John Hagel and The Economist's View discuss a Financial Times article by Michael Schrage that blasts the use of R&D spending as a measure of a company's innovativeness. The point is that many companies now innovate through "efficiencies, effectiveness and productivity." Hagel notes that in his research he has found little correlation between R&D spending and business performance.
Of course, the question is whether business performance is a good measure of a company's innovativeness because many companies can produce incredibly innovative products and fail on execution: manufacturing, reliability, marketing, usability, customer support, costs, etc. Schrage says that:
Innovation is not what innovators innovate, it is what customers actually adopt.
By this definition, a company that introduces an inventive product that fails in the market because of other factors was not in fact innovative. If a company later copies the product and has better pricing or marketing so that the product is accepted by consumers, then the second company is considered the innovator.
That's not the type of innovation I'm interested as someone in R&D. The question to me is what is the relationship between R&D spending and product innovations introduced to the market. Also, what other R&D metrics can account for the the variance in product success once other business variables have been factored out?
Hagel goes on to criticize using patent activity as a measure of innovation because such activity relates only to product innovation and doesn't capture process and business model innovations. I agree, but I am interested in how good a measure patent activity is of a company's innovativeness in product development. Most of the patents that I see assigned to competitors and those to companies in related fields are for inventions that never make it to market--i.e., they have a low hit-rate on invention-to-productization.
The presence of an abundance of patent filings, however, is probably correlated with a company's R&D spending (with other variance accounted for by corporate attitude to the value of patents), and both #of patents and R&D spending are probably correlated with product innovation to at least some extent. I can assess some form of a product innovation quotient for each company in my industry simply through my assessment of product introductions, and I'm going to guess that factor analysis can determine how the PIQ is dependent on R&D spending and # of patents filed/issued. The question I have is: what other metrics are related to the PIQ, and then how is product success related to the PIQ? I would like to be able to quantify the level of product innovativeness for each company and use it as a tool for my company's own assessment.