What do you think?
Rate this book
How Innovation Really Works: Using the Trillion-Dollar R&D Fix to Drive Growth
An essential guide to determining which R&D investments are most likely to drive growth, increase profits, and produce innovative products
Your company is spending millions on R&D every year, but despite your best efforts, that R&D isn t driving growth. There s a reason for that. If you re like 95% of firms, you aren t investing right amount, and the productivity of your R&D has fallen dramatically over the past several years.
How is this possible? You read all the innovation articles, and hire the top consultants. The problem is no one (including the authors and consultants) know if their prescriptions are valid, because there aren t good measures of R&D to test them.
Using a new measure, called Research Quotient (RQ), professor Anne Marie Knott tests many of the most popular innovation prescriptions using proprietary data from National Science Foundation (NSF) surveys of company R&D practices. The results are startling. Many of the most popular prescriptions don t work. Not only do they fail to improve innovation, in many cases they actually make firms worse! Thus the popular prescriptions are actually contributing to the decline in firm innovativeness.
RQ changes that by offering a Sabremetrics for R&D . Just as Sabremetrics improved the productivity of baseball teams, the hope for RQ is it will reverse the decline in companies R&D productivity. How Innovation Really Works will show you how. It provides actionable information to increase companies market value in the short run through wiser R&D investment and to increase it over the long run through better R&D practices. While this prospect should be promising to managers and shareholders, it has even broader implications. Because R&D productivity drives economic growth, reversing the decline in firm innovativeness has the potential to restore economic growth as well.
"
Your company is spending millions on R&D every year, but despite your best efforts, that R&D isn t driving growth. There s a reason for that. If you re like 95% of firms, you aren t investing right amount, and the productivity of your R&D has fallen dramatically over the past several years.
How is this possible? You read all the innovation articles, and hire the top consultants. The problem is no one (including the authors and consultants) know if their prescriptions are valid, because there aren t good measures of R&D to test them.
Using a new measure, called Research Quotient (RQ), professor Anne Marie Knott tests many of the most popular innovation prescriptions using proprietary data from National Science Foundation (NSF) surveys of company R&D practices. The results are startling. Many of the most popular prescriptions don t work. Not only do they fail to improve innovation, in many cases they actually make firms worse! Thus the popular prescriptions are actually contributing to the decline in firm innovativeness.
RQ changes that by offering a Sabremetrics for R&D . Just as Sabremetrics improved the productivity of baseball teams, the hope for RQ is it will reverse the decline in companies R&D productivity. How Innovation Really Works will show you how. It provides actionable information to increase companies market value in the short run through wiser R&D investment and to increase it over the long run through better R&D practices. While this prospect should be promising to managers and shareholders, it has even broader implications. Because R&D productivity drives economic growth, reversing the decline in firm innovativeness has the potential to restore economic growth as well.
"
- GenresEntrepreneurshipBusiness
272 pages, Hardcover
Published February 20, 2017
16 people are currently reading
96 people want to read
Ratings & Reviews
Friends & Following
Create a free account to discover what your friends think of this book!
Community Reviews
Displaying 1 - 5 of 5 reviews
July 15, 2017
This book was a nice change of pace on business books for me. I learned so much from it and actually just part way through it sent a screenshot of the title page to a friend suggesting they read it as well.
About 10 percent of the books I've read so far this year have been business related, My goal being no less then 1 book a month should be business related since I'm in the midst of starting one. I think this is a book anyone who is considering starting a business, runs a business or is part of corporate business could benefit from. I found the insights on how things work great, the why even better and advice compelling.
I love that Anne takes the time to study other businesses and gage what has worked and what hasn't worked and mentions ways to help save money but at the same time increase innovation. It's little road maps for success :)
About 10 percent of the books I've read so far this year have been business related, My goal being no less then 1 book a month should be business related since I'm in the midst of starting one. I think this is a book anyone who is considering starting a business, runs a business or is part of corporate business could benefit from. I found the insights on how things work great, the why even better and advice compelling.
I love that Anne takes the time to study other businesses and gage what has worked and what hasn't worked and mentions ways to help save money but at the same time increase innovation. It's little road maps for success :)
July 12, 2017
A company should look over its research and development capabilities and consider its ability to convert this into products and services that people want to buy. For many, of course, this may require an investment into the area in the first place – or the consideration of same – but for others it can be more of a focussing of existing operations.
This is a bit of a specialist, focussed read, that is based around the author’s tool that seeks to evaluate and better-exploit R&D activities. According to the publishers, this book promises to do for innovation and R&D what TQM did for manufacturing and what Sabremetrics did for baseball. You will have to make your own mind up about that, although you probably should consider the potential too!
If you think you are doing everything right and to the best of your potential, it doesn’t hurt to ‘validate’ it does it, since you’d have nothing to lose? If you know you are failing then anything that can help change your fortune is only going to be a good thing. For everyone else in-between, it is never a bad thing to aim further and seek to do what you do well in any case.
It made for an interesting read with a lot of power and potential. Its messages can be deployed both at company-level as well as at a divisional or project level. The format and style of the book may be off-putting or less-accessible for some, but it is worth persevering to extract its benefit. It is not a book for everyone, neither is it a key guide to introducing innovation into your business, but it will certainly aid you in validating and refining your innovation and research processes.
This is a bit of a specialist, focussed read, that is based around the author’s tool that seeks to evaluate and better-exploit R&D activities. According to the publishers, this book promises to do for innovation and R&D what TQM did for manufacturing and what Sabremetrics did for baseball. You will have to make your own mind up about that, although you probably should consider the potential too!
