Innovation Metrics: “What Gets Measured Gets Done”.

Einstein: “We cannot solve our problems with the same thinking that created them.”

Let’s first understand the 3 key measurement strategies that drive and innovation strategy. 

Company innovation projects are often have support based on leaderships intuition and the market’s latest intriguing concept of potential value that is largely a subjective insight. At some point, it becomes critical to quantify this value in order to fully understand the risk and reward aspects of the investments required.

I.   The 3 Innovation Measurement Traps to Avoid

1. Fixation on a single innovation metric typically the calculation of return on innovation activities. This can lead to setting the wrong priorities. Companies that are good at innovation master the ability to introduce different types of innovation. They recognize that obtaining good innovation outputs requires tracking the right inputs and the right processes.
2. Focus on close-to-the-core sustaining innovations that promise at best incremental returns which are insufficient for driving and creating substantial growth.
3. Focus on profitable growth instead of growth only. Input and output metrics are needed to balance intriguing ideas and the corresponding impact on revenue growth.

Once the company is aware of how to use metrics to drive and align innovation strategy, an integration and leverage of these 4 main metric categories is key.

Metrics that encourage Sustaining Innovation Behavior: Balancing the value of Input, Process, and Output Innovation Metrics to drive corporate innovation initiatives.

The successful approach to managing innovation metrics includes a balanced mix of metrics that track each phase of an innovation activity which includes measurement categories regarding an input, process, and output related focus. This approach includes an understanding of how measurement encourages a balanced innovation portfolio, fosters iteration and learning, and ensures dedicated resources for innovation.

II. The 4 Potential Innovation Metrics Categories that Leading Companies Use to Drive their Innovation Strategy

A: Input Focused-Related Metrics

Financial resources , Human resources, Specific/protected resources for noncore innovations, Senior management time, Number of patents filed.

B: Process Focused-Related Metrics

Process speed, Breadth of idea-generation process, Innovation portfolio balance, Current growth gap, Distinct processes, tools, and metrics for different types of opportunities.

C: Output Focused-Related Metrics

Number of new products or services launched, Percentage of revenues in core categories from new products, Percentage of profits from new customers. Percentage of profits from new categories. Return on innovation investment.

D: Advice for Senior Executives.

1. Focus, Focus, Focus
2. Remember Relativity
3. Constantly review the matrix of selected metrics
4. Gain alignment up and down the corporate chain

Reference: Align metrics with performance measurement system the Innovator’s Guide to Growth: Putting Disruptive Innovation to Work by Scott D. Anthony, Mark W. Johnson, Joseph V. Sinfield, Elizabeth J. Altman, Harvard Business Press, 2008.