Measuring Performance – The Key to Sustained Innovation

You’ve heard it all before:  “In god we trust, all others bring data”, and “You get what you measure”, or “Goals and metrics are the key to [staying] focused.”  Intuitive.  Common sense.  And yet, the proper usage of innovation metrics is quite limited.  Common pitfalls in my experience fall into a few categories:

• Black Art: why try, this stuff just cannot be measured!
• Incorrect Metrics: such as, how many ideas did we collect?
• Postponed Decisions: metrics are addressed well into year 1 or 2 of a new innovation process or initiative, forfeiting the benefits of baselining and solid decision-making

Why do metrics matter?  For at least three reasons.  First, metrics reinforce the total promise of the innovation journey, ensuring that all stakeholders agree on the location of the finishing line.  Tactical metrics beget tactical end-goals.  Strategic metrics carry the enterprise into winning territory.

Second, carefully chosen, metrics guide behavior by helping align goals and actions in synch with the enterprise’s strategy.

And third, metrics enable managers to make well-timed, informed decisions based on objective data, which is especially valuable given the amorphous nature of some innovation initiatives, and the necessity to think long-term success.

Commonly used metrics are among the most dangerous, because they provide false comfort without providing managers with useful tools to achieve sustainable results, to detect early warning signs, or course correct when a new path is called for.  Some examples include:

• R&D spend or innovation spend as a % of total revenues
• Number of patents filed
• Number of proof of concepts completed
• % of sales from new products
• Number of ideas in total, per campaign, or by employee

Rowan Gibson’s “Innovation to the Core” (in my opinion, must reading for any Innovation executive) touches on a notion shared by consulting firm Strategos that there are two types of metrics to get right: input metrics and output metrics.   This distinction has been extremely beneficial to my clients; we’ve made some spectacular progress at rethinking the metrics dashboard.

To achieve sustainable innovation, the right stuff must go in (inputs) to get the right stuff out (outputs).  Easy, right?  Let’s see how easy this is to do at your organization.

Let’s discuss Inputs first, such as:

• % of capital invested in innovation initiatives
• # of entrepreneurs or risk-takers on the innovation squad
• % of each key associate’s time devoted to innovation projects
• % of associates for whom innovation is a key performance goal
• % of associates trained in innovation fundamentals each year
• % of executives’ times spent on strategic innovation
• % of managers trained in the fundamentals of innovation

Rocket science? No.  Common, not at all. Most organizations fixate on the output side only.  Imagine the plight of any manufacturing business that only focuses on what it wants to produce, with insufficient attention to the people, materials, skills, investments and insights that results in the best “end of the pipeline” products.

We’re all a little more familiar with the output metrics; for many reasons, these are usually the ones I encounter when I ask to see the metrics dashboard:

• # of new products, services and businesses launched in the past year
• % of new revenue from products or services recently introduced
• Number of new markets or categories addressed in past year, or planned
• # of times senior management has redefined the business’ strategy
• Number of ideas submitted
• Number of ongoing experiments and ventures
• Average time from submission to commercial launch (actually, a very good one!)

Innovation requires time, duration, staying power and stair-step progress.  To get there, the right Metrics Dashboard is an indispensable ally.  It is later than you think.  Make this a top priority as an Innovation executive.

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Luis Solis is President – North America at Imaginatik plc, a Professional Advisor – IT/IS Department at WP Carey Business School (ASU) and a veteran entrepreneur in the software as a service (SAS) business.