On Measuring Innovation
By: Karl R. LaPan, President and CEO, Northeast Indiana Innovation Center
Innovation is a Messy Business. It also can be hard to measure. I’ve seen too many smart people get fixated on innovation metrics (measuring things like what % of our sales came from new products introduced in the last X years) for the sake of metrics while neglecting what really matters—the change(s) you want to see organizationally to improve something – your products, your processes, your brand, your customer experience, your business model or your methods of delivery. According to Peter Drucker, “Innovation, at its core, is a change in dimension of performance.”
Most CEOs surveyed cite innovation (the pace and rate of innovation) as a top three business priority that keeps them up at night. In order to establish innovation as a credible business initiative, it is important to ensure it doesn’t fall into the trap of being perceived as another du jour change effort. Du jour change efforts share some common characteristics:
- The underlying effort is really focused on cost reduction and cost management.
- There is an outside consultant or expert brought in to kick-off the focus on quality, lean, six sigma to initially wring out the organizational waste and to incrementally improve processes along the way.
- Top leadership highlights and focuses on the results for a 12-24 month after launching the buzz word change program and then the effort shifts to a new organizational change program. This causes employee disengagement, low morale and a healthy suspicion of the organization’s motives.
I should be clear. These shared du jour characteristics are not what innovation is. Also, these are not the characteristics of how innovation successfully flows through an organization. We need to keep in mind that innovation, by its very nature, needs the flexibility and the spontaneity to flourish. Too stringent of parameters (or trying to over-orchestrate early successes) can be the kiss of death for an innovation effort to succeed. What’s more, for measurement to be successful, you and your organization need to:
- Follow Covey’s advice. Begin with the end in mind (Habit #2!).
- Know what success looks like in the targeted areas you plan to intervene with innovation (What is your change theory?).
- Set reasonable expectations and goals. Look for low hanging fruit and early successes/wins (Builds credibility and commitment).
- Know that no two organizations should measure or look the same when it comes to building innovative capacity (What works in one organization probably doesn’t work in another organization);Innovation starts at the top. Top leaders must buy-in and lead innovation. They must be visible and be innovation evangelists (Top leaders can’t delegate vision).
- Innovation requires either a burning platform for change or the pursuit of an incredible opportunity to be long-term sustainable (There has to be discomfort, fear or a BHAG to motivate action and the conditions have to support it).
- Know that building an innovative culture takes discipline and time. It is not an overnight quick fix. There is no simple panacea or vaccination for becoming innovative (You do have to structure, align and invest for innovation results).
In today’s fast-paced world, there is a likelihood that the processes you initially set out to measure will change significantly over time, making it a moving target and not an accurate picture of progress.
That said, I think there is value in measuring progress in what you do. Consider these variables (soft and hard metrics and categorize them into leading and lagging indicators):
- Soft metrics (Consider things like: number of visits to a landing page, followers on Twitter, discussions in communities and mentions in articles; # of ideas submitted into an innovation competition; & # of people trained in basic innovation skills)
- Hard metrics (Consider things like: #of new products launched, % of sales generated from products launched over the last 3 years; % of new products that are disruptive; ROI on new products launched; new customers acquired & Improvement in Net Promoter Score)
Please note I am not recommending the above metrics, I am just providing some examples to get you thinking about it. It is also not an exhaustive list of metrics.
I’ll leave you with this closing thought. Remember that innovation isn’t a goal in itself. Instead, it is a ‘tool’; a means to an end. In football, you don’t win games on the amount of passes you made; you win games based on the number of points you scored. The thing that should be measured is the effect of the innovation on ‘how well you scored’ in achieving your strategic priorities.