Innovation Metrics

Innovation Metrics – Part 1

Posted on August 31, 2010 by Boris Pluskowski

Metrics are one of the most important elements of an innovation program’s success – determining everything from a program’s future direction – to whether a program even gets funded the following year. Yet metrics are probably the least understood, and most misused activity in a corporate program agenda. Understanding what to measure, and how to benchmark your performance is paramount to achieving both recognition and validation at the senior executive level – so how do you get it done? I thought I’d paste in a step by step guide over the next few weeks to let you know!

Understanding the Innovation function

1. Start with Strategy – Key to understanding the metrics used to measure your innovation program is understanding what the real goal of that program is. Your whole program should be focused at trying to help the company achieve its strategic objectives (if it’s not – make sure it’s realigned to do so or you risk having a marginalized program that will be cut at the first opportunity!) – so it makes sense to start your journey into metrics by getting a better understanding of what it is exactly that the organization is trying to achieve – where does it want to go? What are the barriers stopping the company from achieving it? Where are the key competitive forces? These and other questions will lead you into a better understanding of how best to target the activities of your innovation efforts to best benefit the organization as a whole.

Don’t be fooled into believing that the answer will always be via the creation and development of the company’s product set either. Sometimes it could be a need to dramatically improve process efficiency that will drive a company forward. For other companies it could be a need to develop innovative business models to drive profitability in the forthcoming years – and yet others might be driven by a need to get out of a commoditized marketplace and develop an entirely new value proposition and new client base altogether (see my earlier White paper on Innovation Dimensions for more on the different dimensions an innovation program can and should be attacking). Even within the same industry – different players will typically be driven by different environmental and competitive factors that will lead the decision to pursue a particular business strategy. This strategy should then lead both the direction of your program and the metrics you use to measure the program’s effectiveness. In the same way that companies do not typically simply copy another’s business strategy blindly, neither should you simply copy their innovation metrics and benchmarks – as what’s appropriate for one company in a certain situation could be disastrous when applied to another. With metrics, the wrong metrics will give you misleading information on your ability to help meet the company goals

Innovation Metrics – Part 2

Posted on September 5, 2010 by Boris Pluskowski

2. Plan the Path – Now that you have a direction to point your innovation efforts at, it’s time to plan the path to get to that effort. In the same way that strategy documents are formulated with multiple time points to set milestones for where the company wants to be at 1,3, and 5 years – so should your innovation plan and strategy as to how you’re going to help the company achieve those aims and the contribution the innovation program will make to the company’s strategic aims.

Your innovation pipeline will be led and directed by the strategic context of the program (see step 1 from last week) below, which follows the general form of:

i) Find and Identify the problems or barriers to achieving the strategic objectives and define each tightly in terms of applicability, feasibility, and commitment to implementation of the solution. Then decide upon the order in which to tackle those problems.

ii) Collect ideas from internal/external sources on how to solve those problems/overcome the barriers, and begin the collaborative process to build those ideas into base concepts, selecting the most effective concepts/solutions for further development.

iii) Build out the selected concepts and begin testing for feasibility, cost constraints, market acceptance, etc – the various tests and building activities carried out in this stage(s) will vary depending on the company, industry, and target of the innovation process.

iv) Decide upon and begin developing that project through effective project management

v) Launch the developed solution in a limited manner – to one geography, one factory, one business unit, etc – and tightly monitor and control to look for effects and improvements

vi) Redevelop based on insights from the limited launch and Re-launch to a wider audience, usually in stages.

Underpinning the program are the dual disciplines of Portfolio Management (ensuring that the quality of the pipeline is sufficiently high and sufficiently robust in order to achieve the company goals) and Foundations (ensuring you have the culture, skill set, tools, processes, leadership, etc to fully enable the innovation process) .

The pipeline is meant to provide you with a guideline as to the general best practice of a robust innovation program – and you will find that most innovation programs will be able to be overlaid onto this model. You’ll need to spend time understanding how to translate your overall program strategy, into a comprehensive program that fits your company’s capacity, culture, and aspirations. Once you have your process set out, you’ll be ready to start sorting out what you’ll need to measure to ensure you’re achieving your aims.

Innovation Metrics – Part 3

Posted on September 12, 2010 by Boris Pluskowski

3) The Three F’s – When beginning to consider innovation metrics – there are three main “F”’s that you need to measure – Form, Flow, and Function.

1.Form – Form is your ability to perform each part of the innovation process.

2.Flow – Flow is your efficiency at both passing stuff through the individual elements of the process as well as the overall process itself.

3.Function – Function looks at the program as a whole and its ability to achieve organizational goals, and the organization’s innovation capacity as a whole.
Taking the innovation process you’ve developed in section 2 (see last week’s post) above, you then go through the process figuring out what metrics are most appropriate taking into account the 3 F’s. For most companies, the metrics will be broadly split into two sections – the form and flow of the pipeline itself – and the function of the program as a whole (Innovation Metrics Worksheet – Form and Flow):



Some good examples of Form and Flow metrics:

1.Problem Identification and Definition stage:
•Number of Problems submitted for consideration (form)
•Number of individual event sponsors recruited (form)
•Number of Event Charters defined (form)
•Number of Events accepted and set up (flow)
•Number of Events in each of the key corporate strategic areas (flow)

2.Idea Collection, Building and Management
•Number of ideas/builds collected (form)
•Number of Event Visitors / Contributors (form)
•Number of Idea/Build Authors (form)
•Number of ideas reviewed and concluded (flow)
•Number of Ideas passed through to concept development (flow)

3.Concept/Opportunity Development
•Number of Prototypes developed (form)
•Number of ideas going into Project Management (flow)
•Potential value of ideas going to Project Management (flow)
•Average time idea spends in Concept Development (flow)

4.Project Management
•Average time to project completion (form)
•Number of projects completed versus target (function)
•Number of projects currently in the pipeline versus target (function)
•Effective capacity versus capability (function)

5.Initial Launch
•Target sales/cost reduction/process improvement versus actual (form)
•Customer satisfaction (form)
•Customer uptake versus local competitor/alternative (form)
•Number of Launches proceeding to Expanded Launch (function)
•Number of Launches failed (function)

6.Revise, Expand, and Re-Launch
•Contribution to profit margin from innovations
And an Innovation Metrics Worksheet for Function: