The average life expectancy of a company is sadly only 40-50 years. You would think that a company lifetime could easily surpass our lifetimes because many generations can work at a company and pass down it's products, brands, know-how, competencies, customer base, etc. to successive generations. But ultimately companies die because they fail to adapt and change. One area of adaption that is the most difficult to navigate is when to start investing in new markets and de-investing in the traditional markets that initially built the company. Too many companies get themselves caught in a trap of continual investment in their 'core' markets, which are no longer growing and missing out on growth adjacencies that can fuel the company's next generation of growth. This paper will explore the reinforcing feedback loops and systemic delays that cause most companies to invest too much and too long in their traditional market and recommends a new R&D investment rule of thumb that breaks this cycle. A significant mindset change from looking at R&D allocation as a % of sales and instead adopting R&D as a % of future market size is proposed.
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