For most companies, innovation has become a top priority. To rate innovation performance, quantitative performance indicators are often used. Some lagging indicators measure innovation as results or outcomes – such as sales from new products. Others measure innovation as a process, using metrics – such as the number of innovation projects in progress. And some leading indicators track input measures such as the number of ideas generated, while still others focus on the innovation portfolio, by looking at factors such as the percentage of investments in radical/disruptive versus incremental/sustaining innovation.
Recent research by Anders Richtnér et al. suggests that the key managerial challenge is not identifying metrics – there is no shortage of measures to choose from. Nor should the goal be to find the perfect metric, since that quest is often futile. Rather, the crux of effective innovation measurement is to understand the problem that measurement should solve for the organization and, based on that insight, to design and implement a useful and usable innovation measurement framework appropriate to the organization’s needs. In this process, identifying the right questions is usually more difficult than finding the appropriate answers.
The research identifies three important innovation measurement traps to avoid:
- Overestimating or underestimating the potential of innovation measurement
- Measuring only the parts as opposed to the whole
- Overlooking the political power of innovation measures
Mindful of these three traps, how can companies best implement new or revised innovation metrics? Richtnér et al. propose the following framework to identify and implement the right set of innovation measures in an organization. It is of great help for understanding the critical decisions, traps and trade-offs involved.
You can donload the framework in PDF-format here.
For further, worthwile details of this research I recommend reading the entire article at MIT Sloan Management Review.