Methods

Innovation in a company and its stock performance are related – but only those who can recognize “innovation” independently can take advantage of this connection.

Algorithms for the recognition of innovation

ALPORA can not only recognize this otherwise intangible multidimensional quality in companies, but also compare different companies with each other and select the most innovation-efficient ones from a comparison group in each case.

This works thanks to several specially developed procedures for evaluating the volumes of data compiled by ALPORA – first and foremost ALPORA ICA, the analysis tool for Innovation Capability Analytics, and ALPORA OCA, the procedure for Operational Capability Analytics.

Innovation recognition through ALPORA

Details

innovation is not one-dimensional

What makes a company innovative? How do you recognize it?

Many approaches to this focus on individual criteria or parameters such as “high investment in research” or “always new products on the market”.

One disadvantage of these individual parameters is that they do not have the same influence factor in all markets and in every market situation. A company that is strong in one area does not have to worry about another. At the same time, the relation between parameters is often relevant; many patents due to high investments in research and development characterize a company differently than many patents with a comparatively small investment.

Another disadvantage of a one-dimensional view is that the “values” of a company, considered individually, often give a distorted picture and only really allow an assessment relating to other, comparable actors. How this relation of the parameters and the relation of the companies in the market looks can also be variable depending on the market and the situation.

Auswahl der Fonds

Innovation recognition by Alpora

Details

For this reason, ALPORA relies on algorithms for the analysis of innovation efficiency in companies, which optimize the multidimensional data space, considering the relationship of the data and data sets to each other.

Currently, the most important tools for this are ALPORA ICA and ALPORA OCA, which were developed by ALPORA and are used alongside other methods from the areas of Big Data analytics and machine learning.

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Innovation Potential: ALPORA ICA – Innovation Capability Analytics

ALPORA ICA is ALPORA’s method for determining the Efficiency Innovation Frontier, which is defined by all those companies of a comparison cohort (usually all companies in the considered market) whose Innovation Capability is maximal.

These companies represent solutions of the mathematical optimization model that relates input and output parameters of all analyzed companies to each other and thus identify OPS-efficient companies.

Alpora_ICA2_Grafik

Operational Capability: ALPORA OCA – Operational Capability Analytics

ALPORA OCA is ALPORA’s method for determining the Efficient Operations Frontier, which is defined by all those companies in a comparison cohort (usually all companies in the considered market) whose Operational Capability is maximal.

These companies are solutions of the mathematical optimization model, which evaluates input and output parameters of all studied companies relating to each other and thus identifies OPS -efficient companies.

Alpora_ICA2_Grafik

Innovation field analysis: ALPORA IFA

ALPORA’s Innovation Field Analysis follows the preselection of companies with the highest innovation efficiency and operational capability.

The process aims to use semantic Big Data analytics methods to first identify the industries or research areas relevant to the top innovators identified and then to carve out innovation field clusters within them.

The Netculator is then used to determine the extent to which each company is active in these innovation clusters, considering public data and individual research.

From innovative companies to innovation funds

Our research and application results show that the companies that have been identified with objective and quantitative methods (ALPORA ICA and ALPORA OCA as well as ALPORA IFA) generate a higher alpha.
Nevertheless, it is not enough to simply combine the companies whose innovation efficiency ranks highest into a fund – a fundamental analysis is used in the next step to select the most suitable candidates for ALPORA’s Innovation Fund.