Why Most Organizations Aren't Funding Innovation

This episode of 'Killer Innovations with Phil McKinney' tackles a fundamental flaw in how organizations define and fund innovation: the lack of a unified, meaningful definition of R&D. Despite trillions in annual spending, there is no consensus across governments, accountants, tax authorities, or international standards bodies on what constitutes research and development. The episode dissects four major frameworks—OECD’s Fiscati Manual, U.S. GAAP (FSAB), IFRS, and the U.S. Internal Revenue Code—each serving different institutional purposes but collectively creating confusion. The result? Companies can cut research without triggering financial alarms, while sustaining engineering and incremental updates are lumped in with true innovation. Phil McKinney proposes a new, practical definition: research must create genuinely uncertain, novel knowledge not available from existing sources, while development must advance capabilities that competitors cannot easily replicate. He introduces a three-tiered taxonomy—Research, Development, and Product Engineering—to help leaders realign their innovation budgets with actual strategic impact. The episode ends with a call to action: apply this new definition internally, challenge it, and push for change. A brief tool segment highlights the Uniball Zento Signature pen as a personal favorite for idea capture.