The Complete Guide to Measuring Innovation
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It's obvious that if you can't measure it, you can manage it!
How do you measure innovation? How do you know if it’s worth the investment?
There are different reasons why most companies don’t have formal innovation metrics. The primary reason is that it’s not as simple as it sounds. Some organizations, which are very well known for their innovation culture, like Google and 3M, have innovation metrics for years. The most noteworthy is that a certain percentage of employees’ time is dedicated to experimentation with new opportunities.
If innovation wishes to become a legitimate discipline for businesses, the same way sales, marketing or supply chain do, it must be tested in similar parameters. The main parameter is improving the organization bottom line and helping it grow.
The Secret R&D
Innovation is no longer part of a secret group called R&D. These days, innovation is a widely recognized critical business requirement for all organizations across all industries. Innovation could be done internally, or as open innovation (sourcing ideas and technology from outside the organization), using the wisdom of the crowd utilizing clients, suppliers or simply the general public. It will usually involve several sources working together, complementary to the R&D work.
There is no one agreed way to measure the ROI (Return On Investment) that innovation processes and tools can bring to your organization. On top of that, it’s a known fact that most innovative efforts and initiatives won’t become a product or a service, and that can lead to even less trust by the management which already suspects that the innovation unit/team wastes too many resources.
In this article, I will try to give you a list of agreed KPIs (Key Performance Indicators) to estimate innovation-related activities, projects, and initiatives in the organization.
Innovation has a lot of added values which are difficult to quantify, like increasing employee satisfaction and loyalty to the organization or changing the organizational culture to accept change. For this reason, we usually measure the things we can easily count: how many startups signed up to our accelerator, how many ideas we collected in our last idea management campaign, how many startups events we participated in and so on. All of the above have nothing to do with the financial results of the organization, which makes it hard to show the incredible value that an innovation process brings to any organization.
Building a business process supporting a set of KPIs will allow your organization to monitor its’ goals and makes everyone work harder to achieve the set goals. This will provide a sense of control for the organizations’ management team.
Before we dive into the list of KPIs, it’s important to remember that in most organizations, innovation is a new function (usually a one-man show) and should be treated as so. It should be granted at least two years of grace time before starting to measure its’ performance. This doesn’t mean that innovation managers have two years where they can sit and plan with no practical outcomes. They should make all efforts to realize the value and prepare for the point they will be measured like any other business unit in the organization.
Input Vs. Output
We divide all metrics into two groups. Input metrics Vs. Output metrics. This will help you confirm you’re doing enough of the right activities to reach your goals.
Input KPIs ideas:
Output KPIs ideas:
Biz Dev / Finance:
Training and knowledge:
Idea management process:
Implementing a culture of innovation/rewards innovation/accept risks:
We are positive you can think of other KPIs (please share from your experience), but the list above can help you start building your set of KPIs.
Defining the right metrics for your organization is not an easy task. We gave you many examples to help you get going. There is no one right set of KPIs to answer each organizations’ questions, and that’s why you should find out what works for you.
Remember to beware of metric overload. Many companies have too many metrics and try to measure everything. Too many metrics lead to excessive activities, lack of focus and a waste of time you should invest innovating.