How do you calculate R&D innovation's impact on revenue?

1 R&D intensity ratio

One way to assess the impact of R&D innovation on revenue is to use the R&D intensity ratio, which is the percentage of revenue that is spent on R&D activities. This ratio indicates how much a company invests in R&D relative to its sales, and can be compared with industry averages or competitors. A high R&D intensity ratio may suggest that a company is more innovative and has a higher potential for revenue growth, but it also implies higher costs and risks.

2 R&D productivity ratio

Another way to measure the impact of R&D innovation on revenue is to use the R&D productivity ratio, which is the ratio of revenue growth to R&D spending. This ratio indicates how efficiently a company converts its R&D investments into revenue, and can be adjusted for inflation, market size, and other factors. A high R&D productivity ratio may imply that a company has a competitive advantage and a strong innovation performance, but it also depends on the quality and timing of the R&D outputs.

3 R&D impact model

A more comprehensive way to evaluate the impact of R&D innovation on revenue is to use an R&D impact model, which is a framework that links R&D inputs, outputs, outcomes, and impacts. This model can help identify and quantify the direct and indirect effects of R&D innovation on revenue, such as customer satisfaction, market share, pricing power, and profitability. An R&D impact model can also account for the external and internal factors that influence the R&D innovation process, such as customer needs, competitors, regulations, and culture.

4 R&D attribution analysis

A more sophisticated way to estimate the impact of R&D innovation on revenue is to use an R&D attribution analysis, which is a method that assigns a portion of the revenue to specific R&D projects or activities. This method can help isolate the contribution of R&D innovation to revenue, and can be based on various criteria, such as sales volume, customer feedback, patents, or citations. An R&D attribution analysis can also help allocate resources and incentives to the most effective and valuable R&D innovations.

5 R&D impact challenges

When it comes to calculating the impact of R&D innovation on revenue, there are several challenges and limitations that must be taken into account. Data availability and quality can be an issue, as R&D innovation data may be incomplete, inaccurate, or inconsistent. Additionally, due to the long and variable time horizon of R&D innovation, it can be difficult to capture and predict its revenue impact. Furthermore, it can be hard to isolate and quantify the impact of R&D innovation as it may not be the only or main factor influencing revenue. Lastly, due to the complexity and diversity of R&D innovation, measuring and comparing it can be difficult.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?