Innovate or Perish: Managing the Enduring Technology Company in the Global Market

Current Issues with Innovation

“. . . Because its purpose is to create a customer, business has two, and only two functions: marketing and innovation. Marketing and innovation produce results, all the rest are costs.”

—PETER DRUCKER

Technological innovation creates substantial intangible asset valuation within global enterprises. Today, about 80% of the Standard and Poor’s (S&P) 500 market capitalization is mainly due to intangible assets (a large portion coming from IP), up from less than 20% in 1975.^[10] However, between enterprises there is a large variability of innovation return of investment (ROI), defined as the ratio of net income to R&D expenditure. Companies with high R&D budgets and large numbers of patents do not necessarily have high revenues from products, services, and technology license agreements. While there are no absolute measures of innovation success, some gauges include revenues and profitability, increases in market share, number of new markets entered, number of new products launched, frequency of technological breakthroughs, and the ultimate—creation of completely new markets with new products.

^[10] The Brookings Institution, 2004.

The three key issues impacting innovation effectiveness are the existence of innovation value gaps, the difficulty in finding new ideas and opportunities, and the patent portfolio paradox.

Innovation Value Gap

Among the leaders in the innovation-dependent industries—biotechnology, chemicals, computers, consumer products, electronics ...