Recently, Business Week Online posted an article highlighting the results of a Booz Allen Hamilton study entitled, "Global Innovation 1,000." The article is worth reviewing; however, the most telling lesson from the article is that neither the smart people at Booz Allen (and they are quite sophisticated) nor the well-informed editors at Business Week noted that both the study and their article focus specifically, and to a fault, on R&D investments, patents and innovation. This myopia is the source of the unsatisfactory results. See the article at:

http://www.businessweek.com/innovate/content/nov2006/id20061114_428152.htm?chan=innovation_innovation+%2B+design_top+stories

The study offers another example of what we've been saying for a few years now-- that innovation is about more than technology, products and R&D. Moreover, it validates that VERY few firms, people, consultancies, researchers, journalists, policy-makers 'get it'.

The results of the study show little to no correlation between R&D spending and corporate performance, or even innovation performance along some metrics like patent output. This comes as no suprise to us, nor to all of our Organic Growth alumni. We know at least a few reasons why R&D spend is not a good predictor of innovation success. Ultimately, innovation requires the development of complete business systems, based on offerings with solid value propositions that add real value for which customers are willing to pay. R&D plays a role in this equation, but it is by no means the lead. In fact, in many highly innovative companies, traditional R&D plays a limited to even non-existent role in driving success through innovation. The fact that the Booz Allen study failed to account for these other factors in its study design provides an explanation for why the study resolved the way it did. Even the researchers' apparent confusion over these results becomes much clearer in this light.

The Booz Allen analysis of the study appears solid, though narrow in focus, as the study design itself appears narrow. At the end of the article, the author shares some of the open questions regarding how to make innovation work. These relate to integration versus separation from the core businesses for innovation initiatives.

We believe our Corporate Entrepreneurship research offers solid answers to some of these questions. You'll hear more in this regard over the next few months.


To the Future, Robert C. Wolcott