Organizational IQ

I discovered this week an extraordinary paper from Prof. Anne Marie Knott of the Washington University of Saint Louis. This is one of the best research I have see in a long time and its implications are profound. The paper is title “R&D Returns Causality: Absorptive Capacity or Organizational IQ“.

If you are involved in R&D in any capacity from a CEO down to just about any contributor or if you are involved in a technology transfer towards innovate solutions you must read this paper.

Prof. Knott starts by demonstrating that, contrary to popular belief:

it is not that higher investment [which] increases R&D returns (absorptive capacity), it is that having higher returns (Organizational IQ) [which] increases investment.

R&D investments behave pretty much like any other, i.e. you quickly reach a point of diminishing returns. She also demonstrated that:

it appears that spending less on R&D “increases” absorptive capacity if we now define absorptive capacity as the effective use of rival knowledge

The most profound conclusion I believe is that one:

The only way for firms to increase returns to their own R&D productivity is to raise Organizational IQ. Since elasticities vary over time, this appears to be possible.

I would of course like to add that, with BOLT, we have identified a way to reliably augment the IQ of an organization, but beyond this shameless promotion, everyone should feel empowered and responsible to raise the IQ of his or her organization.

Prof. Knott identifies high IQ organizations as:

the high IQ firm will produce more innovations, or for any given innovation, the high IQ firm will invest less developing it.

We’ve created a BOLT diagram to better illustrate when and where an high Organizational IQ can make a difference. Here are the context diagram of a typical R&D unit (as described in the paper) and the lifecycle of a useful element of knowledge:
Steps 1,2 and 4 represent the transition where a High IQ organization would provide a large differentiation. Hence,every R&D manager should focus on tracking the progress of their organizations by measuring the number of problems identified and the type and units of knowledge incorporated as the solution is developed. That would lead to far more agile and innovative organizations, far more so than focusing on “user stories” or even “value”.

I see everyday organizations “assimilating” garbage, whatever they can find in magazines or hear from pundits. I see every day organizations minimizing the problems they are trying to solve and covering it up with a flow of user stories that supposedly deliver value, one at a time. I am sure everyone has heard at least once that quote from Albert Einstein:

If I had an hour to solve a problem and my life depended on the solution, I would spend the first 55 minutes determining the proper question to ask… for once I know the proper question, I could solve the problem in less than five minutes.

It could be time to rewrite the Agile Manifesto, if you truly believe in increasing your Organizational IQ:

We are uncovering better ways of developing
solutions by doing it and helping others do it.
Through this work we have come to value:


Collective Intelligence over individuals, interactions, processes and tools
Identifying Problems with precision, over responding to change or following a plan
Solutions over products and services
Shared Insight over customer collaboration or contract negotiation


That is, while there is value in the items on
the right, we value the items on the left more.

2 Responses so far.

  1. JoukoSalonen says:

    provocative thinking, something I definitively want to try – rapidly diminishing R&D returns is the slope we are right now, we have been working hard to find a cure,

  2. […] I discovered this week an extraordinary paper from Prof. Anne Marie Knott of the Washington University of Saint Louis. This is one of the best research I have  […]

Leave a Reply

Your email address will not be published. Required fields are marked *

8 − = six

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>