"RQ is NOT about spending. It's about productivity of that spending," said Anne Marie Knott, professor of strategy at Washington University in St. Louis and creator of the Research Quotient (RQ) model for measuring optimal R&D.
This year Oshkosh had a higher RQ (a measure of R&D productivity that links R&D spending to corporate revenue growth and market value) than Silicon Valley darlings like Google and Netflix.
How did Oshkosh do it? A good place to begin answering this question is with a fire hydrant.
"A hose that fits a hydrant in Phoenix will not fit a hydrant in New York City," said Gary Schmiedel, executive vice president of technology at Oshkosh, the market leader in fire truck manufacturing. "It's not exactly high tech, but from a practical standpoint, you have to deal with all those things."
The average buyer of a fire truck has about 20,000 options to consider, according to Oshkosh. There are decisions to be made about suspension, ladder height, color and water pumping.
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Product challenges with many variables require innovation, but the products don't need to be sexy to require advanced R&D thinking. At Dow Chemical, a product as ordinary as exterior house paint is a global innovation challenge. When designing a new paint, Dow needs to take into account the materials that are most commonly used for home exteriors across the regions of the U.S., and the fact that in Saudi Arabia the sand will erode paint, and that in India it pours for months every year.
"How can one project attack all of those problems?" said A.N. Sreeram, vice president of research and development at Dow.
Not just dealing with but also constantly improving and rethinking all of the variables has made Oshkosh a hotbed for innovation. One of the company's most popular fire truck innovations is Side-Roll Protection: a system of electronic sensors, automatic-tighten seatbelts and side-curtain air bags developed, in part, as a response to a troubling number of firefighter deaths en route to the scene of a fire (since 2004, 62 firefighters have been killed while driving or operating their vehicles, according to the U.S. Fire Administration).
You may not expect to hear it from Oshkosh, but Schmiedel said, "If we don't innovate, we die."