The Economist has an interesting piece about Nestlé highlighting it’s strong belief in R&D and long term focus. Two key business ingredients that seemingly marks the line of success across most sectors. Companies such as Google, Netflix, Amazon and Spotify (surprisingly) comes to mind when thinking about examples of this in the digital arena.

If Nestlé were content to battle it out with Kraft, the world’s second-largest food firm, in the business of just selling food, then its outlay on research and development (R&D) would be difficult to justify. But Mr Brabeck-Letmathe saw a decade ago that the food industry was becoming a commoditised grind with diminishing margins and little scope for disruptive innovation. So he began pushing Nestlé to develop functional foods with higher profit margins, and he increased spending accordingly. In 2008 Nestlé spent just under SFr2 billion on R&D, a sum that has more than doubled since 1998. At about 2% of sales, this is considerably more than rivals are spending: in 2007 Danone spent about 1% of its sales on R&D, and Kraft spent about 1.2%. Richard Laube, the head of Nestlé’s nutrition business and a former pharmaceuticals executive, describes a “pipeline” of some 75 research projects.

And for the long term view, think Nespresso.

Take Nespresso, an almost instant espresso that is made by machine from a little capsule of coffee. Nestlé started working on the technology in 1970 and filed its first patent in 1976. It was another decade before it was ready to start selling Nespresso pods and machines. Thereafter the business lost money for a decade. But now it is one of Nestlé’s fastest-growing products. Sales have been increasing by 30% a year (even though Nespresso is a premium brand) and are expected to reach nearly SFr3 billion this year. “It took off very, very slowly,” says Mr Bulcke. “It was 20 years of conviction that got us there.”

And they top it of with a kind of crazy but visionary statement about their future. Bold and indvidualistic.

Peter Brabeck-Letmathe, the firm’s chairman, and Paul Bulcke, its chief executive, hope to transform the food company into the world’s leading health, nutrition and “wellness” firm.

Image by Edvill