How to measure innovation 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 post we will provide guidance and advice to help you refine your innovation KPIs.
Measuring innovation 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.
Set your innovation goals and 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.
Establish innovation metrics
There are a myriad of potential metrics that could be deployed to track your innovation output, some more complex than others. There is no right or wrong answer. It is about choosing the most appropriate measures for your own business objectives and goals.
Below we have included a selection of suggested metrics for measuring innovation output; this is by no means an exhaustive list, merely a starting point to build upon:
- Number of new ideas proposed
- Proportion of ideas selected for implementation
- Number of unsuccessful projects
- Speed to market
- Revenue generated from new ideas
- Percentage of sales from new products
- Customer satisfaction with new products
- Lessons learnt
We have found that one of the most popular of these metrics is to measure the generation and sales of new products or offerings. The time period that defines a ‘new’ product is up to you.
Inevitably there will still be ambiguities with this approach of measuring, but as long as you are consistent then it should provide clear and tangible results. Just remember that it is crucial to measure what is important, not what is easy to measure.
Implement your innovation metrics
You have set your objectives and established your metrics but you cannot stop there. The next challenge is to implement these metrics and it is much the same as integrating innovation management software into your organisation.
Announcing the metrics to your executives will not be enough. The process requires careful planning, tracking and development on an ongoing basis in order to ensure their success.
Decide how innovation metrics will be tracked
The first step will involve deciding exactly how these metrics will be tracked and accurately recorded. Devise thorough but straightforward processes to ensure consistency and execution.
It will help to engineer an internal marketing strategy to onboard all employees in the implementation of the innovation metrics, allowing total visibility across the organisation.
Appoint ambassadors and key stakeholders
As with any new business initiative, the implementation process will require key stakeholders to champion the process. Without these ambassadors, regular reporting and tracking will likely fall by the wayside and all the time and energy invested in establishing the metrics will be wasted.
By onboarding all employees and promoting key stakeholders, it will help ensure that the process of measuring innovation stays on track.
A timeline for measuring innovation
- Establish key innovation objectives and goals.
- Choose the most appropriate metrics in line with these objectives.
- Plan and devise processes for recording these metrics.
- Allocate key stakeholders and ambassadors to champion the implementation.
- Push out an internal marketing strategy to raise awareness of new processes.
- Continue to track and monitor progress of the innovation metrics.
- Refine and adapt the metrics where necessary.
- Issue rewards and recognition according to results.
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.