A Dozen Smart Metrics, To Go - ' IT Innovation '
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IT Innovation
Metric: IT-Based Product Launch Ratio
Definition: The percentage of product or service launches planned for the upcoming 24 months in which IT is a key component of the offering. (The personalization software in a new targeted marketing campaign on the Web site, for example.)
| Example: |
# of IT-based product launches |
x 100 |
|
Total # of product launches |
Significance: Shows the focus of the IT department on ensuring near-term success of the company in the marketplace.
Metric: R&D Investment Ratio
Definition: The impact of R&D investments on the worth of a company. Calculate the percent change in your company's market-to-book ratio for each year for the past five years. Divide by the percent change in dollars invested in R&D efforts.
| Example: |
A. Calculate Market-to-book ratio for each year |
|
stock price |
= Mx (x=year) |
|
stockholders' net worth (book equity) |
|
# of shares outstanding |
|
B. Calculate percent change and divide by percent change in R&D dollars |
|
(M1-M2)/M1 |
|
|
(R&D1-R&D2) / R&D1 |
|
Significance: A 34-year study led by MIT Sloan School of Management professor S.P. Kothari found that market-to-book ratios rose 4.3% with each 1% increase in R&D investment-predicated on sound investments, of course. Compare this number with the ratio of R&D costs to IT's R&D support costs to further manage spending.
Projects: Management 
