Accelerating Innovation with Higher Returns

Innovation intensity (the ratio of a firm’s new product development expense to total revenue) has long been a well-accepted indicator for the future growth of a company. However, a far more powerful gauge to a company’s future operating performance and market valuation is how well the investment dollars are put to use, rather than simply how much is invested. The impact investment dollars have on the business should be considered along two vectors; Effectiveness and Efficiency. Effectiveness or ‘Lift’ evaluates the impact a development has in the market in terms of financial return either as revenue, profit, market share, or a combination of these. Efficiency or ‘Throughput’ evaluates the amount of innovation delivered per given time interval. These two elements combine to provide insight into a company’s return on R&D investment and a company’s future success. As we look across the chemicals industry, there is significant variation in how well companies utilize their investment dollars.