May 25, 2012 - 05:30 PM EDT — AAPL: 562.29 (-3.03, -0.54%) | NASDAQ: 2837.53 (-1.85, -0.07%)

How Apple gets away with markedly lower R&D spending vs. alleged competitors

Tuesday, January 31, 2012 · 4:12 pm · 35 Comments

“For a company that manages to debut a new product line every few years that seizes the public’s attention worldwide, it is rather amazing to see how little it spends on research and development compared to its peers,” Erica Ogg writes for GigaOM.

“On Monday Apple number cruncher extraordinaire Horace Dediu at Asymco put together some charts showing how Apple’s R&D spending trends,” Ogg writes.

Here’s a chart showing how Apple ranks among its tech industry peers:

Ogg writes, “The takeaway is this: Bloated bureaucracies spend a lot of money on innovation and occasionally make something new and interesting. Steve Jobs’ insistence on maintaining a startup mentality within Apple (even with 30,000+ corporate employees) and the company’s ability to only focus on a few things at a time mean Apple can spend less and get much more for its investment.”

Read more in the full article here.

MacDailyNews Take: Steve Jobs was nothing if not a lover of efficiency.

[Thanks to MacDailyNews Reader "moebeans" for the heads up.]

Categories: News

Tags: Apple Inc., R&D, steve jobs, Tim Cook

Thank You for supporting MacDailyNews!

♥ Adobe Photoshop CS6 Extended for Mac - Student and Teacher Edition DVD (65171323) only $249!
♥ Blowout: Apple 15.4" MacBook Pro i7/4Core/2.0GHz/4GB/500GB (MC721LL/A) only $1,549.99 + Free Shipping from MacMall
♥ Mac Madness Save 25% on Parallels Desktop 7!
♥ 15% Off Compatible Ink. 10% Off All Others (excludes OEMs). Free Shipping over $55. Coupon: 123BLOSSOM, Expires 6.18.12
♥ Save up to 60% at the Hammacher Schlemmer Special Values Sale-While supplies last.
♥ Dragon Dictate for Mac 2.5 - New! Simply Smarter Speech Recognition
♥ Up to 30% OFF Accessories from Verizon Wireless
♥ Limited Time Offer: Get free ZAGGsmartbuds when you buy a ZAGGsparq!

Comment Feed

35 Comments

XS

Tuesday, January 31, 2012 - 4:18 pm · Reply

Shouldn’t Mikey just take hi r&d budget and give it back to the shareholders?
Since they obliviously aren’t getting good return on the investment.
peter.s.

Tuesday, January 31, 2012 - 4:20 pm · Reply

It is not the amount of money, it is the focus on one clear vision.
- ken1w
  
  Tuesday, January 31, 2012 - 5:55 pm · Reply
  
  True, but there is more to it… Doing something that is truly NEW (actually “innovative”), and doing the work in secret.
  
  Apple – Thinks of a new product. Works on it secretly for an extended period of time with a small efficient talented team, with excellent planning and execution. Because it is secret and something new, there is no need to do a rush job. When it is finally ready, and as perfect as possible, it is announced and released. The crowd goes wild (and the competition is “flummoxed”).
  
  The competition – Sees a cool new product from Apple. Wants to copy it, as quickly as possible. Throws together a large team, and works feverishly (and inefficiently) to meet a deadline, before Apple releases “Version 2.0″ and make their work obsolete. The product is released before it is fully-tested and ready. The crowd laughs and walks away.
  
  Apple can use small teams, working over an extended period of time, because what they work on is something brand new, and they do it in secret. Small teams are cheaper and work more efficiently. The competition is forced use large teams, with inadequate planning, to copy what Apple accomplished, but in a fraction of the time. They are racing not only Apple, and also other copycat competitors. That is VERY expensive.
  
