Innovation is a lot more than R&D

When I first got interested in managing innovation, I was coming at it from the point of view of a scientist. To someone with a PhD in biochemistry it was ‘obvious’ that most innovation resulted from the commercialization of science. Looking at OECD innovation indicators back in the 1990s I used to get frustrated that Australia’s investment in research and development and production of patents was so low compared to other countries. Surely Australia was going to be in trouble through lack of national innovative activity, wasn’t it?

Over 10 years later, I have changed my views, largely through seeing the evidence and meeting a lot of people in many innovative firms. The trap that I fell into all those years ago was thinking about innovation as a linear process, with scientific progress being the fountain for all innovations. The origins of this thinking go back to the 1950s and despite the evidence that innovation goes a long way beyond the commercialization of discoveries, we are still left with pockets of this intellectual legacy.

However, thinking is now changing quickly. Hard times call for new solutions and we are starting to take a good hard look at how innovation really works and what we can do to improve performance. Recent reports from the OECD on national innovation strategy represent a big shift from the old linear models that start with R&D and end in successful products. One of the major points from a study of innovation indicators is that the measurement of R&D is a poor indicator of innovation. Even in Australia where there are tax benefits for R&D spend, the product innovation difference between firms that report R&D and those that don’t is minimal.

The same is true for Norway and Mexico. Although there is a general trend of firms conducting R&D being more likely to report new-to-market innovations, there are still a lot of firms that don’t officially do R&D that are innovative.

So something is going on here that starts to challenge the old linear models and a real clue lies in the next chart from the same OECD report. This figure shows the percentage of firms that collaborate on innovation.

Not only do firms collaborate on innovation, but other OECD surveys show that many firms are getting their most significant ideas for innovative products, services and processes from outside the business. These can be customers, suppliers, competitors, consultants or universities.

Instead of thinking about innovation as a chain were an idea gets developed from inside the firm and commercialized, the modern reality of innovation is that it is a knowledge ecosystem where innovations come about through new connections within and between organizations. I’m not saying that science and research aren’t important – they are. However, rather than the being the origin of innovations, they are part of the system.

The old thinking on innovation was to pump in more science at the front end to get more innovations. The new paradigm is all about connections.

Please note: I reserve the right to delete comments that are offensive or off-topic.

9 thoughts on “Innovation is a lot more than R&D

  1. Excellent post and analysis, John!

    “However, rather than the being the origin of innovations, they are (one) part of the system.” – I completely share your view and it’s good to have some analysis for evidence.

    Sometimes it’s quite difficult to take this position, partic. in tech-oriented environments as people still stick to the “traditional thinking”.

    This also poses an interesting question in terms of staying ahead in the global innovation game: what is the right strategy for (currently) leading countries? Is it really (primarily) investing in basic research, knowledge and education? Does this eventually pay-off without advanced connectivity?

    Again, thanks for this important conclusion.


  2. Hi Ralph

    sorry about the late reply. I’ve been out of town with limited internet access.
    Again, you raise some very important points. Changing the ‘dominant logic’ of innovation policy is very difficult. In Australia we have had an extensive review of national innovation policy with a recommendation to shift to thinking about systems. Unfortunately the government suffered a failure of nerve and retreated to science driven policies.
    There is a very good working paper on this case study which is worth a read. The link is here.
    Tim has published a nice paper on Korea’s national innovation system. I’m sure that he would send it to you.
    Again, thanks for the great comment.


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