Innovation and Research and Development

Innovation and R&D by John Hagel:

From a competitive viewpoint, what matters is the relative rate of productivity improvement. R&D spending and patent filings will matter little if they do not translate into faster productivity improvement -– in fact, they can be a significant distraction. Those who understand this will have a significant edge as competition intensifies in the global economy.

I would argue innovation can be related to productivity improvement or it can be completely unrelated. A company could innovate with an ideas like the remote control for televisions (or microlending or air bags). That innovation may not contribute in any way to manufacturing televisions more productively.

Other innovation may be related to improving the productivity alone and add no additional functionality to the customer. Many innovations will provide a combination of both benefits. Both innovation and productivity improvement are important.

Quoting Michael Schrage’s article:

The simple fact is that R&D spending – whether in euros, dollars or as a percentage of sales – is an input, not a measure of efficiency, effectiveness or productivity. Ingenuity, invention and innovation are rarely functions of budgetary investment.

John Hagel then states:

I only wish that Michael had gone a bit further and spent more time attacking a related fallacy: equating patents with innovation.

I agree with the weakness of using research spending and patents to measure innovation. I do not believe they are worthless as measures, however. Are there better measures? Outcome measures? If so, what are they? From the post I might guess productivity improvement might be such a measure. While that might be a useful measure it is hardly a sufficient one. I agree people should understand the weaknesses with the measures but I still believe they are useful in understanding where things stand and how things are changing.

The Innovation/Productivity Quotient by John Hagel III and John Seely Brown:

The real winners in terms of IT investment to generate major productivity advances have been highly innovative at two levels: They redesigned key business processes to exploit IT capabilities, and they focused on implementing continuing innovations in these business processes.

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