McKinsey’s take on measuring productivity of R&D. This is a very contentious area, and many have criticized companies for spending too much or too little on R&D. It’s largely based on hypotheticals however, because it is hard to guess what a project is going to contribute. And it’s worse at small innovative enterprises, which are mostly R&D, because there is little info on what the impact of new products will be. The formula would seem to work well at Clayton Christensen’s large stable companies which are simply innovating to please a large group of present and demanding customers, rather than disrupt through spectacular new innovation to gather new customers. Still, it’s good reading and extends the thinking in this area.