Are you spending too much on R&D? Too little? Is your innovation program successful? And how do you measure that success?
Your company is spending millions on R&D every year, but despite your best efforts, that R&D isn’t driving growth. If you’re like 95% of firms, you aren’t investing the right amount, and the productivity of your R&D has fallen dramatically over the past several years. That’s because there hasn’t been a universal, uniform, and reliable measure of R&D—until now.
First introduced in Anne Marie Knott’s influential Harvard Business Review article, RQTM (Research Quotient) is a revolutionary new tool that measures a company’s R&D capability—its ability to convert investment in R&D into products and services people want to buy or to reduce the cost of producing these. RQ not only tells companies how “smart” they are, it provides a guide for how much they should invest in R&D to ensure that investment will increase revenues, profits, and market value.
Armed with insights from her experience as an R&D project manager, 20 years of academic research, and two National Science Foundation grants, Knott devised RQ and used the measure to test common innovation prescriptions across the full spectrum of U.S. companies engaged in R&D. The results are nothing short of game-changing.
In this essential guide, you will learn:
• how to use RQ to determine which R&D investments are most likely to drive growth—using the hard data you already have to better utilize the innovation tools you’re already using
• the 7 misconceptions about innovation trends—and how to avoid the ones that don’t work
• how investors can achieve 9x returns in the market and help companies in the process
• why corporate—and GDP—growth has stalled and how to restore it without R&D tax credits
This book promises to do for innovation and R&D what TQM did for manufacturing and what Sabremetrics did for baseball. It’ll show you How Innovation Really Works—with measurable results you can count on.
From the Back Cover
Every corporate leader gives lip service to the need for innovation as the engine of organic growth, but how many actually measure the productivity of their innovation strategies and expenditures? In How Innovation Really Works, Anne Marie Knott provides a truly new and eminently practicable way of measuring and thinking about the productivity of R&D. For everyone who manages or thinks about management, Anne Marie Knotts work is a living illustration of the clarity that flows from having good measures and benchmarks. If you want to see how your company measures up or learn how to improve your innovation batting average, get this brilliant book now.
Richard Rumelt, the Harry and Elsa Kunin Chair at the UCLA Anderson School of Management and author of Good Strategy/Bad Strategy
This treasure chest of insight is a must-read for anyone interested in innovationmanagers, investors, and researchers alike. Anne Maries Knotts RQ measure of innovation effectiveness is an invaluable compass for navigating through the fog of R&D investment, returns, and organization.
Ron Adner, the David T. McLaughlin Chaired Professor at the Tuck School of Business of Dartmouth College and author of The Wide Lens
RQ is an invaluable tool for CTOs and those involved with leading and funding technology development and innovation. Knott provides astute insights and a quantitative tool to define and improve the productivity of innovation spending, as well as inform strategic discussions on optimizing investment at a company level, as well as how to best optimize among divisions.
Bruce Brown, former CTO of Procter and Gamble
When it comes to innovation, many companies are like Alice in Wonderlandthey dont know where they want to go and so they cant choose which road to follow. Knott provides a simple but powerful sign post that leaders can use both to evaluate their prior innovation decisions and to help make future innovation decisions more effectively.
Jay Barney, Lassonde Chair of Social Entrepreneurship at the David Eccles School of Business at the University of Utah and author of What I Didnt Learn in Business School
Anne Maries analysis challenges several myths and misconceptions on how innovation, growth, and profitability are mutually related. Her original and methodical approach, based on the introduction of an R&D investment variable in the classic production function, provides a very useful and practical tool for executive managers to set optimal R&D investment targets focusing on growth and ROI.
Alessandro Piovaccari, CTO of Silicon Labs
Galileo Galilei, in describing the scientific method, said: measure what is measurable, and make measurable what is not so. Professor Knotts research has made measurable and precise how companies can become more effective at research and development. This book provides a modern and comprehensive guide to innovation management and is a must-read for executives who care about improving their companys performance through breakthrough products and services.
Karim Lakhani, Professor of Business Administration at Harvard Business School and author of Revolutionizing Innovation
Anne Maries RQ work is generating a great deal of buzz in the field. She has created an original, convincing, and empirically validated measure that challenges many of the assumptions and conclusions of famous papers in management and economics. Armed with this measure, this book provides corporations with powerful advice about how to elevate R&D as the engine of value creation.
Todd Zenger, the N. Eldon Tanner Chair in Strategy at the David Eccles School of Business at the University of Utah and author of Beyond Competitive Advantage
Just like people have an IQ, companies have an RQ: a Research Quotient. With her painstaking research and data, Anne Marie Knott shows how RQ powers innovation for companies and for regions and nations as a whole. If you want to understand how innovation really works, read this book.
Richard Florida, Global Research Professor at New York University, University Professor at the University of Toronto, and author of The Rise of the Creative Class
Getting the innovation resource allocation decision right is critical to shareholder value creation, demanding metrics to measure productivity and performance. How Innovation Really Works is both a thorough review of existing R&D metrics and a description of a new approach that seeks to better show the value of R&D. This thought-provoking book is a valuable contribution to the field. I very much enjoyed reading it.
A. N. Sreeram, CTO and SVP of The Dow Chemical Company
Billions of dollars are spent each year on R&D, with limited ability to measure the impact on the value it provides to help in proper allocation of limited resources and to optimize shareholder value. Drawing on past research and firsthand experience, as well as interviews with current practitioners in the area, How Innovation Really Works is a book that needed to be written.
Robert W. Frick, former Vice Chairman and CFO of Bank of America
How Innovation Really Works is a refreshing and at times even controversial new look at innovation and return on investment (ROI) from the R&D activities of every major industrial enterprise. Knott uses solid scientific data to support her premise that ROI from innovation is not necessarily proportional to money spent on R&D. She clearly describes the complexity of the subject: how R&D is accounted for, how innovation impacts the outcome, and how that outcome is tied to revenues and timing. She even considers such factors as behavior and human talent. She proves that the most popular recommendations for ROI from innovation do not work and proposes a new and relatively simple measure: RQ (sort of corporate R&D IQ), somewhat of an equivalent to human IQ.
Mietek Glinkowski, VP of Global Engineering NA at Schneider Electric
This is the best book on innovation I have read. I've read it twice.
Steve Freilich, former Director of Materials Science at DuPont