Research & Development

We believe that product innovation leadership is critical to the sustained success of our Group. As a result, we invest considerable resources into continuously developing technological innovations and contemporizing our design philosophy, to best unite our brand values with the unique needs of our consumers. The research and development process is driven by internal teams of designers, product developers as well as in-house experts from the fields of biomechanics, materials technology, product and process engineering and similar disciplines.

Brand-Specific Global R&D Activities
Research and development within the adidas Group is organized in a decentralized structure, i.e. each brand separately runs its own research, design and development activities, with major locations in several countries. Our brand teams collaborate closely, sharing fundamental and biomechanical research to utilize the full scope of our R&D organization. In addition, our brands share existing technologies. The adidas Torsion® technology, for example, will be applied across a collection of Rockport men’s footwear in 2007 (see Campaigns and Products). Furthermore, our research and development functions work with our vast network of manufacturing partners around the globe, to increase efficiency in the product development and engineering processes.

Highly Skilled Technical Personnel
For all our brands, the foundation and success of our R&D efforts depend on bringing together a diverse and highly skilled workforce, and providing them with cutting-edge technology. Personnel expenses represent by far the largest portion of R&D expenses, accounting for over 67% of total R&D expenditure. At December 31, 2006, 1,040 people were employed in the Group’s R&D activities compared to 636 employees in 2005 (+ 64%). This represents 4% of total Group employees (2005: 4%). The increase in employees was mainly driven by the first-time inclusion of Reebok R&D staff. The R&D departments for each brand comprise experienced teams from different areas of expertise including mechanical engineering, materials engineering, industrial design, biomechanics, finite element analysis, advanced CAD design and product development. Our teams also include commercialization engineers as well as experts in production techniques, costing, packaging and IT systems.

Holistic R&D Approach at adidas
R&D activities at adidas focus on the development of revolutionary footwear, apparel and hardware technologies. To solidify the adidas brand’s position as a leader in technology and innovation, the adidas Innovation Team (ait) is responsible for developing cutting-edge technologies and concepts in all product categories. ait creates products that drive the success of the adidas brand, to give consumers exciting and relevant sports experiences. The team is divided into groups that focus on individual product categories such as basketball or football or cross-category project areas such as Intelligent Products or Energy Management Systems (cushioning technologies). These groups see the complete R&D process through from initial sketches to final production. R&D projects follow a holistic approach that involves collaborating with professional and recreational athletes to test and optimize products according to their needs and ideas. This concept of an R&D team creating market-ready products clearly is a competitive advantage in the sporting goods industry. adidas does not purchase any R&D expertise except fundamental research. To that extent, the team collaborates with well-established global research partners such as the Sports Technology Research Group of the University of Loughborough, England on long-term projects studying, for example, the characteristics of footballs or motion analysis in running and basketball. As a result of multi-faceted R&D projects, the ait has developed major innovations for 2007 which include adidas_1 intelligent footwear technology in running and basketball, BOUNCE™ in footwear, ForMotion™ in footwear and apparel and TechFit™ Powerweb in functional apparel. 

Divisional R&D Structure at Reebok
Within the Reebok segment, the Reebok, Reebok-CCM Hockey and Rockport divisions run separate R&D teams due to the different product offering of each. At brand Reebok, the R&D team creates footwear, apparel and equipment with the primary focus being the enhancement of fit and comfort for the consumer. The main goal of this R&D team is to develop product that provides a perfect fit for the consumer based on function, aesthetics and value. The R&D team at Reebok-CCM Hockey is dedicated to continuously creating innovative state-of-the-art hockey equipment used by both professional and recreational players. Rockport’s R&D function primarily focuses on developing insole components of footwear while incorporating the Group’s advanced proprietary athletic footwear and also industry-leading proprietary technologies into the outsole of both casual and dress shoes. R&D at all Reebok divisions includes a development/engineering team as well as a design and commercialization team, a human performance laboratory and a prototype sampling group with the product marketing teams in each strategic business unit. Major projects involve extensive biomechanical, fit, wear and materials testing and include collaborative tests with athletes. To further increase competitiveness, Reebok’s divisional R&D teams are extending own R&D activities while significantly reducing the utilization of R&D expertise purchased from external parties. The teams, however, continue to work in partnership with contracted manufacturers to share R&D resources. The Reebok R&D teams developed several important technologies to be used in 2007 products including the Kinetic Fit System (KFS), The Pump™ 2.0 custom fit technology, DMX footwear cushioning, PlayDry moisture management and the Rbk EDGE Uniform System™. 

