Page 136 - Accelerating out of the Great Recession

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Invest in R&D and Accelerate Product Development

During the Great Depression, R&D spending dropped signifi-
cantly. But we find a consistent pattern in our research: compa-
nies like IBM that were able to sustain investment in R&D cre-
ated enduring advantage. It is also true that downturn
investments are often of better value, with less competition for
scarce resources not only keeping costs down but also increas-
ing availability. Playing catch-up with a company that contin-
ues to invest through difficult times is extremely difficult.
In the years before the Great Depression, the U.S. chemical
industry had experienced a period of innovation and success.
Much of that success continued through the 1930s, with the
industry still remaining profitable despite a sharp drop in rev-
enues. However, DuPont significantly outperformed the indus-
try. The company’s profits increased by 60 percent between 1929
and 1937, with its share of the profits of the chemical industry
increasing from 20 percent to 32 percent over the same period.
Rather than follow convention and cut back R&D in response
to the Great Depression, DuPont expanded, recognizing that
increasing investment in R&D could open up an innovation gap
over its competitors. It adopted a policy of cost “refinement, not
retrenchment,” assessing research on the basis of its potential to
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deliver marketable products in a short time frame. This practi-
cal commitment to rapid development cycles and the prioritiza-
tion of investment that can yield quick returns are features of
many successful innovators in difficult economic times.
DuPont used the downturn as an opportunity to take a hard
look at its research programs, eliminating those that had little
chance of success and increasing R&D spending on others with
greater potential. The struggling ammonia division, for example,

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