Measuring innovation

Mar 05 2008 by Max McKeown Print This Article

Some people argue that innovation is impossible to measure. But if innovation is not measured it can't be managed. You can't prove to doubters that what you are doing is worthwhile. You won't know whether your efforts to innovate are improving.

On the other hand, if you measure the wrong things you will manage the wrong things, reward the wrong behaviour and screw up your innovation efforts.

So measuring innovation deserves some thought. Your measurement efforts need to reflect the process and purpose of your innovation efforts. You want to know what is happening, identify new opportunities, let everyone know how to get involved, and share how innovation can help.

Many attempts to measure fail because they are too complicated, too much effort, and too removed from the way that innovation works.

Patents are a popular measure of innovation. The logic here is a company will patent its most important innovations and that increasing the number of patents is the same as increasing innovation.

If only it was that simple! What about the innovations you can't patent?

Patents are not relevant to services. How do you measure the difference in quality or innovation between patents? You combine an old patent with a new business model: Are you or the patent owner most innovative?

If your industry generates patentable innovations, measure them. Compare your company to your industry and competitors. Group them by type, originating team, and likely impact on the business. Track where they are used and how they have helped financially and competitively.

Evidence shows they are a good predictor of future new products but remember there is no clear link between patents and financial performance. There's much more involved.

Balanced Score Cards offer a powerful way of measuring innovation. They follow the idea that measuring anything can only be as good as your understanding of what you are measuring. As your grasp of innovation grows then you are better able to measure what matters.

Describing the way innovation works is a group activity. Managers get involved to learn and agree together. This process of creating a shared view of innovation is valuable. It often results in creative new ways of looking the nature of the management role in moving from objectives to performance. It challenges assumptions as the group thinks about inputs, processes, outputs, and outcomes.

Draw a diagram that shows how you believe that innovation should work in your company. Think about how to measure the performance of the various parts of that innovation flow. Keep the model as simple as possible but no simpler.

Compare your model with what is already measured. Some should overlap. Others will be completely new. Your measurements should follow the logical flow of innovation from source to market.

Since everything affects innovation, it's tempting to measure everything. Unless you are all knowing, and all seeing, this is a mistake. Too many measurements confuse people. They ignore what is overwhelming. Even worse, they may spend valuable time managing the measurements rather than increasing innovation.

Measurements will be a mixture of objective, stuff that is easy to count like number of patents, or subjective, stuff is all about opinion like the quality of an idea. It is important not to focus on the objective just because it seems straightforward. First, most objective measures require judgement. Second, the most important inputs, processes, and outputs are subjective.

Every company is different but here are some measures that are always worth counting: How innovative do people think you are? How innovative do people think your managers are? How easy is it to get from idea to market? How many innovations are suggested? Where do ideas come from? How many innovations are being studied? How balanced is the range of ideas? How many get to market? What revenue and profit comes from new products or services?

The innovation model is never finished and the measurement system is never perfect. Innovation is a balancing act. The measurement system must help people balance their efforts between competing demands for their time. It should be open for discussion so that it can improve as understanding increases.

Without measurement, you have to rely on luck. Innovation is impossible to measure but measuring it is still a huge part of improving your efforts to innovate.

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About The Author

Max McKeown
Max McKeown

Max McKeown works as a strategic adviser for four of the five most admired companies in the world. He is a well-known speaker on subjects including innovation and competitive advantage. His latest book, #NOW: The Surprising Truth About the Power of Now, was published in July 2016.