Innovation has become the explicit engine of corporate strategy, and the scale of investment reflects it: worldwide expenditure on research and development has nearly tripled in real terms since 2000, reaching roughly US$2.8 trillion in 2023. Yet the capability to measure that investment has not kept pace with the willingness to make it, leaving organizations committing strategic resources to innovation while relying on measurement that cannot tell them what those resources produced.
The traditional return-on-investment question “did this project return more than it cost?” is well suited to predictable, repeatable investments and poorly suited to innovation, which is uncertain by design and generates much of its value in forms that money does not immediately capture.
This report introduces ROI², the return on innovation investment, which reframes the question at the level of the portfolio, asking how much total value the innovation system created, financial and intangible, for every unit invested.
This reports looks into four connected arguments:
- Innovation should be measured at the level of the portfolio rather than the individual initiative
- Failure is not a defect of a well-run portfolio but a necessary feature of it
- The return on innovation is multidimensional
- Realizing this return requires a formal innovation management system that serves as the organization's system of record for innovation