  Look at that chart. All the copiers of Apple, all at the top. Working “slavishly” and blowing through their R&D money to copy Apple.
  - fandango
    
    Wednesday, February 1, 2012 - 3:37 am · Reply
    
    No, no, no…
    
    ‘R&D’ is a euphemism for ‘party supplies’ aka: ‘expense account’.
    
    Srsly…
- vanfruniken
  
  Tuesday, January 31, 2012 - 6:04 pm · Reply
  
  It IS the amount of money as well.
  
  Just look at what the chart becomes in absolute numbers (multiply all the percentages times market cap), and you will see Apple spends a substantial amount of money on R&D. If a valuable idea works out, it can be manufactured in vast amounts (e.g., on a scale commensurate with Apple).
alanAudio

Tuesday, January 31, 2012 - 4:21 pm · Reply

It’s all to do with focus.

Apple knows where it is going. Steve Jobs had a vision and carefully put all the pieces in a row. Jony Ive thinks that way too, so the process will continue and stay as lean and efficient as ever.

Other companies dream up fanciful ideas, but without a practical application or business model for them. They waste money developing a concept that has no value in the bigger picture.
BoC

Tuesday, January 31, 2012 - 4:32 pm · Reply

MS uses a blast-em with a shotgun approach. Invent everything.

Blamer Balmer’s approach to killing a turkey must be to get an Uzi and just unload clip after clip at the grass. A bullet has to hit a bird sometime.
- janeshepard
  
  Tuesday, January 31, 2012 - 5:01 pm · Reply
  
  Ballmer’s new secret strategy is dual-wielding Micro Uzis.
  - billyjackblack
    
    Tuesday, January 31, 2012 - 5:20 pm · Reply
    
    Ah, bringing back memories of the 80′s and Scarface.
    - janeshepard
      
      Tuesday, January 31, 2012 - 8:00 pm · Reply
      
      Nah, bringing back memories of the 90′s and Lo Wang.
      
      http://www.imfdb.org/wiki/Shadow_Warrior
  - markar12
    
    Wednesday, February 1, 2012 - 11:04 am · Reply
    
    The only thing Stevie has hit is his own foot!
- nciceman
  
  Tuesday, January 31, 2012 - 5:13 pm · Reply
  
  I’ve been saying this for some time about Microsoft’s “us too” approach to getting in to new markets. When do they ever really R&D anything new?
  
  Big Ass Table was an attempt at something somewhat original, at least.
  - Seamus
    
    Tuesday, January 31, 2012 - 5:26 pm · Reply
    
    Sorry. No it wasn’t. A better big-ass table was demonstrated at TED long before MS brought theirs out. Again, they were just copying the actual innovators.
wandering Joe

Tuesday, January 31, 2012 - 4:33 pm · Reply

As anyone can see, the reason the others spend so much money on R&D is because of all the overpriced Apple products they need to buy in order to copy them
- Ned Ryerson
  
  Tuesday, January 31, 2012 - 5:06 pm · Reply
  
  +1 hahahaha
  Apple saves on leasing photocopiers and buying samples of everyone else’s products.
Cleetus

Tuesday, January 31, 2012 - 4:34 pm · Reply

It’ll change in 2012. Apple used to pay the head of R&D $1/year.
- Raymond in DC
  
  Tuesday, January 31, 2012 - 5:13 pm · Reply
  
  Correction: $1 per year plus millions of stock shares, not to mention a Gulfstream jet.
  - billyjackblack
    
    Tuesday, January 31, 2012 - 5:22 pm · Reply
    
    And he could’ve demanded much much more. He just wasn’t interested in being the richest man in the cemetery.
Richie

Tuesday, January 31, 2012 - 4:41 pm · Reply

It’s called TALENT. Just saying….
- 3l3c7ro
  
  Tuesday, January 31, 2012 - 4:51 pm · Reply
  
  “Just saying….” That is just a poultry feces way of saying that you lack the intestinal fortitude to stand up for what you are saying. Please don’t post or at least drop the gutless tag line.
  - enzos
    
    Tuesday, January 31, 2012 - 6:00 pm · Reply
    
    Coffee machine not working this morning?
    Cheers
    (Yes, I hate that craven tag-line too but not THAT much!)
Xan

Tuesday, January 31, 2012 - 4:42 pm · Reply

Measuring R&D spend as a percentage of sales is fairly dumb really. The dollar figure on R&D spending is probably more interesting to consider.

