At Ingersoll Rand, we create new technology with an eye toward the world that our customers will inhabit in the future. We believe that innovation—finding new ways to meet the market’s future needs for reliable, energy-efficient solutions—is critical to driving our organic revenue growth. In 2017, we spent $210.8 million on research and development. We launched 73 new products and services, spanning nearly every business and region. Our average innovation revenue from 2015 to 2017 was 21.3%. Looking ahead to the next three to five years, we expect that several trends will have an especially powerful impact on our customers and our business. Chief among them are climate change, urbanization and industrialization, demographic shifts and demands for enhanced energy productivity. Read more about our innovation process in the letter from our Senior Vice President of Innovation and Chief Technology Officer, Paul Camuti.
At the end of 2017, 54.3% of direct spend
One of our core strategies is to increase our exposure to emerging markets. Overall, emerging market revenues made up 21% of the company’s revenue for 2017.
Our emerging market strategy has been particularly successful in China, Brazil, Mexico and India. In these four countries, we have established large local teams with full capabilities, manufacturing facilities and strong localized channel partners.
The Ingersoll Rand heating, ventilation and air conditioning (HVAC) business in China is participating in the “Coal to Electricity” program initiated by China’s government. The program is intended to significantly lower coal consumption for winter heating in North China, prevent air pollution and reduce PM2.5 emissions to improve the air quality in China over the long term. Our market and engineering teams and sales channels are collaborating to develop a new product with vapor injection and variable-speed technology to deliver heating capability that meets the needs of low-temperature environments. We continue to aggressively increase our participation in early-stage markets for Ingersoll Rand products.
We use a three-step process to prioritize our investments in emerging markets.
Based on analytics performed in 2014, the company determined to focus on four new markets, which included three emerging markets: Mexico, Brazil and the United Arab Emirates. We have embarked on hiring and training local sales and application resources to improve business and channel development in each of these countries and achieve aggressive revenue growth targets.
In parallel with these market expansion initiatives, we are developing innovative technologies and products targeted for the unique requirements of developing markets.
We have a 2020 goal to share energy conservation knowledge with 200 officials in developing regions. Please see our Progress Toward 2020 Targets section. We operate four engineering and technology centers globally, including facilities in Bangalore and Chennai in India, Prague in the Czech Republic, and Shanghai in China. Ingersoll Rand uses frequent exchange programs with global engineering leaders. In addition, we make temporary and permanent assignments of engineers from emerging markets into developed markets. Engineers are sent to the U.S. and European locations on short-term assignments to get hands-on experience with new technologies and collaborate on projects with their extended business engineering teams. We also form global distributed team structures for all new developed-market product engineers to grow skills in emerging-market R&D teams.