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olivier blanchard

Solid article/blog post, John!!!

Amen x infinity. :)

John Hagel III

Chris - The measure for innovation that I propose is hard to apply and simply can't be done for private companies without access to inside information.

The McKinsey Global Institute has invested significant effort in capturing productivity data by industry across many different countries, but it has done far less in tracking the rate of productivity improvement and, with very limited exceptions, has not focused on the enterprise level. A great synthesis of this work is available in The Power of Productivity by Bill Lewis, the former head of the McKinsey Global Institute.

I have frequently done the analysis on specific public corporations that I proposed in my posting. It is time-consuming but extraordinarily revealing. One can take short-cuts and look at simpler measures like profit per employee or even revenue per employee over time. These are suggestive and informative, but they also have clear limitations.

Obviously, looking at R&D spending or patent filings is much easier but it is fundamentally misleading. The problem is not R&D spending or patent filings - it is achieving market impact from all forms of innovation initiatives.

Larry Irons

Booz, Allen, Hamilton recently reported on their Global Innovation 1000 research in "Money Isn't Everything." Their study makes a similar point about R&D spending as well as patent output as indicators of innovation. The report noted:

"We found only one strong performance correlation. Higher R&D-to-sales ratios were associated wtih higher gross margins: the percentage of revenue left over after subtracting the costs of materials, labor, manufacturing, and direct shipping, and after paying other expenses incurred in making the products or services sold."


As someone who heads a research department mandated to produce product innovations, I appreciate your post on the lack of information provided by R&D spending and # of patents as measures of a company's innovation.

If we limit our interest to product innovation only, I'm curious how those two measures stack up. I would guess that they are still only loosely correlated, and in some cases correlated only through a co-dependent relationship with another independent variable like R&D size.

chris anderson

Most of the uses of stats on R&D spending and patents granted are in regional competetiveness studies. If they're useless, what would you suggest as an alternative? The productivty growth/employee example you offer is hard to get from outside, especially for private companies.

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