Return on Innovation

This chapter explores the critical role of customer perceptions in shaping the financial success of business innovations. The chapter discusses a five-year study providing empirical evidence that customer perceptions of a company’s innovativeness influence loyalty and abnormal stock returns. These findings are then contrasted with research on the impact of perceived innovativeness on firm revenue, highlighting the multifaceted ways in which customer perceptions drive financial outcomes. Moreover, the chapter discusses industry-specific perceptions of innovativeness, using case studies of IKEA and Amazon Go to illustrate how companies can excel in both innovation and social responsibility. Finally, the chapter advocates for a broader approach to innovation metrics and justifies the Wallet Allocation Rule as a framework for understanding the relative impact of innovativeness within different industries.