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Patents, MVA or GDP: None of them indicate innovation

Innovation?

In “When is it innovation?“, I introduced the idea of a sector’s familiarity with an concept. I’ve just read Bloomberg’s Innovation Index and I find a few of the variables used to be old-school to say the least. It made me wonder what the index should actually include to be relevant to innovation.

 Issue 1: Patents

The first item I noticed was the grading of countries based on the number of patents. I think of patents as being the enemy of innovation, especially when we consider the role of patent trolls in the marketplace. If someone can create an idea, patent it, but have no intention of delivering it. But only holds onto it in order to prevent the person who does actually figure out how to build it, isn’t that stifling innovation?

To some extent, I’m just shouting against a wall. The establishment and market of patents exists and I do not possess the influence to change it. I’m ok with that. However, considering the position of patents, why are they in the Innovation Index? Wouldn’t a better figure be, the ratio of patents created in that country against the number of patented, implemented products? That at least would account for ideas that have been translated into reality.

Issue 2: Non-innovation Metrics

There are several metrics in the table that do not fit with innovation, at least in any definition I’m aware of, and definitely not in the definition I’d proposed in “When is it innovation?“.

For instance, Manufacturing-Value Add is a good metric for assessing the transformation of materials in higher value, e.g. taking a raw material and refining it, taking sheet metal and producing a finished product, etc. But that’s not innovation. That’s just doing your job. It’s business as usual. You could innovate in that area, e.g. a novel way of refining, etc. But that metric doesn’t measure that.

Also, the Productivity metric based on GDP and GNI exhibits similar issues. It’s a measure of how much money is generated relative to the population. That isn’t innovation. True, a high productivity score could be attributed to high levels of innovation (in terms of increasing the output of each person), but not necessarily.

 

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