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The Decline of the Corporate Lab Rat?

| On 27, Feb 2008

Cass PursellThe Organization for Economic Co-Operation and Development (OECD), is an organization that was once described as a think-tank for rich countries. In a recent publication, the OECD defined innovation as “new products, business processes and organic changes that create wealth or social welfare.” It’s a definition that isn’t tied to Research and Development spending, and it indicates a break from a technology-centric innovation paradigm.

This is significant because more and more business leaders are becoming disenchanted with their return on innovation investment as defined by R&D spending. While many organizations still funnel oodles of money into research and development, many are growing tired of the lack of a demonstrable correlation between R&D spending and growth, profitability, or shareholder returns.

This is why an emerging tendency is for organizations to move away from establishing vertically integrated R&D shops, and toward a more grass roots innovation model. Why spend millions on a focused, insular approach to developing new ideas, the thinking goes, when great new ideas are laying around on the sidewalk outside the corporate headquarters? I’m paraphrasing. But the basic idea is to open up to ideas generated outside of the corporate castle walls, and to connect previously untapped intellectual capital with the financial wherewithal of the organization.

The primary take-away for me here is that there seems to be innovative thinking being applied to the process of developing fresh ideas that create value. We’d all do well to pay close attention, because if someone can demonstrate that it’s possible to improve the ROI of innovation processes by reducing R&D investment while holding constant or even improving the number of viable ideas generated for the innovation pipeline, that would be a value-creating idea, to be sure.