What Doesn’t Get Measured Can’t Succeed

Companies struggle to define and apply the right metrics to their innovation efforts, often setting out to “do innovation” without explicitly defined goals. Three steps to fix that.

Corporate innovation isn’t going anywhere in the wake of Covid-19. Many companies, such as Salesforce, Hershey and The Home Depot, are back on their feet after adapting to the new landscape and doubling down on innovation to fuel growth. And while prioritizing the future is a fabulous mission, many established organizations struggle with one critical piece of innovation: how to measure success.

Companies consistently struggle to define and then apply the right metrics to their innovation efforts. There are a couple reasons for this. One is often that companies will set out to “do innovation” without explicitly defined goals. It’s hard to assign relevant metrics to vague objectives. Another reason is that the metrics used to measure success will inevitably evolve with the maturity of the innovation program. A newly established innovation function may be more focused on activity metrics – number of ideas, for example – while a more mature innovation group may emphasize increasingly more business-oriented metrics.

To monitor progress, maintain momentum, and create more valuable innovation outcomes, it’s critical to define a holistic and flexible set of innovation performance metrics first. In our 20 years of establishing and tracking innovation efforts for notable brands in nearly every industry, we’ve come up with three design principles that the most successful companies employ:

1. Metrics should align to specific goals within your corporate strategy and fit the company structure.

A common misstep is when companies launch innovation programs with vague notions of their mission, large budgets, and a dedicated, trendy innovation space, only to see those programs lose funding a few years later after leaders question their value. The ones that are still around today are the ones where the goals for innovation aligned with the CEO’s priorities and company strategy. For one company, this meant driving greater collaboration with startups by creating a digital sandbox for testing and co-creating new concepts. For another client that wanted to leverage the scale and scope of its multiple business units and geographies, it meant establishing a metric that measured value created when innovation created in one business unit was realized across its other business units.

Also important in complex organizations is ensuring that you’re accounting for the company structure. While this may sound obvious, the goals and constraints of different business units can vary widely, and innovation should be treated in the same vein—”successful innovation” may look very different across different businesses. It’s not one-size-fits-all across the organization.

You don’t need to track all the things—in fact, this is often a detriment. More doesn’t always mean better. Give senior management a core set of metrics that they can focus on – for example, number of ideas submitted by employees, or percentage of executive time spent on innovation, etc. – that are aligned to the company strategy. If you can develop them in collaboration, great. And if you can tie them to executive reviews, even better.

2. Establish metrics that make sense for the maturity of your innovation program.

There is no special sauce when it comes to tracking innovation. We often find that leaders are eager to borrow strategies from other innovative companies – typically tech or CPG companies – but what works for Amazon or Tesla won’t necessarily work for a utility or mining company.

Start with a baseline assessment of your innovation program. Do your employees have permission to innovate, and the tools to do so? Do leaders support or encourage these efforts? Are there processes in place to protect high-uncertainty, long-term horizon opportunities? Make sure you’re not just asking senior leadership these questions. Engage as much of the employee population as possible to get an honest assessment.

Answering questions like these will help you determine where you are on the innovation maturity curve by assessing how you’re doing in each of the six key drivers of innovation performance – leadership, organization, learning, capabilities, process, and culture. Knowing what your baseline performance is in each of these areas will guide what goals to set and metrics to track.

3. Create a balanced, flexible set of metrics that can evolve with you.

As your innovation capabilities grow, you need to continually assess and refine your metrics. Creating a thriving innovation engine requires building out each of the six areas above – for example, employee engagement will be a key metric to track if you’re just starting out, before innovation has become embedded into the company culture.

Furthermore, large companies will often fall into the trap of treating innovation the same way they do their core business, and applying the same operational and financial metrics. Focusing on metrics like new product revenue biases investments closer to the core. Breakthrough innovation requires a dedicated infrastructure and longer time horizon, which should be taken into account when tracking the potential value. Rather than applying the same metrics they do to their core business, companies can employ methods like Real Options Valuation to more accurately value options in a portfolio of innovation projects.

Evolve your metrics as your innovation program matures, and ensure you’re taking a balanced approach by using a mix of early signal metrics (number of ideas and projects, velocity of the pipeline, engagement) and those related to outcomes (return on invested capital).


MORE LIKE THIS

  • Get the CEO Briefing

    Sign up today to get weekly access to the latest issues affecting CEOs in every industry
  • upcoming events

    Roundtable

    Strategic Planning Workshop

    1:00 - 5:00 pm

    Over 70% of Executives Surveyed Agree: Many Strategic Planning Efforts Lack Systematic Approach Tips for Enhancing Your Strategic Planning Process

    Executives expressed frustration with their current strategic planning process. Issues include:

    1. Lack of systematic approach (70%)
    2. Laundry lists without prioritization (68%)
    3. Decisions based on personalities rather than facts and information (65%)

     

    Steve Rutan and Denise Harrison have put together an afternoon workshop that will provide the tools you need to address these concerns.  They have worked with hundreds of executives to develop a systematic approach that will enable your team to make better decisions during strategic planning.  Steve and Denise will walk you through exercises for prioritizing your lists and steps that will reset and reinvigorate your process.  This will be a hands-on workshop that will enable you to think about your business as you use the tools that are being presented.  If you are ready for a Strategic Planning tune-up, select this workshop in your registration form.  The additional fee of $695 will be added to your total.

    To sign up, select this option in your registration form. Additional fee of $695 will be added to your total.

    New York, NY: ​​​Chief Executive's Corporate Citizenship Awards 2017

    Women in Leadership Seminar and Peer Discussion

    2:00 - 5:00 pm

    Female leaders face the same issues all leaders do, but they often face additional challenges too. In this peer session, we will facilitate a discussion of best practices and how to overcome common barriers to help women leaders be more effective within and outside their organizations. 

    Limited space available.

    To sign up, select this option in your registration form. Additional fee of $495 will be added to your total.

    Golf Outing

    10:30 - 5:00 pm
    General’s Retreat at Hermitage Golf Course
    Sponsored by UBS

    General’s Retreat, built in 1986 with architect Gary Roger Baird, has been voted the “Best Golf Course in Nashville” and is a “must play” when visiting the Nashville, Tennessee area. With the beautiful setting along the Cumberland River, golfers of all capabilities will thoroughly enjoy the golf, scenery and hospitality.

    The golf outing fee includes transportation to and from the hotel, greens/cart fees, use of practice facilities, and boxed lunch. The bus will leave the hotel at 10:30 am for a noon shotgun start and return to the hotel after the cocktail reception following the completion of the round.

    To sign up, select this option in your registration form. Additional fee of $295 will be added to your total.