If you think you are doing everything right and to the best of your potential, it doesn’t hurt to ‘validate’ it does it, since you’d have nothing to lose? If you know you are failing then anything that can help change your fortune is only going to be a good thing. For everyone else in-between, it is never a bad thing to aim further and seek to do what you do well in any case.
It made for an interesting read with a lot of power and potential. Its messages can be deployed both at company-level as well as at a divisional or project level. The format and style of the book may be off-putting or less-accessible for some, but it is worth persevering to extract its benefit. It is not a book for everyone, neither is it a key guide to introducing innovation into your business, but it will certainly aid you in validating and refining your innovation and research processes.
March 2, 2017
The theme of this book is impossible to argue with, no one disputes that research & development (R & D) spending is a main driver of economic growth. While it has always been important the increased velocity of change in the past century in general and the last decade in particular has made innovation and improvement even more essential and often critical to survival.
I knew that I was going to be impressed with this book very early, when the subject was the performance of Jack Welch at GE. In many circles, Welch is put forward as an icon of corporate leadership, considered a sage. Yet, the reality is quite different. Before Welch, GE invested 40 to 50 percent of profits in R & D each year. When Welch introduced the market power strategy of investing to grab market share, the percentage of profits that invested in R & D dropped to below 15 percent.
There was an immediate and steady rise in the share price when the market power strategy was introduced, peaking at $58 a share before starting a slow and steady decline to around $10 a share. GE had essentially burned through the capital that had made it the industrial power that was created by Thomas Edison. That fact is largely ignored when Welch is discussed. Another example of a failure to appreciate the value of R & D investment is HP in the nineties and early twenty-first century.
Knott uses a computation known as the Research Quotient (RQ) as a metric to measure the return on R & D spending. It is a fascinating and revealing norm in that some of the conclusions are against the grain of conventional wisdom. For example, there is the belief that it is small companies that fire the R & D engine, a notion that is challenged by Knott. While there are valid reasons to question some of the aspects of RQ, it does help explain why productivity and economic growth are generally stagnant. For that reason, people in all positions need to read the book. The technical people working in R & D will find their position validated and hopefully the executives that allocated the internal capital will develop the courage to spend some money in driving a successful future.
A secondary point in the book is that companies where institutional investors have a major ownership tend to invest more in R & D than those faced with the potential of an attack by people somewhat euphemistically called “activist investors.” Readers concerned about the economic future will be somewhat relieved to learn that there are islands where companies are making decisions using a focus that extends beyond the next quarterly earnings announcement
I knew that I was going to be impressed with this book very early, when the subject was the performance of Jack Welch at GE. In many circles, Welch is put forward as an icon of corporate leadership, considered a sage. Yet, the reality is quite different. Before Welch, GE invested 40 to 50 percent of profits in R & D each year. When Welch introduced the market power strategy of investing to grab market share, the percentage of profits that invested in R & D dropped to below 15 percent.
There was an immediate and steady rise in the share price when the market power strategy was introduced, peaking at $58 a share before starting a slow and steady decline to around $10 a share. GE had essentially burned through the capital that had made it the industrial power that was created by Thomas Edison. That fact is largely ignored when Welch is discussed. Another example of a failure to appreciate the value of R & D investment is HP in the nineties and early twenty-first century.
Knott uses a computation known as the Research Quotient (RQ) as a metric to measure the return on R & D spending. It is a fascinating and revealing norm in that some of the conclusions are against the grain of conventional wisdom. For example, there is the belief that it is small companies that fire the R & D engine, a notion that is challenged by Knott. While there are valid reasons to question some of the aspects of RQ, it does help explain why productivity and economic growth are generally stagnant. For that reason, people in all positions need to read the book. The technical people working in R & D will find their position validated and hopefully the executives that allocated the internal capital will develop the courage to spend some money in driving a successful future.
A secondary point in the book is that companies where institutional investors have a major ownership tend to invest more in R & D than those faced with the potential of an attack by people somewhat euphemistically called “activist investors.” Readers concerned about the economic future will be somewhat relieved to learn that there are islands where companies are making decisions using a focus that extends beyond the next quarterly earnings announcement
April 8, 2018
Challenging
I was searching for a relation between R&D at universities and he industry when I came across Anne’s book. Surprising to know there is a simple way for companies to evaluate their R&D investment and the profit coming out of it. However, still some field to cover if we want Universities having a greater and better role to play in the innovation path.
I was searching for a relation between R&D at universities and he industry when I came across Anne’s book. Surprising to know there is a simple way for companies to evaluate their R&D investment and the profit coming out of it. However, still some field to cover if we want Universities having a greater and better role to play in the innovation path.
April 25, 2017
A must read for CFOs, investors, and R&D professionals. How Innovation Really Works describes in detail how managers and investors can quantify the productivity of their R&D and accurately value the returns to R&D investment, and even compute the resulting profit and market value created by R&D. Dr. Knott describes in detail the "RQ" measure (short for Research Quotient), which is analogous to human IQ and indicates a company's R&D productivity, and then goes further to demonstrate how the RQ measure is directly linked to company profits and market value, replacing intuition with economic science. In the process, the author debunks many myths surrounding R&D through economic analysis and telling case studies. Despite the deep science, this book is engagingly written and very accessible to non-technical readers. The chapter for investment professionals is a gift to those who will act on the near term arbitrage opportunity presented by the RQ50 index. The book in total is a must for research-driven firms seeking to maximize growth and market value ahead of the competition.
Displaying 1 - 5 of 5 reviews