KPIs are critical to the test-and-learn process.
Companies need to
spend a lot more time distinguishing the "performance" of execution
and the "objective" of innovation, before they try to fuse them
into "the performance of innovation". Innovation KPIs can become a
problem if they are poorly developed. The main outcome of adopting KPI from an
innovation perspective is to improve the quality of knowledge and learn faster
from mistakes. KPIs in such perspectives can be seen as representation of what
the innovation actually is (or does) for business: a kind of scale model or
framework. The dangerous part of this discourse is the attractiveness of the
"dark side" metrics and performance systems: they tell you what you
want to be told. Innovation instead tells you things differently.
Performance
indicators should focus on both business objectives and desired behaviors.
Further, before performance indicators are designed, the necessary and complete
set of desired behaviors should be clearly established. If performance measures
are to have the required impact, all of these behaviors should be assessed
effectively. Otherwise, the behaviors that remain invisible will be sacrificed
to raise scores on others that are being closely watched. A
"good" KPI is judged both by its connection (even loosely or
qualitatively) to the business objectives and by the behaviors it reinforces
(or in some cases, discourages). But the even better KPIs are the ones that
have been developed to positively reinforce desired behaviors.
The problem does not
reside in the KPIs, but in the lack of wisdom on its crafting or use. Inappropriate
KPIs do kill innovation. Particularly when traditional, operational excellence
based corporate KPIs are applied to innovation efforts too early. The
appropriate innovation management KPIs are more activity and directionally
oriented. However, as KPIs have been used for many executives as a tool to
foster results through linking “indicators” to reward and recognition systems,
managers became trapped into the paradigm that a simple “indicator” should be
the measurement of success for the lack of a better tool in terms of
management.
KPIs are the best
tools available for innovation managers that wish to promote continuous
innovation within any organization. If innovation managers are not prepared
yet to understand the difference between fostering creativity and rewarding
end-results, that is another issue to be dealt with. The fact is traditional
management focuses on the performances achieved upon the tangible assets; it ignores
in its reporting and rewarding system for the intangible assets & resources
(that include talents, alertness, vision, innovation capabilities, etc.), it means
that they miss out the main drivers of out-performances. Reward systems that
target on results are excellent for “on going” operations where execution is
the main goal. When managing innovation, reward and recognition systems that
aim at promoting engagement and creativity are more important. Therefore, KPIs
must be applied here too, not solely on execution. For instance, you have to
change the rigid way that rewarding and recognizing through KPIs in terms of
management, and pursue a more advanced performance system in “the new
innovation era”.
KPIs are critical to
the test-and-learn process. The
starting point is to define what you want to measure to improve the process.They
focus thinking, effort and resource allocation. What's important is for the
business to acknowledge that new KPIs, germane to the initiative, may need to
be established and that these may fall outside current cultural norms and
scorecard comfort zones. Likewise, for the process to be meaningful, it's vital
that one is actually measuring and reporting KPIs, as opposed to just metrics.
Pay more attention to dark side of KPIs, which discourages you to make
mistakes. To quote Tagore " Where the mind is without fear and head is
held high for the river of reasoning to flow..........."
Therefore, if a KPI may kill innovation, it simply means
that this is not a good KPI for innovation effort, it takes wisdom and
practices to craft the right set of KPIs in order to stimulate advancement and
manage innovation project more systematically.
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