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Measuring Innovation in the 21st century economy

Posted by: Helen Walters on September 18, 2007

One of the comments to a piece I wrote on the US Department of Commerce’s formation of a group of high profile business leaders to look at effective ways to measure innovation in the global economy was pithy, to say the least. “Big Dog” was to the point: “Attempting to measure that which cannot be measured is a waste of time and tax payer money,” s/he wrote.

It’s a widely held view, and certainly measuring the apparent intangiblity of innovation can seem like a Sisyphean task. Myriad factors play into effective innovation strategies, which call into question the point or effectiveness of comparing those of individual companies. But no one disputes that innovation itself is a ‘good thing’, and in an ever shakier economy, it seems even more vital than before (though as my colleague Bruce Nussbaum points out, this tends to be precisely the time at which companies panic and cut back on the one thing that might see them through.)

So what’s a government to do?

Well. Even a year after its high profile panel was announced, it remains to be seen. But the second major meeting of the group, which features big business figures including MSFT’s Steve Ballmer, IBM’s Sam Palmisano and 3M’s George Buckley, met in Washington last week. And while we wait for the transcript of the meeting to be made available, I had a look at the agenda and discussion points to try to get a sense of how useful this exercise might prove.

It's a weighty document, with a lot of interest. I won't pull out everything that struck me here, but a few proposals seemed important:

-- Commissioning the Census Bureau to undertake more conscientious and detailed surveys of companies, to expand research beyond R&D undertaken by scientists and engineers

-- Refining estimates of Total Factor Productivity, perhaps creating a satellite account of New National Income and Product Account (NIPA) to focus on innovation

-- Forming a measure of innovation intensity, a la the EU Community Innovation Survey

But the one clear conclusion, even of the agenda, is that there are a lot of questions that need to be answered; benchmarks that need to be agreed upon before any investments can be made. I hope that the transcript of the meeting is made available soon, and I hope the action points are clearly focused. Otherwise, "Big Dog" will be right and the whole thing will be nothing but an intriguing, thought-provoking waste of time. And that would be a global shame.

Reader Comments

Bill Ross

September 28, 2007 3:14 PM

Because the processes that result in any profitable venture or project are so complex, with input from so many different functions within a company, the value of innovation alone is certainly terribly difficult to measure.

Yet when you look at runaway hit products like the iPod, the Web browser, Post-It Notes, and countless others, the dollar value of a fresh, completely original look at a problem is unquestionable.

Assigning a number you could plug into a spreadsheet (another revolutionary idea, while we're at it), however, looks like a purely speculative exercise. And don't we have enough of those already?

Our Farrell Reynolds' presents a hard-nosed perspective on this in his recent post, "The Science of Innovation." Much in the spirit of the Commerce Dept.’s desire to find "effective ways to measure innovation," Farrell writes,

"Any Innovation plan must be just that, a hard plan. It can't be an 'initiative.' A plan has to have milestones and expected results. These results must be measurable and... just as Innovation must have clear expectations and timelines, it must also have clear rewards."
The Science of Innovation

- Bill Ross, "The Heart of Innovation" blog

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