![]() While all of those are interesting inputs into innovation R&D, they don’t necessarily understand or measure the monetization of those investments in your R&D and innovation activity.Īnd as companies have explored ways to try and understand how to measure the output, or the outcome of their R&D investments, they’ve struggled largely because there are not a lot of common metrics across industries or across organizations that capture what our two metrics capture, which is both the investment side and the outcome side in the form of profit margin for the resulting impact of what R&D investments and innovation investments may have. Oftentimes an organization will get very caught up with patents and the number of patents that they are filing. We see a lot of quantification of the number of ideas and the size of the portfolio. That’s the inputs into what makes innovation happen. Sean Brown: Why do you think no one has used these two metrics before?Įrik Roth: I think no one has used these particular metrics before because a lot of innovation-measurement activity or -measurement focus has been largely on what I’ll describe as “upstream” activity. Google Podcasts Apple Podcasts Spotify RSS In this article, what we explored-actually on the back of a client question-was, what is a really good, simple, and benchmarkable metric that can be used to both assess the performance of R&D innovation in an organization and compare it to other companies so that a CEO can understand whether or not their investments in R&D are productive relative to their competitive context and also are achieving their performance objectives over time? What’s interesting is, we rarely see an organization taking a thoughtful approach to how it actually measures the outcome of its innovation in R&D performance over time. ![]() And so often when we address this with clients, they’re interested in scorecards that are measuring the number of ideas, ROI on a specific project, the number of projects, and any assorted metrics trying to look at how well their organization is performing. And when a client asks us that question, they typically are concerned with the activity of R&D and innovation as opposed to the output and the impact of that output on performance. Can you say a little bit more about that?Įrik Roth: We get the question about innovation metrics quite often. Your latest article focuses on a pair of innovation metrics. To start off, Erik: often when people think about measuring innovation performance, they think of things like the number of patents the company has registered or the new-innovation pipeline. He directs McKinsey’s work in innovation globally and also coauthored the seminal article “ The eight essentials of innovation.” Guttorm Aase and Sri Swaminathan are associate partners who also focus on innovation. Today, we’ll hear from the authors of the recent McKinsey article, “ Taking the measure of innovation.” Erik Roth is a senior partner in the Stamford office and is a global innovation leader in our Strategy Practice. Sean Brown: From the McKinsey Strategy and Corporate Finance Practice, I’m Sean Brown. ![]() ![]() Apple Podcasts Spotify Google Podcasts Podcast transcript
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