How does your company determine how much to spend each year on R&D? Likely, a group of senior executives get together and offer their thoughts on what the figure should be for the next year. After a back and forth discussion focusing on the right amount for R&D, other corporate financial considerations are then put on the table that compete for monies that might go to R&D.
Now, with everything on table, the group decides what it will spend for R&D. So, one question is answered. What will we spend next year? But, the more important question is not answered. What is the right amount to spend on R&D? Each year management answers the “how much” question, but for decades management has never known if it is the “right amount” to spend.