Innovating With Fresh Ideas

In 2005, the mantra inside many companies remains simple: Cut costs and push the hottest, high-margin sellers. But there's been a quiet casualty in the quest for cost containment and selling more, faster. R&D is suffering. A recent International Survey Research Corp. study on American managers found that nearly 40 percent thought their companies weren't doing enough to develop new products. Compare this to 1991, when only 21 percent of managers felt their companies lagged in R&D.

Now, companies' views of R&D are changing. It used to be that you were only as good as your last project; these days, you're only as good as your next idea. Kraft Foods Inc. co-CEO Betsy Holden was demoted in 2003 surrounding talk that the company wasn't generating new products to counter the obesity epidemic. Pharmaceutical giants such as GlaxoSmithKline are re-energizing new product development to counter Wall Street analysts' claims that their product pipelines are running dry. McDonald's, meanwhile, is finding it must continually introduce new menu items to remain competitive.