Performance metrics for new ideas
Covered in Measuring Innovation
- How do we hold new initiatives accountable?
- Which metrics will help us to avoid unfairly judging our programs?
- How have other companies been measuring their innovations?
Innovation Metrics: What Every Innovation Leader Needs to Know - Innovation Leader, Special Report
“Since we started Innovation Leader, the subject of measuring innovation progress has come up in virtually every interview, off-the-record conversation, and Field Study gathering we’ve had. Innovation executives want to be sure they’re using the right metrics, and reporting to business unit leaders and senior management teams in a way that ensures continued support and resources.This report captures what we’ve learned so far — both what executives are tracking today, and what new dimensions they’re still working to capture.”
“At companies that track the relationship between shareholder value and spending on innovation, the three most important metrics are all externally focused: revenue growth, customer satisfaction, and the percentage of sales from new products or services. At companies where innovation is the most important strategic priority, the top three metrics are a somewhat more comprehensive mix: customer satisfaction, the number of ideas in the pipeline, and R&D spending as a percentage of sales.”
“I’ve prepared the following list which is by no means exhaustive but is designed to get you thinking about this from the context of your organization’s objectives.”
“Beneath that question is a very real worry. If this new crop of Chief Innovation Officers, company-bred venture capitalists, and creative catalysts can’t prove that they’re moving the needle on things that actually matter to their employer, their jobs will almost certainly evaporate.”
Cisco: “As soon as the idea starts creating business impact it starts to counter day 1 for us. We track that idea specifically for 3 years. After 3 years we don’t track it at all and it no longer hits our books anymore as business impact. It’s no longer innovation impact, it’s just run-the-business now. As soon as we’re able to calculate the true business impact it counters for 3 years and once that’s up we no longer track it.”
Scaling Lean - Ash Maurya, Book
“You’ve talked to customers. You’ve identified problems that need solving, and maybe even built a minimum viable product. But now there’s a second bridge to cross. How do you tell whether your idea represents a viable business? Do you really have to go through the whole cycle of development, failure, iteration, tweak, repeat?
“Number 1 – the # of experiments run. When it comes to disruptive innovation it’s about getting away from taking a few large bets slowly to one that takes lots of small bets quickly.”
“To address these issues, this chapter describes key measurement traps, spells out fifteen potential innovation metrics that companies can use, and provides tips for executives seeking to start implementing their own set of innovation metrics.”
“By measuring and analyzing as you grow, you can validate whether a problem is real, find the right customers, and decide what to build, how to monetize it, and how to spread the word. Focusing on the One Metric That Matters to your business right now gives you the focus you need to move ahead – and the discipline to know when to change course.
“Instead, what’s needed is an approach that can value innovation (what finance needs for effective corporate governance) while delaying investment decisions until we know more about the market (what product needs to be successful.) We need a tool that can measure learning in dollars, allowing Product and Finance to speak the same language and keep them aligned to the same goal under conditions of uncertainty. In short, we need Innovation Options.”
“With Dupont in mind, we can come up with a better measurement by sub-dividing ROII as follows:
- Innovation magnitude (financial contribution divided by successful ideas)
- Innovation success rate (successful ideas divided by total ideas explored)
- Investment efficiency (ideas explored divided by total capital and operational investment)”
“Profitable innovation, in other words, cannot be bought. Simply spending more usually leads to a waste of resources on increasingly marginal projects. The solution to innovation anemia is not to boost incremental spending, but to raise the effectiveness of base spending — to increase the return on innovation investment, lifting the firm’s “ROI2.””
LINKS TO MORE AUTHOR CONTENT
© 2017 Econic, LLC. All rights reserved.