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The R&D Effectiveness Index: A Metric for Product Development Performance
Author(s) -
McGrath Michael E.,
Romeri Michael N.
Publication year - 1994
Publication title -
journal of product innovation management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.646
H-Index - 144
eISSN - 1540-5885
pISSN - 0737-6782
DOI - 10.1111/1540-5885.1130213
Subject(s) - metric (unit) , index (typography) , measure (data warehouse) , new product development , product (mathematics) , profit (economics) , computer science , product metric , operations management , operations research , business , economics , mathematics , marketing , data mining , microeconomics , metric space , mathematical analysis , geometry , world wide web
Measuring the overall success of product development efforts has been frustrating because there is no generally recognized metric to measure effectiveness. The R&D Effectiveness Index is introduced to address this need. It measures effectiveness by comparing the profit from new products to the investment in new product development. The article provides the details for calculating the index along with alternative interpretations. Michael McGrath and Michael Romeri report that this index was validated through a study of 45 electronic systems companies. They found a strong relationship between the R&D Effectiveness Index and other performance factors and believe that the R&D Effectiveness Index can be used to compare performance, measure improvement, and evaluate business units. Its application is illustrated in a case study.