while back, I reached out to our Innovation Champions Forum, the corporate innovation leaders who help Quantum Hub corporate partners promote innovation, and asked to learn about their key innovation challenges. One answer stood out: Companies struggle with measuring the success of different innovation initiatives.
In a shifting world where even the largest businesses might become irrelevant, this is a significant problem we must work hard to prevent. And since we can’t control what we fail to recognize, measuring innovation (and doing it right) is crucial.
The problem with traditional innovation metrics
Traditional innovation KPIs include the number of patent applications filed during a specific period, the budget percentage invested in R&D, the number of new products and projects initiated, and more. While these are great indicators because they offer clear-cut, measurable results, there are several problems with this approach:
- They tend to measure quantity and can miss out on some of the more practical innovation manifestations.
- They focus on internal innovation and fail to consider external factors like partners and startups the company collaborates with, outsourced development, and more.
- Some companies can focus on long-term innovation goals and even lose quite a bit of money in the process. Tesla, for example, invests hefty budgets in projects that may yield results years from now. But many businesses need quick wins that demonstrate innovative success.
- Not every company has a dedicated innovation team, which makes counting initiatives close to impossible. Instead, we need to ask how many projects were eventually launched and investigate the results.
When using rigid metrics, we miss out on a lot of crucial information that tells us much more about the company’s openness to new ideas.
Three types of innovation to look for
When measuring your company’s innovation success, there are different levels of innovation to consider, each one measured using different tools and KPIs. According to Harvard Business Review, the three levels of innovation are:
- Incremental Innovation: Innovation in existing projects meant for current customers.
- Adjacent Innovation: Taking something your company already does well and applying it to new markets, products, and projects.
- Disruptive Innovation: Creating new offerings for new markets.
The level of innovation you’ll be focused on depends on your organization’s current status and business goals. For example, a company that is set to increase revenue during the current year should focus primarily on incremental innovation, which is usually measured by ROI and other short-term financial KPIs. A company focused on industry leadership should focus primarily on disruptive innovation measured through the number of disruptive ideas and achieved pre-defined milestones.
Innovation focal points
To remain flexible, we should replace some of the rigid metrics with new ones. The next section will detail specific metrics you can embrace, but even if they don’t work for you, build your own innovation KPIs based on these foundations.
- Funnel-focused: To measure a company’s innovation levels, we must observe the entire process, from idea to execution and results. Less-successful outcomes must also be measured because they are very telling. Companies that are willing to fail will fail to innovate. Only one in 25 innovation projects delivers a tangible ROI, and you don’t want to leave 96% of your innovation projects out of the equation.
- People-driven: Hiring innovators is a critical goal, and companies should use innovation metrics that focus on the organizational culture and measure people’s behavior. This will boost the number of innovation projects and attract more talent with an innovative state of mind. If people within your organization aren’t actively participating in creating an open mindset, your company is unlikely to reach high innovation levels.
- Open: Measure openness to change by asking “what’s new?” in various ways. Do so every once in a while to ensure that the answers are based on your company’s current state.
- Success-focused: Track concrete performance results. The new world is data-driven, and your innovation metrics should be the same. The language we use in this article may seem “soft” at first, but you’ll see that it always leads back to numbers and a positive ROI.
The new innovation metrics
Now that we’ve covered the building blocks, here are four innovation metrics worth tracking to make sure that your company isn’t in a rut. I chose to phrase these metrics as questions to help turn them into an actionable checklist you can use.
- Progress: Measure your year-on-year advancement by asking a series of relevant questions. How many projects did we aim for? How many were launched? How many succeeded? How many remained within the organization and became permanent procedures?
- ROI: How much money did you end up saving thanks to innovative projects? How much can you expect to save in the near future?
- Engagement: How many people actively participate in brainstorming sessions and contribute their own ideas? Are different groups and seniority levels involved in innovation projects and initiate them?
- New ideas: Does your company innovate within your immediate area of expertise or a very narrow field? How many companies and sources are on your inspiration list for a project? How many did your business end up collaborating with?
- Time investment: If innovation is a nice-to-have, it’ll never make it to the daily schedule. How much time do you dedicate to innovation regularly? How many innovation meetings were planned but got canceled? How many kickoffs actually reached the development stages? In addition, we should measure the time invested in light of the progress achieved. Our goal should be to ultimately utilize our time better, invest less and reach more substantial results.
After answering this list of questions, you’ll see a clear image of your company’s innovation state. You will also have a detailed list of areas for improvement if the results aren’t perfect (which is often the case). A routine innovation check-up can keep you focused on your company’s bigger goals and encourage you and the team to stay hungry for new, bold ideas.
Final thoughts
While investigating this topic, I approached dozens of academia and business experts, researched online, and participated in group discussions. I was trying to find a magic formula to answer this crucial question, but the truth is there’s no template for innovation. Innovation has different meanings for every company and should never be measured with a one-size-fits-all state of mind.
Companies should take the time to build an innovation measuring method. While this process may change over time, it's crucial to have a strategy in place. I hope you’ll be able to pick and choose out of the metrics suggested here and assemble the right process to match your needs.
