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Wall street just doesn't understand innovation


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Over the last 30 years, the companies that have been able to innovate effectively and make good use of their research and development (R&D) budgets have become coveted companies, but the market doesn’t value them accordingly.

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Wall street just doesn't understand innovation

  1. 1. WALL STREET JUST DOESNTUNDERSTAND INNOVATIONFor additional information about Innovationplease visit
  2. 2. www.InnovationGrow.comOver the last 30 years, the companies that have been able to innovateeffectively and make good use of their research and development (R&D)budgets have become coveted companies, but the market doesn’t valuethem accordingly.While the market can be quick to jump on the latest craze and pushcertain hyped stocks to new heights, the companies that innovateeffectively aren’t always given their due until after the fact. Most of thetime Wall Street, tends not to properly value the companies oninnovation because of its relative difficulty to quantify.With innovation not being something that is universally measurable inthe same way that profits, revenue, and cash flow can be, mostinvestors tend to shy away from the analysis of innovation.2
  3. 3. www.InnovationGrow.comInnovation is often the most valuable asset that a company has when itpays off, think Apple over the past 15 years, but without properquantification this value is rarely taken into account. Investors areuneasy by the possibility that R&D is uncertain, but analysts have foundthat using the track record over the previous five years as a relativeguide, can predict the value.Within the companies that have a large R&D spend, that are generallyconsidered to be more innovative, the past tends to be a very goodpredictor of their future success.Often these companies that have a proven record of innovation successover the previous few years will outperform their competitors by over 7percent a quarter. This translates into big profits resulting fromtheinnovative approach.3
  4. 4. www.InnovationGrow.comWhile Wall Street may be hesitant to make their decisions based onthese studies, there is no doubt that the innovation process can be thedifferentiating factor between competitors.Increasing the R&D spend without tightening the innovation processcan be one of the reasons that many companies don’t string together agood record of innovation. Innovation can also be fickle as even the topcompanies can have a year or two of bad R&D performance, but mostcompanies that focus on the process and continually increase theirinnovation spends see financial gains before Wall Street.4
  5. 5. www.InnovationGrow.comWhether you are looking to increase your company’s innovation spendor tighten the innovation process there are great metrics that can begained from Wall Street attempting to quantify innovation.By providing data that they can use to analyze the companies moreeffectively, you can adapt this same information for your company tomeasure the success of your process and improve your results.Most companies will benefit from these metrics as much as or evenmore than Wall Street will, if they are willing to use them.5
  6. 6. GROWING BUSINESS WITH INNOVATIONFor additional information about Business Innovationplease visit