An article in the San Francisco Chronicle, “HP Labs seeks to regain its former glory,” cites research from Olin professor of strategy Anne Marie Knott on corporate ROI from R&D spending.
“R&D has not been as productive as it was four decades ago,” Knott told the Chronicle. In her research, Knott “found that corporate returns on R&D spending actually declined 65 percent,” since 1972.
According to the Chronicle, the Internet age has taken a toll on innovative companies like HP that were known for their R&D prowess:
Hewlett-Packard launched HP Labs in 1966, which promptly created the HP2116A minicomputer. In the years that followed, HP Labs rolled out LED lighting, scientific calculators, lasers to make microchips, and ultrasound technology to capture live images of the human heart.
However, the emergence of the Internet in the 1990s posed problems for big companies. The pace of innovation accelerated and once-dominant industries seem to crumble overnight. Corporations were too slow and bulky to catch up.
If HP wants to improve innovative output and profits from its once fabled Silicon Valley labs, the company should study Knott’s recent book, How Innovation Really Works. She explains how companies can use her RQ (Research Quotient) tool. It measures a company’s R&D capability―its ability to convert investment in R&D into products and services people want to buy or to reduce the cost of production.
RQ not only tells companies how “smart” they are, explains Knott. “It provides a guide for how much they should invest in R&D to ensure that investment will increase revenues, profits, and market value.”
Photo: HP Labs celebrates 50 years: Barney Oliver (left), director of research and development at HP for three decades, checks out a new scope in 1966 at HP Labs along with Peter Lacy (center) and George Mathers.