Manufacturers say they need to innovate to grow. But in the past 10 years, manufacturing growth, by innovation or other means, has been more wish than reality. This isn't a generalization. Deloitte studied more than 400 chemical and industrial product manufacturers. Subsequent data analysis returned surprising insights, especially about research and development.

The traditional path to innovation-internal R&D efforts-is not likely to turn things around. Studies show that increasing R&D spending rarely boosts revenue growth, profitability or shareholder return in chemical and industrial products companies. For instance, the Cooper and Kleinschmidt benchmarking study, which included 161 businesses representing a broad range of industrial products, showed no correlation between R&D spending and profitability.

Also, the traditional R&D model often results in lengthy time-to-profitability, high development costs, and too few commercially viable ideas generated.

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