Tag: HBR

Though the stock market is strong, company profits are stagnant—a function of a short-term focus that one Olin professor attributes to a slow-down in innovation.

In a Dec. 13 article for Harvard Business Review, Anne Marie Knott attributes the lack of innovation to three trends she uncovered through research she and her collaborators have developed.

Knott, Olin’s Robert and Barbara Frick Professor in Business, blames the “short-termism” on the trend toward companies hiring “outside” CEOs to “shake up” the organization and provide fresh insights; the decentralization of corporate research and development efforts; and a focus on “development,” rather than “research”—or, said another way, too little early-stage innovation.

In the first case, Knott argues that new, outside CEOs tend to lack the technical domain expertise to drive R&D growth. Using “RQ,” or a “research quotient,” as a measure of the return on R&D investments, Knott noted that firms with outside CEOs tended to see a decline in R&D intensity—a ratio of investment to sales—and a corresponding decline in R&D capability.

“In other words,” Knott writes, “the new leader’s disinvestment cut meat as well as fat.”

Further, by moving R&D responsibility from a central unit to separate division managers, firms separate the incentive from the result. Division managers, Knott writes, find that “their compensation is typically based on division profits (which they largely control), rather than on the company’s market value (over which they have little control).”

The result again is a reduction in the firm’s RQ quotient.

Finally, a similar problem plagues firms by lowering their tendency to invest in early-stage technologies and innovations—and for a similar reason: Division manager compensation is tied to division profits.

She cites Procter & Gamble as an example of a company that decentralized R&D from the 1990s to 2008. After a string of market-moving innovations such as the first synthetic detergent (Dreft in 1933), first fluoride toothpaste (Crest 1955), and Febreeze odor fresheners in 1998, “P&G failed to introduce a single blockbuster,” Knott writes.

Read more of Knott’s article on HBR.org.

Ashley E. Hardin, assistant professor of organizational behavior, co-authors a post published on the Harvard Business Review that calls for more compassion in the workplace. The authors advocate for a more compassionate and connected workforce in an age when technology facilitates isolation and discourages civil behavior and interaction.

Restoring compassion to the workplace, the authors suggest, will not only improve the working environment, but it will also have a positive impact on productivity:

“If people feel like they belong and genuinely care about one another, they will be more creative, resilient, and eager to contribute at work.”

Hardin’s coauthors, Monica C. Worline and Jane E. Dutton, are co-founders of the CompassionLab, the world’s leading collaboratory for research on compassion and work organizations. They define compassion this way:

“A 4-part experience of noticing someone’s distress or pain, interpreting it as relevant and important, feeling concern for that person or group, and acting to alleviate their pain.”

Expressing compassion can range from small gestures to heroic acts of generosity and life-saving support in times of need, according to the authors.

Read: “Forming Stronger Bonds with People at Work.”

About Ashley Hardin

Prior to pursuing her PhD and joining Olin, Professor Hardin worked as a Senior Associate Consultant for Bain & Company and the Bridgespan Group.

Her research interests include relationships, affect, work-life boundaries, and unethical behavior. 

The bad news is: “the money companies spend on R&D is producing fewer and fewer results,” according to Anne Marie Knott, Olin strategy professor, and author of the just-published book How Innovation Really Works.

In an article published on the Harvard Business Review website this week, Knott says, “My research shows the returns to companies’ R&D spending have declined 65% over the past three decades.” This decline begs the question and title of Knott’s article, “Is R&D Getting Harder, or Are Companies Just Getting Worse At It?”

Her research finds that companies are getting worse at R&D, but there’s a silver lining:

“It appears the decline in companies’ (and the economy’s) ability to drive growth from R&D stems from the fact that companies have gotten worse at innovation, rather than because innovation has gotten harder. This is great news, because the problem of companies getting worse is fixable, whereas the problem of innovation getting harder isn’t. The challenge, of course, is knowing what to fix and how to fix it.”

Link to Harvard Business Review

“What the Two Most Innovation-Friendly States Have in Common,” an article by Prof. Anne-Marie Knott appears on the Harvard Business Review website. Based on her research that measures R&D metrics she finds what California and Minnesota do to promote and keep innovative companies in their states.