Innovation Management Essentials: Series 3 - Innovation Metrics
In the previous articles of the same series, we have gone through the fundamentals of innovation management, where we learnt its definition, key aspects, approaches, and common models. In this one, we will discuss more on the key innovation metrics to measure and how to get the most of it.
Metrics are important levers of innovation – for driving behavior, evaluating the results of specific initiatives, as well as guiding you in allocating resources. However, due to the abstract and somewhat uncertain nature of innovation, finding the right metrics to measure innovation can be tricky. It is easy to pick some metrics that are simple, without thinking whether they are the important ones that will actually be useful to your business.
The most important thing in measuring innovation is to ensure that you are going in the right direction. To set the correct metrics, you should measure not only in the traditional ways, i.e. measuring return on investment, but also see if the organization, leadership, and resources are in line with your business goals.
Input vs. output metrics
To put it simply, the input and output metrics are used to measure what goes into your innovation process and what comes out of it. The input metrics are to measure if you are taking the right initiatives and if you are allocating your resources properly, whereas the output metrics are to measure the results they bring and if they are the desired results.
Input metrics are a great starting point for measuring innovation in the early stage because they are straightforward and tangible. It is, however, important to have in mind that input does not guarantee output.
Key types of innovation metrics
Broadly speaking, there are three types of metrics when it comes to measuring innovation - return on investment metrics, capability & structure metrics, and leadership metrics. We will briefly introduce each type of them and some examples in regards to what exactly to measure.
Return on investment metrics
ROI metrics are the most straightforward metrics of all, they focus on measuring resource investments and financial returns.
Input metrics | Output metrics |
No. of ideas submitted | No. of new products, services, and businesses launched |
No. of campaign / challenge launched and no. of ideas submitted for each of them | Revenue / profit gained from the new launches |
Money spent on implementing the ideas | No. of the new market entered |
Time spent on developing and implementing the ideas | % of the market share |
% of ideas implemented vs ideas submitted |
Capability, culture & structure metrics
Capability and structure metrics refer to the infrastructure and process an organization has to facilitate innovation. And culture metrics refer to if the culture of an organization is pro-innovation and can draw innovative talents. They focus on measuring the abilities and skills of people, as well as the organizational structure and process.
Input metrics | Output metrics |
No. of employees who have received training and tools for innovation | No. of innovations that significantly advance existing businesses |
Existence of formal structures & processes that support innovation, e.g. an innovation management solution | No. of new opportunities in new markets |
Resources spent on innovation program |
Leadership metrics
Leadership metrics measure if and how the management level supports innovation and is making an effort to boost an innovative culture, as well as if it supports specific initiatives.
Input metrics | Output metrics |
% of time that executives spent on managing innovation | No. of managers or team leaders that become leaders of new business initiatives |
No. of managers with innovation related training |
Creating effective use of innovation metrics to drive innovation
When it comes to measuring innovation, it is important to understand what, when, and how to measure the metrics to get the best possible result. Creating innovation metrics to drive innovation requires one to start with aligned organization strategy and cascade throughout each business division and group. It involves continuous planning, monitoring, and learning & improving.
Planning: Involving key stakeholders in identifying the key metrics to insure they are clear and align with the organization’s business strategy.
Monitoring: Tracking metrics against business goals to determine the progress and make necessary adjustments.
Learning & improving: A process where an organization reviews its metrics and progress, engaging its key stakeholders in improving its use of current metrics, identifying new metrics, and achieving business objectives.
Here are a few tips to create goal-driven innovation metrics:
- Clarify organization business objectives
- Define actionable innovation goals
- Identify innovation-related leadership behaviors
- Identify organizational processes required to drive incremental and disruptive innovation
- Create metrics that support the innovation strategy of the company
- Review and improve strategies and metrics on an ongoing basis
- Do not force the same metrics on every process or everyone
While it can be rather difficult to choose what to measure, measuring innovation is not rocket science. It is critical to engage key stakeholders in every process and make sure the metrics are not overwhelmed but are aligned with the business strategy and objectives. And one should also keep in mind that metrics should not be standing alone but rather a part of an organization’s growth plan.
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