Major R&D Locations and  Developments

Industry-Leading R&D at TaylorMade-adidas Golf
Experts widely believe that success in the golf market is primarily determined by the ability to constantly introduce and commercialize innovative performance technologies and products. TaylorMade-adidas Golf continually strives to adhere to that tenet by designing and developing industry-leading equipment, utilizing an array of sophisticated tools to improve existing technologies and introduce revolutionary new ones. Before products are brought to market, the R&D team conducts extensive testing activities including frequent and thorough input and feedback from tour professionals. In addition to undertaking own R&D activities and utilizing the ait’s know-how in adidas Golf footwear and apparel, TaylorMade-adidas Golf also purchases external hardware expertise amounting to 20% of the total R&D expenditure at the brand. Examples of this include 3-D animation technology used in the MATT system and ultra-thin driver casting capabilities to cast driver walls less than 0.8 millimeters thick. 2007 golf equipment technologies and products developed by the innovation teams of TaylorMade-adidas Golf or adidas include TaylorMade’s Movable Weight Technology™, Inverted Cone Technology, AGSI (Anti-Skid Groove System Insert) Technology, the Maxfli Fire, Maxfli Tour Fire and Maxfli PowerMAX golf balls, and adidas Golf’s ClimaCool® and Clima Compression apparel technologies.

First-Time Consolidation of Reebok Impacts R&D Expenses
Given the short product lifecycles in the sporting goods industry, R&D costs at the adidas Group are recognized as expense in the period in which they are incurred and are not capitalized. The increase in employees, primarily as a result of the acquisition of Reebok, drove R&D expenses higher by 56% to € 98 million in 2006 (2005: € 63 million). For the Group excluding Reebok, R&D expenses increased 14% to € 72 million. In 2006, R&D expenses represented 2.6% of total operating expenses versus 2.4% in the prior year. R&D expenses as a percentage of sales increased slightly to 1.0% from 0.9% in 2005. Other related expenses for product development and market research, for example, were incurred as part of the Group’s other operating overheads.

Active Trademark and Patent Protection Policy
To capitalize on the Group’s R&D achievements, we seek to gain trademark and patent protection for our key products, technologies and innovations in all major markets for footwear, apparel and hardware. We hold registered trademark rights or have applied for trademark protection for the Group’s brands and other proprietary names in most countries around the world. Our business is not dependent upon any single patent or licensed technology. As part of our business policy, we rigorously defend the adidas Group’s trademarks and patents by monitoring and prosecuting infringements of trademark and patent rights around the world (see Risk Report). 

R&D Expenses € in millions

R&D Expenses in % of Net Sales 

R&D Expenses in % of Operating Expenses 

Successful Product Introductions Highlight R&D Strength
Developing industry-leading technologies is only one aspect of being an innovation leader. Even more important is the successful commercialization of those technological innovations. The majority of the adidas Group’s sales in 2006 were generated with products newly introduced in the course of the year. At brand adidas, products launched in 2006 accounted for 79% of brand sales. Only 5% of total sales were generated with products introduced three or more years ago. Two examples of how adidas transformed technological innovations into commercial success in 2006 are the first modular football boot +F50 TUNIT and the +Teamgeist™ match ball of the 2006 FIFA World Cup™. After being launched in the market in March 2006, sales of the +F50 TUNIT football boot clearly surpassed our original targets. Similarly, after successfully launching the +Teamgeist™ in December 2005 featuring a completely new 14-panel configuration, sales figures clearly exceeded our original targets. An example of how Reebok successfully commercialized R&D efforts in 2006 is the Trinity KFS running shoe introduced in 2006, featuring both the innovative KFS upper material construction and DMX cushioning. This shoe was very well received at retail and won the prestigious Global Runner’s World Editor’s Choice award. In the TaylorMade-adidas Golf segment, current products (i.e. products launched in the last 18 months, which is the typical product lifecycle in golf) represented 79% of total sales. Products that had been brought to market three or more years ago accounted for 8% of TaylorMade-adidas Golf sales. As in prior years, all our brands will launch several new highlight products during the course of 2007 featuring major technologies (see Subsequent Events and Outlook). 

Related Links:

Global Operations
Group Strategy
Campaigns and Products