How to measure innovation is a subject that has not quite yet generated sufficient interest. For some time innovation has been on everyone's lips as the way to create competitive differentiation. The sad thing is that many of those well intended lips can not define innovation let alone measure it.
Maybe a harsh statement but we all know that what gets measured gets done. No wonder few companies win at innovating.
Art Fry, the developer of Post-It Notes said it best in an interview “I agree that innovation is a tricky thing to bring about. Companies want it but focus on the wrong things."
Where does one begin when developing an innovation performance indicator (IPI) system. Quit simply you start with your company’s strategy. Define the innovation strategy and business model of innovation for your company, and build a measurement system for innovation that tie the two together.
You will need to know what it is each measurement system should achieve at each level of the organization. There are three roles of a measurement system: (1) communication of the innovation strategy, models and measures, (2) monitor the overall innovation performance and (3) enable learning.
It is important to remember that companies grow and evolve, particularly when they have the right measurements in place. At least, with the appropriate and reliable innovation performance management system, the health of the organisations ability to create new can be monitored.
In addition, just as your strategy, it is important to allow your measures to change as your company changes. The worst thing is to develop a new innovation strategy and performance objectives but still measure progress in the same old way.
When developing an innovation measurement systems four key elements warrant attention. They are:
The elements that require close measurement within this realm are (a) culture, (b) exposure to innovation stimuli, (c) understanding of the innovation strategy and models, and (d) management infrastructure to advantage ideation. Various methods can be employed to measure these aspects.
The crux of your innovation strategy, yet only second to the right culture. The portfolio should consist not only of current projects / initiatives underway, but should consist of a continuous filtering and feeding mechanism. New ideas and concepts should be added to a hopper for constant evaluation and regarding of the current and future portfolio. Innovation projects and initiatives should be measured against the following criteria:
A measurement systems is required that measures both at the aggregate level as well as being capable of drilling down to the project level.
At the aggregate level of interest may be the current status of the innovation deployment, number of projects at specific stages, resources consumed by projects and value created by these projects.
At the project level of interest may be the current stage and status of the innovation project. A charter for each project will define its scope and objectives, these are to be measured.
Value creation has to be measured correctly and fairly. When it come to innovation it is best to employ a Residual Income calculation rather than a ROI approach.
Measurement is a significant factoring in successful innovation.
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