% 25% 30% 35%

Other


rounding


What function/role has the responsibility to drive innovation in your company?Q

Metric to measure innovation value

36%

53%

ROI

Revenue growth

2%

9%

18%

22%

29%

35%

Other

Number of patents

Brand/ Reputation barometer

Market value

Number of new customers acquired

Market share


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2%

0% 10% 20% 30% 40% 50% 60%

Other

Multiple responses

allowed


What metrics are used in your organization to measure the value of innovation?Q

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Creating an innovative culture

17%

39%

Career progression (promotion)

Financial incentives (bonus, salary increase)

1%

12%

15%

16%

Other

External recognition (market place notoriety)

Time allocation (percentage of paid work time

allocated to innovation, ideation)

Internal recognition (acknowledgement)


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0% 5% 10% 15% 20% 25% 30% 35% 40% 45%May not equal 100% due to

rounding


Which of the following is the most effective for an organization to motivate its employees to be innovative?Q

Questions?

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Today’s Presenters

Mark Barnes

+1 313 230-3316

[email protected]

Martin Grueber

+1 216 898-6402

[email protected]

Adam Bates

+44 20 73113934

[email protected]

© 20XX KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. <Insert DOCID>

© 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independentfirms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

Gary Matuszak

+1 408 367-4757

[email protected]

© 2012 KPMG LLP, a Delaware limited liability partnership and the U S member firm of the KPMG network ofand the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International Cooperative ("KPMG International").

Documents

High Growth Markets magazine series: Trends in …...1 High Growth Markets magazine series: Trends in Global Innovation October 4, 2012 Disclaimer The information contained in this