“What gets measured gets managed.” This maxim proves especially true when implementing innovation initiatives within organizations. Absent tangible tracking and evaluation of innovation performance, the momentum and strategic prioritization of efforts risk drifting.
In my consulting work assisting enterprise leaders in building innovation management systems, developing relevant metrics and scorecards provides the necessary window into what’s working, what’s not, and where to improve. Otherwise, teams operate blindly against stated goals.
In this article, I’ll share insights on metrics and key performance indicators (KPIs) helping leaders assess innovation efforts. We’ll cover:
- Why metrics matter for innovation management
- Key categories of innovation metrics
- Examples of specific KPIs to consider
- Methods of collecting and evaluating data
- Using findings to drive continuous improvement
Approaching innovation measurement strategically establishes a critical feedback loop for leaders to course-correct initiatives and optimize resource allocation toward high-impact efforts. Let’s explore how to shine a light providing necessary visibility.
Why Metrics & Measurement Matter For Innovation
Many leaders kick off innovation programs with great intentions but little specificity on what success actually looks like. By distilling initiatives down to concrete metrics, leaders can better track progress and steer ongoing efforts. Reasons for properly tracking innovation KPIs matters include:
- Creates visibility into what’s working vs. not
- Allows benchmarking progress against targets
- Enables data-driven decision making on resource allocation
- Motivates teams when milestones are met
- Identifies areas needing refinement
- Quantifies the ROI value delivered by initiatives
Absent metrics, innovation ceases being a strategic capability delivering tangible returns and instead becomes a theoretical pursuit easily discarded when budgets tighten or leadership changes. But consistent measurement provides the proof points justifying the sustained investment to leaders and teams alike.
Categories of Innovation Metrics
In my experience, useful innovation metrics typically fall into four major categories:
1. Input Metrics
These KPIs measure what resources are going into innovation initiatives, including:
- Total R&D spending
- Budget allocations for new innovation projects
- Full-time employees focused on innovation
- Senior leadership hours devoted to innovation
2. Process Metrics
These KPIs examine internal behaviors and processes enabling innovation, like:
- Number of new ideas submitted/generated
- Employees participating in innovation workshops
- New concepts prototyped
- Innovation portfolio review cadence
3. Output Metrics
These KPIs quantify the tangible results of innovation efforts, such as:
- Number of patents filed/approved
- New products/services launched
- Process improvements implemented
- Pilots tested with customers
- Venture capital invested in spinoffs
4. Outcome Metrics
These KPIs measure the organizational impact of innovations, including:
- Revenue from new products/services
- Cost savings from process improvements
- Reduced time-to-market with new offerings
- Customer satisfaction/growth from innovations
- Employee engagement/retention boosts
While not exhaustive, the above framework covers key areas providing end-to-end visibility into the health and returns of innovation programs. Leaders should analyze metrics across all four levels to identify correlations and performance gaps requiring realignment.
Example Innovation KPIs To Consider
Here are some specific key performance indicators from each innovation metric category enterprises often track:
Input Metrics
- Total R&D expenditure as percentage of revenue
- Innovation training hours per employee
- Size of dedicated innovation teams
Process Metrics
- Number of cross-functional idea exchanges
- Employee ideas submitted/implemented
- Hours spent experimenting with new technologies
Output Metrics
- Annual IP disclosures, patents filed/awarded
- Success rates piloting new concepts
- New business initiatives undertaken
Outcome Metrics
- Annual revenue from products/services less than 3 years old
- Decrease in customer churn/increase in lifetime value
- Improvement in employee net promoter scores
The optimal metrics should tie directly to your organization’s specific innovation objectives and focus areas. But covering a mix of input, process, output and outcome measures provides comprehensive insights.
Methods of Collecting and Evaluating Innovation Metrics
Taking time upfront to thoughtfully determine innovation metrics and targets gives teams goals to execute against. But measurement only delivers value if gathered and acted upon consistently. Tactics to consider:
- Build metrics into quarterly business reviews on par with financial results.
- Leverage internal platforms to track real-time innovation program data.
- Poll employees on perception of innovation progress and barriers.
- Review metric trends across multiple quarters to identify optimization areas.
- Tie innovation KPIs to team and executive scorecards and incentives.
- Benchmark innovation program metrics against competitors and leading companies.
Transparency on current performance versus targets as well as longer-term trend analysis provides the visibility needed to continually refine strategies and resource allocation toward impactful programs.
Using Innovation Measurement to Drive Continuous Improvement
The ultimate purpose of diligently measuring innovation performance is optimizing the return on resources invested and enhancing program effectiveness over time. Ways leaders can leverage insights include:
- Identifying initiative areas producing stronger innovation outputs and outcomes to double down on.
- Highlighting parts of innovation portfolios failing to hit KPI targets in need of restructuring or pausing.
- Aligning process improvements and training to address lags in specific metric trends.
- Sharing successes proven through data to evangelize innovation momentum.
- Making the case for greater innovation investment with demonstrated ROI.
- Maintaining stakeholder support for long-term initiatives on transformation agendas.
In essence, innovation metrics make visible what’s working well to amplify and what requires recalibration to keep efforts aligned on value delivery versus chasing vanity metrics. They provide the roadmap guiding leaders to build a high-performing capability.
In Summary
Approaching innovation measurement rigorously establishes strategic feedback loops that maintain focus on tangible returns versus theoretical progress. But leaders must dedicate time determining relevant metrics aligned to specific program objectives, collecting insightful data consistently, and taking action on insights revealed.
While innovation remains a complex alchemy involving culture, people, and ingenuity impossible to fully distill into metrics, well-constructed scorecards make strategic impacts transparent. They enable crucial conversations on when to double down on successes or re-vector stalled efforts.
For any organization seeking to reap the immense benefits that disciplined innovation management delivers, I encourage starting by defining targeted outcomes and milestones reflecting what success would look like. Otherwise, inertia creeps in. Instilling a metrics-driven mindset within innovation teams better assures efforts stay fastened to meeting organization needs versus pursuing novelty for its own sake. But measurement only retains meaning if feeding leadership decisions on how to cultivate programs delivering maximal mutual value over time.
