Innovation Metrics in Outcome-Based Culture
One of the key objectives of the corporate innovation function is to build and manage the innovation funnel of ideas that will eventually become Horizon 2 & Horizon 3 products. How do you measure success of corporate innovation especially when your organization’s planning process is extremely outcome-based, and most ideas are not going to move forward by design?
McKinsey’s “3 Horizons of Growth” model states that each horizon calls for different success metrics. Mature products (Horizon 1) are measured with profit, margins, and costs. Growth products (Horizon 2) are measured with market share growth. Incubation products (Horizon 3) are measured by reaching certain milestones.
While this model does not answer the question about measuring success of Corporate Innovation, it clearly shows that different metrics apply depending on the project/product lifecycle, with metrics becoming more shareholder oriented, and therefore more outcome based as the product matures and moves from H3 to H2, and to H1.
For any corporate innovation initiative to succeed at scale, there needs to be a group of people who is actively managing innovation. It doesn’t have to be their primary job description, but they must be held accountable for successfully managing innovation initiatives. At Citrix, where I’ve helped foster and grow the company’s innovation initiatives, we call this group the Innovation Center of Excellence. Here are some operational metrics Innovation CoE success will be measured by:
- Number of classes and workshops offered & conducted
- Number of innovation challenges organized
- Employee Engagement metrics as described below
- Innovation Funnel metrics as described below
Employee Training & Engagement Metrics
No disciplined innovation happens if the employees are not trained and not engaged, so it is critical to invest in both training and engagement by offering a variety of classes on topics like Design Thinking, Lean Startup, Business Model Canvas, Pitching to Investors and run coordinated innovation programs. Here are some metrics that can help track progress on this front:
- Number of employees attended classes and workshops
- Number of ideas submitted / Number of employees
- Percentage of employees submitting ideas
- Number of employees participated in discussion on submitted ideas
- Number of innovation programs alumni actively engaged as mentors and trainers
- NPS of innovation classes and innovation programs
It is important to set a YoY growth targets for the above metrics to ensure Innovation CoE focus on continuous employee engagement.
Innovation Funnel Management Metrics
Let’s apply the “3 Horizons of Growth” model of incremental metric maturity, as raw ideas evolve to business concepts and to Beta products in customer’s hands. For every stage of the idea lifecycle (Ideation, Validation, Launch) there will be different metrics to track and indicate success or failure. These metrics will be activity based and output based in the beginning, evolving into output and outcome-based metrics as ideas turn into validated business concepts, and eventually into Beta products in customer’s hands.
Ideation is a multi-stage process with filtering of high-quality ideas for further validation. The top of the funnel needs to be as massive as possible with focus on quantity over quality. Eventually, we want to select top X ideas to be approved for the validation phase. Therefore the key metrics at this stage are:
- Number of ideas submitted – top of the funnel quality metric
- Number of ideas selected – bottom of the funnel quality metric
Now that the ideas have been selected and teams formed, the success will be measured by team’s ability to cultivate a business concept of a desirable, feasible and viable product or service. Metrics at this stage will keep tabs on teams ability to stay on that track:
- Number of interviews conducted – did the team talk to enough customers to identify patterns, and conform they are on the right path, solving for the right problem and customer?
- Number of experiments run – how well does the team apply the scientific method to stay on track by validating their assumptions and hypotheses.
- Number of demos performed – as with a traditional Sales funnel, this metric shows whether the customer funnel is healthy and will be needed later to calculate a conversion of demos to sign-ups.
- Number of pre-product sign-ups – most people will tell you they like your idea, but signing up for Beta or early access to your product requires a higher level of commitment and is critical for measuring validation.
Now the product is in customer’s hands and early traction metrics become key. Note that metrics like CAGR, Churn Rate, and NPS are not as important at this point – these will become important at later stages at scale. What’s crucial to track is how quickly the product is being adopted and whether it’s being used. That’s exactly what VCs and Angel Investors will be looking for with early stage startups, and there is no reason to ignore these metrics of early success or failure when it comes to new product development in a large organization. Here are key traction metrics to follow:
- Number of customers acquired per day (or week)
- Number of users at each customer
- Daily Active Users growth
- Repeat use
The list of metrics above is not meant to be exhaustive but merely illustrates how innovation initiatives can be managed using a set of non-outcome based metrics. Even in companies with outcome-based culture, there is a place for activity & output based goals. The key is to recognize that different problems call for different means and different metrics, and accept that metrics mature as products mature, eventually becoming outcome based as products move from ideation to incubation to becoming core revenue generating products in company’s portfolio.
image credit: bigstockphoto.com
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Eugene Yamnitsky is Director of Product Management and Innovation at Citrix. He leads the ShareFile Product Management team and is responsible for mobile, desktop and web applications, as well as key infrastructure components and the developer program. Eugene also leads Citrix’s Innovation Center of Excellence where he acts as a catalyst for innovation and mentors teams in their corporate Startup Accelerator.
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