Measuring innovation is challenging at best, and often elusive for practitioners and researchers alike. Recent developments point to gaps in current innovation measures and highlight new ways to address them at both the company and market level.
Innovation at individual companies
Erik Roth, senior partner at McKinsey, provides alternative perspectives on innovation measurement for individual companies. According to Roth, a company might measure patents or the number of ideas in their pipeline, but rarely takes “a thoughtful approach to how it actually measures the outcome of its innovation in R&D performance over time.” Instead, he suggests they evaluate outcome measures, including a ratio of R&D spending to new product sales over a certain number of years to tie R&D directly to business outcomes.
Read the full article here.
Innovation outside of “formal” sectors
New research by the American University in Cairo’s Access to Knowledge for Development Center (A2K4D) outlines the specific gaps left by the current indices that compare only “formal” sectors across countries.
The report, developed in partnership with the Open African Innovation Research Network (Open AIR), examines practices like knowledge sharing and skill building; activities that are commonplace in both formal and “informal” sectors. The authors point out that traditional measures of inputs, such as R&D expenditures, and outputs, such as patent filings, simply do not pick up on a large portion of innovation activity occurring in informal sectors and by means of more informal channels. This is important because developing countries have a significant informal sector, where business takes place between individuals or groups of people, rather than between formal entities.
Read the original study here.
Contributed by Leah D. Barto.