Determining how much to spend each year on R&D and product development is an issue that has plagued management for decades. In last month’s column, a number of traditional methods used by R&D leaders to determine R&D spending levels were discussed. This month, we examine an approach that is barely five years old.
The goal of R&D spending is clear and commonly shared: Companies seek to maximize their return from R&D investments. Just a few years ago, a comprehensive approach that correlates R&D spending to financial results did not exist. Coming up with one became a passion for Anne Marie Knott, a professor at Washington University in St. Louis, who began her career as an mathematician in the think tank that was formerly Hughes Aircraft.