More companies tracking 'true performance metrics.'
Seven significant trends in R&D emerged from the 2008 GGI Biennial Product Development Metrics Survey, according to Bradford Goldense, GGI's president. He describes the results as encouraging for senior R&D and product development leaders. "Finally, after 10 years of surveying industry practices on metrics, there is positive change and movement in measurement practices. While the Top 10 metrics and their penetration levels have remained relatively constant for a decade (see Metrics Matter), seven distinctly positive trends are evident across the 86 metrics surveyed in 2007-2008." His findings:
- "The commonality of metrics is rising. More companies are using metrics and defining them in the same way. In the next few years, penetration will likely get to the point that identifying benchmarking partners will become easier in R&D.
- "The most common measure of tracking new product revenues, 'current-year sales due to products released in the prior x years,' has increased from 48% penetration to 55% penetration. Clearly R&D managers are more focused on business results.
- "Tracking of profit, while still not a Top 10, has increased significantly. In 1998, tracking of overall profit from R&D was not on the radar. In 2008, analogous to the revenue metric above, 28% of companies now track 'current year profits due to products released in the prior x years.' Companies that have developers focused on the bottom line as well as the top line will generate larger shareholder returns.
- "Other measures of revenue and profit are also increasing. Many companies now take the time to average their returns from projects that produce salable products and calculate averages for first year, first two years, first three years, and first five years revenues and profits after products launch.
"'Open innovation,' meaning multi-party development or sale or licensing of intellectual property (IP), which has been the talk of industry since about 2004, appears to be becoming a reality. There is a clear rise in tracking metrics like 'percentage revenues and/or profits from technology licensing' and 'percentage revenues and/or profits from technology sales.' There is also a clear increase in the basic tracking of all forms of IP, including patents, trademarks and copyrights. Perhaps this is also a defensive move now that IP is becoming more open.
- "There is a clear increase in 'true performance metrics.' For years many metrics simply counted how many projects were in queue, or done, or the number of people involved. Half of the Top 10 are still not true performance metrics. More companies are now calculating productivity measures such as 'products released per engineer or developer' and 'revenues and/or profits per engineer or developer.' In general, 'output over input' metrics [classical industrial engineering measurement] along with revenue and profit metrics are rising.
- "Experimentation is on the rise. Many companies are trying out old and new metrics that they have not used previously. Likely the quest is to find even better measures of performance than have been present in the past. The invention of new measures is also increasing. 'Return On Innovation' (not to be confused with ROI), a metric that is less than a decade old, is now being tried by about 20% of companies. "The saying goes, 'You get what you measure,' If the current trends continue," Goldense predicts, "North American companies will be ever more competitive in the years ahead."