There are plenty of resources out there to help entrepreneurs innovate: Google’s Startup with Google website provides dozens of tools. Books like Lean Startup provide frameworks to track your startup’s progress. Even nonprofits are jumping on the innovation bandwagon.
Research from Innovation Leader found that the vast majority of corporate innovation executives see measuring innovation as critical, but differences exist on what or even how to measure it. Of the 200 leaders surveyed and interviewed, Jason Berns, senior director of innovation at Under Armour, summed up the innovation metrics challenge by asking: “How do you take 19th century management and measurement practices, and make them work in the world of today–the world of Steve Jobs and Mark Zuckerberg?”
Innovation Leader’s research found that most large companies simplify the challenge of measuring innovation by focusing on two types of data: activity metrics and impact metrics.
Activity metrics are all about the “inputs” to the innovation process. Activity metrics measure specific activities that produce innovation–like number of employees training in the innovation process, number of ideas generated, number of patents filed, etc.
Impact metrics, on the other hand, represent the tangible results of the innovation–like revenue growth, entering new markets, new product or service revenue, etc. At the end of the day, impact metrics are what really matter, but in most organizations you also need activity metrics to ensure people are doing meaningful things that will actually produce measurable impact.
Of the 200 corporate innovation executives surveyed by Innovation Leader, here’s what they said are the top five measurements of innovation:
- Revenue generated by new products (69 percent)
- Projects in pipeline (66.5 percent)
- Stage-gate process, i.e. projects moving from one stage to the next (57.5 percent)
- P&L impact or other financial impact (57 percent)
- Number of ideas generated (44.5 percent). Most companies use a blend of activity and impact metrics. Of the top five metrics, two are impact metrics and three are activity metrics.
Activity and impact metrics are high-level measures that any organization can use to inspire and incentivize innovation-focused behavior. Metrics to measure individual business opportunities and projects are also important, especially, if you’re a startup or new business venture within a big company. That’s when more granular measures of progress and success are needed like I’ve outlined in my article on Innovation Accounting.
I’ve been writing about metrics for a long time. Slowly but surely, more small and large companies will recognize the value of measuring what really matters. That’s really the only way to ensure you’re moving closer to actually getting it.