Measuring the Value of an Innovation Practice

How do you value a start-up? And more importantly, how do you tell a small business owner that their business is only worth $50k, despite the $75k in start-up capital and two years of long hours they have put into it? I still remember this quote many years on:

“I realise you have put in two years of hard work, and all of your life savings…but for all I know you could have spent the entire time digging holes in the ground and filling them with pencils.”

We know that businesses should be valued on their capacity to generate revenue. But how should we value our innovation programs? How can we tell that all our brainstorming, brown bag sessions, and innovation breakouts have been worth the effort?Leading Indicators for Idea Value
In his blog on Innovation Management, Doug Collins wrote about measuring the value of an innovation practice. In it, he provides a framework for measuring the value of an innovation practice based on three simple criteria:

  • Strategic Alignment
  • Are the ideas helping the organisation achieve its goals?

  • Relative Advantage
  • How much better are things after the ideas have been implemented?

  • Engagement
  • Is the community engaged, and will the program maintain momentum?

I particularly like the consideration of strategic alignment, I used this approach in a previous role and found it extremely useful. There is also real value in evaluating the effectiveness of individual ideas and guaging whether or not your program has the legs to continue. Whilst you are looking at engagement I would highly recommend taking a look at the links between the way innovation is practiced and the way revenue is generated. Here are two different approaches from a professional services firm, guess which one still has engagement in two years time:

  1. An exciting range of lunchtime innovation sessions are launched, with cool brown bags full of lunch goodies and plenty of high energy ideation. The best ideas are put forwards for selection with prizes going to the crowd favourites. Successful ideas are then pitched to clients in an attempt to monetise them.
  2. Innovation practices are embedded into existing client projects, with staff trained in creative thinking techniques and provided with on site facilitators to help generate innovative ideas at key points during each project. Evaluation and funding is decided within the project team, with close collaboration and support from the client.

Leading Indicators for Innovation Culture
As well as looking at motivation we need measures for individual characteristics, ideally to support some very clear cultural benefits within our strategic goals. For a look at some of the human measures of innovation (i.e. are our people any more innovative as a result of our efforts) we need to consider the resulting mindset. Two recent posts look at the Innovator’s Mindset, and What an Innovative Culture Looks Like. The thinking can be summarised like this:

  • What is an innovative culture for, and why would you want it?
  • Innovation is a skill-set and a process which you can develop and use to create and implement cool ideas. You’ll know the ideas were really cool when no-one else has thought of them, and they blind side your competition to create real competitive advantage. An effective innovative culture will continue to unearth opportunities, keeping your company agile and ahead of the game

  • How can you spot which people are innovative?
  • They’re the ones with innovative characteristics like curiosity, flexibility and fluency. They will be willing to experiment and make mistakes, and they will have the drive to keep trying until they get it right. Innovative people will keep being innovative because it gives them joy, and they really want to keep innovating.

Predictive Indicators
Within your innovation program, you will also need some predictive indicators to be used at the point of origin of all these ideas. Of all the posts on idea selection criteria and approaches, I found this article the most interesting. In it the author introduces the concept of focusing on potential impact and ease of experimentation, doing away with the creativity crushing metrics of ‘will it work’ and ‘can we do it’, and introducing the innovation stimulating metrics of ‘what could this do’ and ‘when can we get started’.
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Tools for Idea SelectionBrendan Coram is a Management Consultant at The Birchman Group where he specializes in ITSM, ITIL v3, organizational change, business process improvement, workshop facilitation, asset management, project management, and innovation. He leads performance improvement initiatives for organisations in government, transportation, telecommunications, and professional services across Australia.

Brendan Coram




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