The fact that Apple ranks so low on the graph is more a reflection of the type of company that Apple is. Apple has lots of retail employees, and since they outsource the manufacture of physical products they have high costs associated with that.

Apple’s R&D spend is going to mostly be the salary for all of their OS engineers, software developers, and product designers.

What this article is telling us is that Apple employs less of these kind of people than Microsoft or Google.
- Kendo
  
  Tuesday, January 31, 2012 - 4:54 pm · Reply
  
  I think that should read ‘fewer people’. Also, I can’t understand your point. I could be stupid. Could you clarify?
  - janeshepard
    
    Tuesday, January 31, 2012 - 5:08 pm · Reply
    
    Xan’s point is that the number of R&D employees is small compared to all other Apple employees. So, it stands to reason that it’s a smaller percentage of the total.
macromancer

Tuesday, January 31, 2012 - 4:46 pm · Reply

It’s the difference between a company that’s focused and a company that hasn’t got a clue and just throws tons of garbage on the wall to see what sticks.
- Seamus
  
  Tuesday, January 31, 2012 - 5:28 pm · Reply
  
  Exactly! It’s only a few years ago that Microsloth’s R@D budget was larger than Apple’s income. And yet Apple innovated brilliantly while MS flopped around producing nothing of note.
Bizlaw

Tuesday, January 31, 2012 - 4:54 pm · Reply

This chart really shows that Apple doesn’t partake in “pet projects” of various whims, like Microsoft’s Big Ass Table. Apple puts its R&D to work on developing viable, salable products.

Dell’s number isn’t surprising either. Dell doesn’t really make anything new; it just assembles boxes. When it does venture out of its box (see Dell Streak), it quickly admits failure and crawls back into its hole. Thus, little needs to be spend on R&D.

Microsoft, on the other hand, buys companies like Sidekick and then makes cigars out of thousand dollar bills and sits in a room smoking them until it runs out of cigars and the acquired company’s product dies.
- Sherm
  
  Tuesday, January 31, 2012 - 5:24 pm · Reply
  
  Brilliant synopsis of Dell!
3l3c7ro

Tuesday, January 31, 2012 - 4:55 pm · Reply

Interesting how little that Dell spends on R&D. They must have spent the whole wad on a Samsung photocopier and screw drivers to take apart Apple’s products.
Sherm

Tuesday, January 31, 2012 - 5:22 pm · Reply

Dell…that’s hilarious!

What do they have to research or develop? How to make even cheaper plastic boxes that breakdown in a shorter time frame?
Amstel

Tuesday, January 31, 2012 - 5:22 pm · Reply

Does anyone really care – just look at the bare facts – who makes the best products by a mile – APPLE r&d or not it’s that basic!
TheConfuzed1

Tuesday, January 31, 2012 - 5:58 pm · Reply

The numbers are skewed.

If Apple has the highest revenue, it takes a higher percentage to equal the same amount of cash.

Just like 2% of $1,000,000 is more than 10% of 100,000.

So just because they spend less as a percentage, does not necessarily mean that they spend less in actual dollars.
None-Too-Great Hits

Tuesday, January 31, 2012 - 6:36 pm · Reply

How to Lie with Statistics
MEES

Tuesday, January 31, 2012 - 9:41 pm · Reply

Wow, copy machines are dang expensive over at Redmond!
Mr. Reeee

Wednesday, February 1, 2012 - 12:12 am · Reply

So, burning piles of cash out in the parking lot at the Microsoft campus is called R&D?