Avoid disruption with the right innovation metrics – Innovation Book Series

With this blog post we launch an occasional series exploring what some of the best innovation books say about measuring and evaluating innovation. Since you’re reading this blog you are probably trying to figure out how to better measure your innovation efforts (either that or you’re a family member and here under duress). You may also be interested in exploring what some of innovation’s leading thinkers have said about evaluation, measurement, and innovation metrics. We’re starting this series to help directly answer that question (and, perhaps, save you some time).

So where to start? We thought Christensen’s The Innovator’s Dilemma was a fairly obvious place to begin, and so did Google’s algorithms, so we must be right.

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Firstly: if you’re hoping for a summary of Christensen’s main points here, you’ll be disappointed. Go read the book instead. Seriously. Our intent is to explore what the book says specifically about measuring innovation. And, the answer? Nothing. Ok, I’ll admit it, I didn’t re-read the entire book, but a quick scan suggests that the book doesn’t have anything big to say directly about measuring innovation. BUT (yes, that big), some of Christensen’s key findings do have significant implications for measurement of innovation processes. Here’s what jumped out at me as I flipped back through the book.

Christensen’s Second Dilemma

There are, of course, incumbent companies that are disrupted because they aren’t paying attention, or fail to act at all. But Christensen and collaborators found that incumbents were often aware of what would eventually become disruptive technologies, in their early days. Engineers in those firms explored these technologies, building early prototypes and seeking internal resources to undertake development. Although they had both foresight and resources, the projects were not successfully executed; and those firms were ultimately disrupted.

Why? Christensen’s provides the following description:

… in the day-to-day decisions about how time and money would actually be allocated, engineers and marketers, acting in the best interests of the company, consciously and unconsciously starved the disruptive project of resources necessary for a timely launch.

(Christensen, 2000, p. 50)

So, even though companies had decided to explicitly explore a technology, the projects floundered because people shifted resources away to other projects. To me it is fascinating that those individuals thought they were making the right decision for the company, despite having been given approval to explore these potentially disruptive innovations.

Why did those people think they were acting in the best interests of the firm? Christensen argues that, to succeed in a context of “sustaining” innovations, individuals develop strong knowledge of—even intuition for—what creates value for their existing customers and their existing business. That knowledge and intuition becomes a powerful implicit incentive, causing individuals to prioritize time away from the “disruptive” project towards more traditional initiatives where the value being created resonated with their intuition.

Innovation managers have several options to overcome these implicit incentives. Some firms go to great lengths, creating entirely new R&D teams to explore disruptive technologies. One global manufacturer we’re familiar with went so far as to deliberately isolate its innovation lab team from current customers, to make sure they were not constrained by current paradigms.

The Innovation Metrics Solution

Like I said, Christensen didn’t address measurement directly, but we see innovation metrics as a simpler solution to this dilemma. Managers should carefully consider metrics used to evaluate the progress and success of “disruptive” innovation projects. The “wrong” innovation metrics can reinforce the implicit incentives discussed above. The “right” innovation metrics can ensure team members are conscious of those incentives and provide an alternative framework to assess how they are creating value for the business.

Important questions to address when framing innovation metrics and setting objectives for a “disruptive” innovation project might include:

  • How do we track “activity” to ensure timely execution and provide managers with insight into whether resources are being prioritized away from the project?
  • What “outcome” metrics would help make value creation clear for team members, even if that value is not for our existing customers?
  • How do we ensure these metrics are given equal weight (with metrics related to more conventional innovation projects) when evaluating staff performance?

Reference:

Christensen, C. M. (2000). The innovator’s dilemma. Harper Business, New York.