A Beginners Guide to Innovation Metrics

It seems an oxymoron to some that, a process as spontaneous and creative as innovation can and should be measured.  Here at Strategos, we firmly believe that Innovation can be taught, learned and systematically implemented by establishing the right processes, systems, structures, skills … and metrics.  Metrics are important to track and guide the development of your innovation system.  If you don’t know what’s broken, how do you fix it?  And as the old adage states:  “You get what you measure.”  In other words, metrics are important in sending the signal you are serious about innovation and in establishing the desired innovation behaviors.

Strategos published an earlier article on innovation metrics¹ in 2005.  Surprisingly, there has been little published on this topic since that time. Is it because companies still see innovation as a capability that does not lend itself to measurement?  Or is it because, the whole idea of measuring innovation seems complex, cumbersome and generally daunting?  In an attempt to make the topic a little less daunting, it seems to be the right time to review some of the key guidelines to help you get started in designing and implementing innovation metrics.

Input – Process – Output

At the time of that article, the most popular innovation metrics were output metrics:  number of patents, percentage of products less than 3 years old, percentage of revenue from new products, etc.  In our view, output metrics alone cannot tell the whole story and are certainly of little help in steering and improving an evolving innovation capability. We define:

Input metrics – measure those variables which set the preconditions for successful innovation.  They can be measured in terms of money, talent, and time devoted to innovation.

Examples:  Fraction of the work force trained in innovation, amount of leadership time spent on innovation rather than day to day operations, fraction of the capital budget that is invested in innovation projects

Process metrics – address those variables that affect the movement of ideas through the pipeline process

Examples:  Average time from idea generation to first revenue, number of (actionable) ideas submitted by employees/month, fraction of opportunities moving on to the next stage

Output metrics – measure the results of innovation

Examples:  Number of new products or services launched, ROI on innovation spending, number of new customers.

Getting Started with Innovation Metrics

Here are a few guidelines that we have found to be useful in helping clients to develop innovation metrics.

1. You can’t measure what hasn’t happened – focus on input.  For companies starting on the innovation journey, you have to build the system and processes, before you can measure the output.  Focus on metrics that encourage training and innovation skill development and on recruiting innovative individuals.
2. One size does not fit all.  The most important variable is the level of “innovation maturity.”  Metrics should be tracked and encourage the development of your innovation system – no matter what the starting point.  Also, metrics will vary across industries because some of the competences and skills required for innovation will be different.
3. Keep it simple.  Avoid the tendency to collect every possible piece of data.  Create metrics that are simple, meaningful, and intuitive.  Metrics will have the greatest impact if they can become commonly used and understood throughout the company.
4. Leverage existing metrics and methodologies.  There may be innovation metrics in place somewhere in your company – seek them out and assess them for wider use.  Also, if your company currently uses a method such as Balanced Scorecard or Value Based Management, reconcile your metrics with that methodology.  Also, if your company uses a management dashboard, make sure the innovation metrics are included.  In our experience, “modified” metrics are more readily accepted than additional brand new metrics.
5. Don’t be afraid to modify or adapt the metrics.  Consider metrics a living thing.  As your company evolves towards greater innovation maturity, your metrics should reflect that maturity.  If a particular metric isn’t providing the insight or guidance that you had hoped, adjust it or replace it.

With these five starting guidelines in mind, it should be less of a daunting task to measure your innovation progress.  Start small … but keep your eye on the real goal:  a prolific, profitable and engaging innovation engine.

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¹  Amy Muller, Liisa Välikangas, Paul Merlyn, (2005) “Metrics for innovation: guidelines for developing a customized suite of innovation metrics”, Strategy & Leadership, Vol. 33 Iss: 1, pp.37 – 45.