How to measure innovation output (part one)

Easier said than done, measuring innovation is notoriously difficult. In part one of these blog posts, we discuss why it is so challenging to set innovation metrics and the importance of first setting clear objectives.

by Jon Lapham
How to measure innovation

How to measure innovation output is a question that continues to perplex executives from across the business world. It’s a simple enough question, but the answer is far from straightforward. We live in a data-driven era where focus on tangible metrics is imperative to establishing successful initiatives and processes. The importance of measuring these initiatives and establishing appropriate metrics is widely understood to be the key to developing and growing. Yet how do you measure innovation, a process that is often defined by intangible measures?

Innovation is notoriously difficult to measure. There is no right or wrong answer and the most appropriate metrics will vary depending on each individual business and their own unique objectives. Nevertheless, in this two-part post we will provide guidance and advice to help you refine your innovation KPIs. Measuring output is essential in understanding ROI, establishing learning outcomes and driving growth, as well as offering appropriate rewards. Establishing innovation metrics is therefore vital and is both an art and a science.

Challenge of measuring innovation

The trouble with measuring innovation is that metrics are usually set on the basis of benchmarks already put in place by other companies. However, there is a notable lack of these benchmarks when it comes to innovation. Perhaps the closest you will get is the Google scheme of allocation 10% of employee time to experimentation and innovation. The primary challenge lies in taking into consideration all aspects of strategic innovation and not just the financial outcomes.

Another point to consider is whether getting too hung up over metrics and KPIs is actually defeating the point of innovation in the first place. We always emphasise the need for creative freedom and the avoidance of too many rules and restrictions. By placing so much prominence on results and statistics, do you risk stifling the process in the first place?

We believe this can be avoided by setting appropriate metrics that recognise the necessity of failure in the innovation process. Any targets set should not be limited to financial indicators. These will always be important but innovation is more than that. If you can establish the correct metrics then you will be able to use them to effectively develop your innovation strategy, not stifle it.

“Inherent in innovation is exploring the unknown and that brings with it a higher rate of failure than many are accustomed to. Accordingly, it’s important to measure things as a whole, with a portfolio mentality.” – David Silverstein, Breakthrough Management Group

Setting objectives

Before any metrics are established, the first step is to identify a clear set of goals and objectives. These will help you to set targets and KPIs that are in line with your overarching business strategy, facilitating more insightful reporting. Ultimately the metrics used will be unique to each organisation, as they depend on your own unique business objectives.

For this reason, there is no set approach to measuring innovation; as long as you take into consideration the objectives and maintain consistency, you will be able monitor your innovation progress and leverage the resulting feedback loops. Furthermore, it is necessary to take a long-term view in setting objectives. Innovation is not meant to be about overnight successes, rather it takes time to build up the processes and hardwire your workplace innovation culture:

“Innovation is a process that is best managed with a long term perspective, not necessarily measured in long time increments (e.g., months, years) but rather in completion of targeted goals.” – Marc Chason, Motorola Lab

Key takeaways

  • Measuring innovation output is crucial in understanding your ROI, developing the strategy and issuing rewards where appropriate.
  • Take time to establish innovation objectives so that you can ensure your chosen KPIs and targets are in line with overall strategic goals.
  • It is important that the chosen metrics are appropriate for innovation, in that they go beyond financial signals and consider that failure is a necessary component of successful innovation.

In part two we will consider example metrics and how to implement them.

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