Saturday, November 16, 2013

How to Measure Innovation Performance

It takes innovation to measure Innovation Performance. 

Innovation is about how to implement the creative idea and achieve its business value. One can only manage what it’s being measured. It is also true for innovation management.  Innovation performance metrics and tools can help companies think systemically about business innovation.

First, in-depth understanding the business HOW before measuring: You need to know 1) how a company is performing in bringing new ideas (Inputs) and what are the sources of innovation etc. 2). How a company is processing the existing and new ideas it is getting as inputs, how innovative are the process. 3) how a company is bringing the ideas into reality more related to commercialization, here it also deals with profits, learning etc (Outputs). So overall, company innovation performance can be measured by these three parts.

The quality of ideas as an innovation measure: Quality of ideas is measured by how well your ideas satisfy customer’s desires and how much of the idea space your ideas cover. Innovative businesses have connected their funnel for collecting ideas (which consists of their own tools like portals, ideation platforms, social networking platforms and so on) with the product development process. All the ideas collected through this funnel pass through an automated filtering and then through a manual process of selection which qualifies ideas. The collected ideas then pass through the business case preparation process. Some companies employ certain effective techniques like Design factory method at this point and the results of this stage are then processed through regular design. In short, following the steps
- Idea collection (funneling through multiple sources)
- automated filtering of ideas (basically for the elimination of the most obvious non-candidates)
- manual assessment/filtering
- business case preparation and validation
- regular product development / design / product engineering 

Next step to drive the business and to increase creativity and innovation within a company is to introduce the Personal Innovation-index (PÏ). In relation to this index, the PÏ will indicate, top-down, the contributed economic value of each employee (executive/management, professional/expert) in relation to their innovative initiatives and personal activities, commitment, influences, impact, and contributions. This indicator represents the innovation maturity level of an employee based on the personal impact and influences on innovation, the ability to innovate, the ability to network externally, the ability to innovation integral and the ability to accelerate operational processes.

The performance of delivering the ideas is another innovation measurement. An organization’s innovation performance could be measured in terms of its ability to convert the ideas that enter the ‘Innovation Pipeline’ into the desired output, propositions, process improvement etc. Obviously, the performance of the pipeline depends on the quality of the ideas entering it and the organizational mechanics that evaluate and implement the ideas. Simple metrics can be applied to measure the performance of the pipeline at each stage. This would allow an organization to tune its processes to enhance the performance of the pipeline and measure the performance improvement/decrease.

Innovation Quotient is the percentage of the total idea space covered by your products and designs. There are several types of Innovation Quotient to measure different aspects of the quality of ideas. For example, vitality Index measures the contributing value of your new products or innovations as either revenue or preferably profit to your overall value, % of new product/service contribution to total value.

Given the dynamic nature of any organization and the complex mix of its resources, a well-defined standard set of innovation performance metric would need to be considered in better measures of innovation success such as: revenue sustainability, increase in knowledge, impact on brand reputation, customer satisfaction and loyalty, price elasticity, even attractiveness as an employer


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