The article Strategic Decision Making and the CFO has some interesting data about contribution of innovation to the bottom line.

As chart 1 shows, this provocation (which isn’t our word by the way – see below) is important. The data comes from the well-known book “Blue Ocean Strategy” and shows that new ideas only account for 14% of new business launches but deliver 61% of the profits.

Chart 1: Revenues and profits from innovative versus incremental new business launches

Definition of what is innovation will change the results significantly The results would be easily explained if one defines innovation as new product line introductions (as opposed to incremental releases to an existing product line).  A relevant question to ask is how much of the R&D investment is spent on what is defined as innovation…