📖Philip Fisher
R&D Effectiveness
Continuous innovation is essential for maintaining competitive advantages.
Does the company have an above-average research and development program that can continue to develop products that will sustain its growth?
🏠 Everyday Analogy
📖 Core Interpretation
Sustainable growth requires continuous innovation. R&D is the engine of future products.
💎 Key Insight：Companies without strong research and development programs eventually lose market position to more innovative competitors. Above-average R&D spending relative to revenue, coupled with a track record of successful product development, indicates a company is investing in its future rather than harvesting past successes. The best investments are in businesses that consistently develop new products or improve existing ones, creating barriers to entry and sustaining pricing power.
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❓ Why It Matters
Companies that stop innovating eventually lose to competitors who don't.
🎯 How to Practice
Look at R&D spending as a percentage of sales, patent filings, and new product pipeline.
🎙️ Master's Voice
Go to five companies in an industry, ask each of them intelligent questions about the other four, and you will get an amazingly accurate picture of all five.
Fisher invented the scuttlebutt method—gathering information from multiple sources to triangulate the truth. This qualitative research gave him insights that financial analysis alone could not provide.
⚔️ Practical Guide
✅ Decision Checklist
- Have I talked to competitors?
- Have I spoken with customers and suppliers?
- Am I triangulating information?
📋 Action Steps
- Develop a network of industry sources
- Ask the same questions to multiple parties
- Look for patterns and contradictions
🚨 Warning Signs
- Relying only on company presentations
- No primary research
- Taking claims at face value
⚠️ Common Pitfalls
Confusing spending with results
Ignoring return on R&D investment
📚 Case Studies
1
Motorola Early R&D Bet (1955)
Fisher evaluated Motorola’s heavy R&D in semiconductors and communications, seeing a pipeline of products and strong technical leadership.
✨ Outcome：Invested and held long term; Motorola became a multibagger as R&D translated into dominant positions in radios and early electronics.
2
Texas Instruments Semiconductor Leadership (1960)
Fisher studied TI’s R&D intensity in transistors and integrated circuits, focusing on management’s ability to commercialize lab advances.
✨ Outcome：Maintained investment; TI’s technological edge drove strong revenue and profit growth, validating Fisher’s emphasis on sustained, productive R&D spending.
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