TVP – Metric 21 Comparative Technology Investment

Resource Type
Tool
Authors
Alan Fusfeld, Innovation Research Interchange
Topics
Innovation Metrics, Stage-Gate, Tools and Techniques
Associated Event
Publication

Background | User Guide | Program Contents | Stakeholders | List of Metrics

1. Metric Definition

The current annual expenditure for R&D staff and capital compared to the best competitor and/or the industry average.

2. Advantages and Limitations

This metric measures the rate of current activity in developing the technology of interest with the intent of predicting whether the firm is expected to gain or lose ground in the technology. It may be kept separately for the KEY and PACING technologies most critical to the strategy. Retrospectively it measures the efficiency of the investment in meeting new product and technology development goals.

This metric should be applied in as quantitative a way as possible, but in some industries it may be necessary to make estimates as to the size of the development effort of the best competitor and the industry average. Analyses must be based on a comparison of similar functions. For example, some organizations include sales support as part of their report for technology expenditures. The components of the expenditures under study must be understood in making the comparison.

3. How to use the Metric

Information on a firm’s overall technology expenditures is typically available in the firm’s annual reports or industry publications. These can be used for comparison to internal overall investment. Information by industry is available in industry publications and from organizations such as IRI (IRI/CIMS survey).
Calculating ratios of the firm’s current investment in technology vs. the best competitor and industry averages provides an insight into the efficiency of the technology investment. Performance exceeding expectations in value creation goals at competitive investment rates indicates an efficient organization while sub-standard performance raises concern about the quality of the investment. Smaller firms may require an investment higher than industry norms to maintain a competitive position to offset critical mass issues. 

4. Options and Variations

5. Champions and Contacts

6. References