Innovation Metrics and Measurement

What gets measured, gets managed.

Innovation is not serendipity, it’s a managed process of transforming novel ideas to achieve their business value. You can only manage what you measure. Innovation is a management process which needs to be measured for making continuous improvement. Given the dynamic nature of digital organization and the complex mix of its resources and business factors, a well-defined set of innovation performance metrics need to be considered in better measures of innovation success such as revenue sustainability, customer satisfaction, knowledge accumulation, brand reputation or price elasticity, etc.

The measures should be oriented to justify innovations the organization needs: Better look at what the results were prior to implementing the innovation and after. Generally speaking, there are two types of innovation measurement. The first type is about measure innovative thoughts or actions - the business value brought by those novel ideas being designed and implemented. The second type of innovation measurement is through innovation drivers - the crucial elements of creative culture or the differentiated innovation competency. The further goal of innovation measurement is to track innovation management effectiveness, not just about the quantitative results which sometimes can mislead the management with a short-term perspective. Innovation performance indicators need to focus on measuring quality, quantity, time, cost, revenue growth, profit improvement, margin targets, products variety for stability, turnover, shareholder/owner return and talent sustainability, etc.

Select a set of measurements which are seen as critical to make continuous progress: Normally organizations look for metrics measuring business results generated by innovation efforts. But, it often takes quite some time for a new innovation driver to produce those measures. It is difficult to measure the impact without taking the time to generate impacts. Therefore, it’s always critical to select some leading KPIs for measuring innovation results in the long run and help to make continuous improvement. Do no just measure innovation with lagging financial metrics only. For example, one of the solutions is to define process KPIs, which demonstrate the growing capability of the organization to deliver more innovation with business impact in the future. In practice, the problem for innovation measurement is often that the initiative is not well defined. The performance metrics have to be credible and relevant in the eyes of stakeholders, and truly help the business improve their innovation capacity.

The innovation performance indicators should focus on building innovation competency and desired culture (mindsets, attitudes, and behaviors): There are incremental innovation, radical innovation, hard innovation and soft innovation. And most importantly, being innovative is a state of mind, it is a culture thing. Thus, innovation efforts cannot be measured the same as other types of business initiatives via quantitative manner only. In many companies, a pervasive obsession for purely quantitative measurement or numerical success indicators sweeps aside much of the softer and more qualitative information that is crucial in making innovation effort to develop a creative culture and build innovation competency. To measure and manage innovation effectively, a necessary set of desired attitudes and behaviors should be clearly established before performance indicators are designed. And then, innovation managers can leverage performance indicators as the best tools to nurture an innovative culture and promote continuous innovation within an organization.

What gets measured, gets managed. Metrics are not the end-all solutions to innovation management, but simply another set of tools and information. Choose the right metrics by deciding which are seen as critical to make the progress in delivering high performance innovation results. And keep the measures simple and understandable.

Posted in: Innovation,KPIs,Performance Master