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Two and a half years after putting ‘innovation’ at the heart of its
industrial policy, the Department of Trade and Industry has finally decided
what the word means. What is more, the department now wants to measure it
and find out how innovative Britain’s companies are.

When DTI officials began informal inquiries into how innovation could
be measured, the usual response was: ‘What is innovation?’ The Oxford English
Dictionary defines it simply as ‘the introduction of novelties’. But the
department decided it means something else: innovation is ‘the successful
exploitation of new ideas’.

Armed with this phrase, which ties the word to the business of making
money, the department commissioned two research teams to devise independent
ways of measuring how innovative companies are. The DTI hopes the techniques
will enable it to compile a scoreboard of Britain’s most – and least – innovative
companies.

‘Innovation is a nebulous concept,’ says Paul Stoneman, an economist
at the University of Warwick, and leader of one of the teams. ‘But I think
the attempt is worthwhile.’ Stoneman will focus on indicators of innovation
such as the level of research funding and investment in new equipment. By
combining these figures with the company’s profits, he hopes to calculate
the company’s innovation rating.

The team led by Joe Tidd of Imperial College, London, has devised a
different method which will rely more on market indicators, including the
proportion of a company’s sales that come from new products. ‘It is ambitious,’
says Tidd. ‘We cannot explain (innovation) in all its richness, but we do
believe we can capture it.’

The DTI hopes its scoreboard will show that the most innovative companies
are also the most profitable, demonstrating that innovation, whatever it
means, is genuinely valuable.