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Innovation Measurement. Can Innovation Be Measured?

Innovation metrics are difficult to set and measure. We typically assume that innovation as a soft skill, that can’t be measured at all. This is incorrect as it complicates innovation’s crucial role in developing company-wide added value. Although measuring innovation is possible and necessary, it’s still a touchy subject for most innovation manager. Why?

1. Innovation is new to the business and often ambiguous. For most companies, innovation is regarded as one-off or a new discipline. Creating a repeatable, scalable set of practices tends to highlight organizational obstacles and politics.
2. Innovation is often unknown. Most innovation leaders face a tough task when translating the potential value of ideas into tangible measures. We often go to the bottom line with measures like ROI, however these metrics can kill early-stage concepts.
3. Innovations will need long time horizons. Measuring innovation is an exercise in patience. Potential new products that are mere concepts today may take years to enter the market, yet be able to show a return.
4. Measuring innovation requires internal partners. We will need a strong partnership with the HR and Operations functions, to create the environment where such questions can be answered.

Few innovation programs have the comfort of waiting years before giving results.

Most organizations already have an abundance of metrics and KPIs in active use, it may be tempting for innovation leaders to measure everything from the beginning. Although well intentioned, the “measure everything” approach should be resisted, at least initially.

Whether you are an innovation manager, or someone with the task of introducing new ideas or product into your company we can help with the application of startup thinking. We call it Startup Innovation®.

Tracking financial returns is the best way for obtaining trust and influence within the business. The specific choice of financial metrics depends on how your company’s innovation strategy sits with organizational goals and KPIs. The early metrics focus areas will also be driven by which innovation activities can be measured most readily, and which leaders or functions are most willing to partner with the innovation group. So look for cost savings or revenue increases.

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Typically, these metrics track throughput across each stage of the ideas to innovation cycle. These measures look at overall volume of the pipeline, for example, ideation volume, projects launched etc.
After several years of development and maturation, it’s common to approach an upper limit on innovation’s potential impact.

At this point, innovation’s ability to generate financial returns should no longer be in question. Along with other mature corporate functions, innovation now plays an instrumental role in leading the charge for overall growth and corporate success. Strategic objectives, and corresponding metrics, are pivotal.

Typically, measuring the strategic layer of an innovation program means assessing portfolio health. Bigger, more impactful bets come with longer payback periods and higher degrees of uncertainty. Lagging indicators such as validated financial returns are not useful in placing and executing these bets. By the time you know the score, the game is over.

Thus, tracking the portfolio is proactive rather than reactive. You must keep an eye on your customers, technologies and the general ecosystem.

Mix of Activities

Expanding the activities mix is pivotal as innovation evolves into a mature function. Many programs begin simply, by crowdsourcing ideas and executing on projects. That’s a fine start. But for innovation to protect the firm’s strategic interests, you need to have a more complete set of capabilities in place, including trend scouting, incubation and the ability to scale-up.

The best innovation executives continuously measure their progress, and to fit their program’s current level of sophistication and staying power.

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