Sustained, disciplined innovation tends to beat one-off breakthroughs over a full business cycle. The simple reason is compounding. When firms invest year after year in product pipelines, platforms, and capabilities, they create option value that widens over time, while one-shot bets usually decay without a follow-on engine. Multiple strands of evidence point in the same direction: industries and companies that keep up a steady cadence of innovation deliver stronger long-run growth and better risk-adjusted outcomes.
What the data says about persistence
Across the OECD, business accounts for roughly three quarters of total R&D spending, and that share has been rising. In 2023, business R&D represented about 74 percent of total R&D, with overall inflation-adjusted R&D growth at 2.4 percent for the year. These figures confirm that persistent corporate investment is the locomotive of innovation in advanced economies.
At the industry level, research shows a clear association between higher innovation intensity and superior long-term performance. A McKinsey analysis finds that more innovative industries tend to post higher rates of long-run revenue growth and deliver higher returns, reinforcing the idea that steady reinvestment produces durable advantages.
There is nuance at the firm level. The long-running Global Innovation 1000 study highlights that simply spending more as a percent of sales does not guarantee superior financial results. What matters is the capability system behind the spend and the consistency with which it is applied. High-leverage innovators in the dataset outperform peers while spending less as a proportion of sales, because their investment is focused and repeated rather than sporadic and reactive.
Policymakers see similar dynamics in the public sphere. The IMF has argued that increasing public funding for fundamental research by around 0.5 percent of GDP can lift GDP by as much as 2 percent over eight years, but only if that funding persists and is paired with broad access to R&D incentives. The message is consistent: continuity compounds.
Why consistency compounds in the real world
Learning curves and cost declines. Steady investment accelerates learning. Repeated design, test, and release cycles lower unit costs and shorten time to market. The benefits are cumulative because each iteration starts from a higher base of knowledge and capability.
Platform effects. Platforms pay back over time. A firm that invests annually in a data asset, a developer ecosystem, or a modular architecture can reuse building blocks across product lines. One-off projects rarely achieve that spillover.
Talent markets. Consistent funding attracts and keeps specialized talent. The probability that a breakthrough is commercialized rises when the same cross-functional teams work together year after year.
Capital discipline. A stable innovation portfolio makes it easier to stop weak bets and double down on traction, which improves the return on invested capital. Recent guidance for executives emphasizes portfolio teardowns and stage-gate rigor so scarce resources flow to the highest potential concepts on a continuing basis.
The timing illusion: why sudden breakthroughs underperform on average
Every sector has legends of single products that moved markets. Yet even famous breakthroughs rested on years of pre-investment in tools, talent, and infrastructure. Academic work also suggests that equity markets can undervalue long-horizon R&D, tempting managers to favor quick wins over compounding capability. Firms that succumb to this pressure risk underinvesting in the very pipeline that would sustain performance later in the cycle.
Investor sentiment adds noise. When sentiment is euphoric, markets may briefly overreward visible R&D announcements and underreward quiet platform work. During pessimistic periods, the same R&D spend can be penalized, encouraging volatility in budgets. The lesson for managers is to smooth investment across the cycle rather than chase sentiment.
Measuring the payoff without falling into traps
Executives and investors need two simple lenses to evaluate long-run innovation returns.
1) Cumulative outcomes. Over multi-year horizons, what matters is the end value created by compounding cash flows and reinvestment. When planning or communicating a long-range investment case, many managers project the terminal outcome of steady reinvestment at plausible growth rates and contribution margins. If you want a quick, transparent way to illustrate this for a program or portfolio, you can run a simple projection with a future value calculator at this point in the planning conversation.
2) Annualized growth. Different starting points, divestitures, and macro shocks can distort simple growth comparisons. Using an annualized growth metric helps normalize performance across periods. Research on long-lived firms that reignite growth suggests that those able to refresh their growth engines can post very strong total shareholder returns over multi-year windows, which aligns with the logic of annualized compounding rather than point-to-point jumps. For clarity in your own reporting, compute the annualized rate with a CAGR calculator.
Note that both the lenses are sanity checks. The first keeps teams honest about cumulative value creation under consistent reinvestment. The second prevents cherry-picking by translating lumpy growth into a comparable rate.
A practical playbook for consistent innovators
Anchor on a multi-cycle thesis. Define two or three secular forces you will invest behind for five to ten years, not one budget season. Private-capital research stresses that superior long-term performance often comes from backing trends that require patience most peers will not tolerate.
Balance exploration and exploitation. Maintain an explicit split between horizon-one enhancements and horizon-two or three bets. This prevents near-term priorities from crowding out the next S-curve and helps avoid a feast-and-famine pattern.
Institutionalize small, fast releases. A predictable cadence of releases forces continuous customer feedback and builds a culture of shipping, which compounds learning effects.
Run portfolio teardowns twice a year. Kill projects that are starved of customer pull or platform leverage. Fund the few that compound across business lines. Evidence from recent downturns shows that freezing innovation wholesale is costly, while rebalancing toward the most promising bets yields better long-run outcomes.
Protect the talent flywheel. Hiring surges followed by freezes destroy tacit knowledge. Use variable vendors and cloud credits to flex costs, and keep core teams intact so that capability compounds.
Report with right-sized metrics. Do not rely on spending alone. Tie a small set of leading indicators to each program: reuse percentage across products, components shipped per quarter, active developer partners, or time from concept commit to in-market pilot. The Strategy& evidence that spend level alone does not predict outcomes is a useful reminder to emphasize capability and consistency in board reporting.
Case patterns that repeatedly win
Platform plus applications. Organizations that invest in a core platform and then roll out application layers across verticals see disproportionate returns, because each application is cheaper and faster than the last. This pattern explains why industries with dense innovation networks tend to grow revenue faster over time.
Customer data loops. Continuous investment in data collection, labeling, and privacy-safe activation improves model performance and personalization year after year. One-time data grabs without operational follow-through rarely sustain lift.
Ecosystem leverage. Firms that make steady investments in partner tooling and incentives benefit from network effects. Sporadic partnership programs typically fizzle.
Hardware plus services. Recurring service layers on top of improved hardware create durable cash flow that funds the next generation. The compounding effect is financial and technical.
What this means for boards and investors
Directors should judge management not only by headline breakthroughs but by the health of the innovation engine that produces them. Ask whether the firm has maintained investment through the cycle, whether the platform reuse rate is rising, and whether leading indicators are improving at a steady cadence. For investors, pay less attention to single announcements and more to whether the organization has the mechanisms and culture to compound. Market headlines can inflate or depress perceived payoffs in the short run, but long-run evidence favors firms that simply keep going.
The bottom line
Breakthroughs matter, but they are outcomes, not a strategy. The strategy is a steady, focused, multi-year investment that compounds learning, platforms, and talent. Cross-country statistics, industry analyses, and governance research all point the same way. Companies and economies that protect consistent innovation budgets generate more durable growth and better long-term returns than those that chase the next big thing and stop. The long arc of innovation bends toward those who keep investing.