I often get asked about the top innovation metrics and how to properly measure innovation effectiveness. This is for good reason: metrics are essential to the success of any innovation initiative and often difficult to get right. Here’s my take on the subject and as well as some key insights that you can hope to gain from measuring your efforts.
The best metrics, I believe, are stunningly simple and carefully thought through before implementation. The more complex they are the more likely they are to be missed – or unused. The 3M metric – “percent of current year sales due to new products release in the past N-years” – is still helpful. I’ve even seen service firms use this metric and it seems to apply very well. However, one study indicates that only about one-half of companies are using this metric. I would also recommend having some means of measuring your pipeline.
In terms of how to use them effectively, I would add a cautionary note. Metrics that are used to financially reward or punish have a potential to create disunity. It’s my belief that metrics should be used primarily for comparison purposes. Citibank, for instance, takes a fairly thorough snapshot of where they stand in terms of innovation. They can provide a portrait of what a given location produces in terms of new products, the success rates, the number of ides in the pipeline, etc. And if you’re falling short in a given area, they can use these statistics to show you where you’re falling short. And they can show you a comparison against the best-in-class. I think it’s very important to have these sorts of drill-down metrics as a snapshot of where you currently are. I would advise using them for that purpose as opposed to using them to set compensation.
Key Insights on Innovation Metrics
- Look at innovation as an end-to-end discipline, a holistic process… innovation needs to be managed as a discipline
- Develop a company-wide idea management system to help get everyone involved in the innovation initiative. Spigit has a great tool for doing just this that I’d recommend checking out.
- Measure your progress
- Create metrics to measure your progress, but use them for comparison purposes – not as a stick to motivate compliance
- Measure your yearly revenue from new products , your success rates, your pipeline and your times-to-market
- Find out what metrics Innovation Vanguard firms are using and then choose from that menu the metrics that have the most buy-in in your organization
- The simplest metrics are typically the best
- Keep in mind, Innovation is about growth
- Innovation is not merely creativity – it’s not just having new ideas, but also “bringing them to life”
- Innovation needs to be harnessed and tied into the overall business strategy