At a recent event I spoke about the importance of metrics for innovation, and I've had so many people asking me for more information about metrics that I thought it would be useful to make a summary of the key metrics components for an innovation program.
I'm fortunate to have worked with some brilliant business geniuses in my time and my knowledge of metrics has essentially come from my time working with Creel Price (a retired 40 something entrepreneur and author of 'The One Thing To Win At The Game Of Business').
The bottom line when it comes to innovation is: 'If we can measure it, we can sell it'. True for being able to sell the idea of an innovation program (say for example selling it to a CFO), and more importantly in being able to monitor and track the Innovation program's success in an organisation.
There are 5 key elements to creating effective innovation metrics in an organisation:
- Link to Profitability
- Ability to Influence
- Ability to Motivate
Measurability is as the word suggests, activities or elements that we can actually quantifiably measure. Say for example, the number of prototypes or pilots that are generated is a clear quantifiable metric. If the metric is abstract (such as the number of feelings we get each day), then it's not an effective metric.
Regularity relates to how often we can (or need) to measure the metric itself. We might find it valuable and useful to measure the number of prototypes or pilots that we create every quarter. The regularity will depend on which metric we are using and how important it is to measure it.
Link to Profitability is about identifying whether there is a direct or indirect link to profitability. Profitability can be interpreted a number of ways. If your organisation is a non for profit or a government agency, the thinking still applies- what is the link to enabling our organisation to operate more effectively and efficiently with the most impact to achieve our KPI's (what ever they may be)?
Ability to influence is an important component of innovation to consider in a metric. We need to ask 'Can we influence it in some way shape or form?' Can we increase or decrease it? Say for example a metric of pilots or prototypes can be influenced by the organisation. The organisation could encourage the no. of prototypes being created, the organisation could also provide a training program on how to create prototypes. All of which can lead to increasing either the quality or quantity of prototypes being generated.
Ability to motivate is another key element of metrics. While financial rewards have long been seen as a motivating reward, recent research and literature (check out Daniel Pink's book Drive) has shown that financial reward only succeeds in linear task driven activities. Innovative thinking behaviours such as thinking 'lateral thinking' or 'reverse brainstorming' are not motivated by financial reward, rather they are motivated by challenge, curiosity and recognition instead. We can still however help to create motivating drivers around many innovation activities say for example by creating a recognition award for the most improved innovator. Our ability to motivate around the metric increases our chance of continual commercial success.
Once we've considered our metric across each of the 5 elements we need to consider the importance of each metric by considering which of all the metrics are most quantifiable, can be measured most regularly, have the biggest link to profitability, enables you to influence them and motivate your team around them.
More often than not a smart organisation will have a number of metrics to continue their innovation success. What are your metrics going to be?