Problem: Most firms neglect to evaluate the effectiveness of their innovation performance measurement systems.
Action: Conduct a quick check-up by following the 3 steps below.
High-performing companies know that using metrics effectively is critical to managing innovation. And they see the payback—they attribute 20% of their improvement in innovation performance to better management by metrics.1 And yet, research conducted by the Innovation Research Interchange indicates most organizations don’t review the effectiveness of their measurement systems, even on an ad-hoc basis. If your organization is among those, follow the 3 steps below.
Step 1. Check your innovation performance measurement system’s intended functions.
Over time, innovation leaders can find themselves with a hodgepodge of metrics—some that they collect because “it’s what we’ve always done;” some because someone read that a competitor collects them; some because the CFO asked for them; etc. But then those metrics don’t end up being used to inform specific decisions. In the best case, reporting unnecessary metrics is a waste of time and resources. In the worst case, those metrics end up sending contradictory or confusing signals that lead to bad decision making.
It’s important to be deliberate in identifying how the information generated by your innovation performance measurement system will be used. The diagram below lists the possible functions. First, choose the functions your system is intended to accomplish. Next, identify “orphan metrics”—metrics you track that don’t correspond to any of those functions.
Last, determine whether your system is effective at each of the intended functions. The following, corresponding questions may help.
- Do you have the information you and leadership need, to know if your portfolio(s) and mix align with your firm’s strategy, risk tolerance, and innovation ambitions?
- Do you have the information you need to determine portfolio-level investments? What about to allocate resources to projects (e.g., which new projects to fund, which existing projects to continue and which to kill)?
- Can you quickly ascertain whether projects are making sufficient progress toward unlocking future value?
- Using information from your measurement system, can you communicate with leadership, innovation teams, and other functions about innovation priorities and progress?
- Can you tell where improvements in innovation capabilities are most needed?
- Do you have the information you need to evaluate team performance?
Step 2: Ask your stakeholders whether the innovation performance measurement system is working for them.
We’re big believers in getting to know the customers of your innovation performance measurement system, just as you would for a new product or service concept. So, to review the system’s effectiveness, ask your stakeholders for input. Choose 8 to 10 people including representatives of your team, leadership, and other internal “customers” for innovation. Schedule short (<30-minute) conversations with each.
Remind each stakeholder of the functions of your measurement system, as identified in Step 1. For example: “We want to make sure we stay aligned with strategy, get more systematic at allocating resources, and keep everyone posted on the progress being made. We’re having these conversations to make sure we’re accomplishing those things and meeting your information needs.” Then proceed with a few focused questions like:
- Of the information we report, what is most helpful or interesting to you? What else would you like to know, or learn about?
- Does our reporting schedule/cadence align with decisions you need to make?
- What concerns do you have about the state of the innovation function? Is there anything you believe we should be actively encouraging (e.g., more risk-taking) or discouraging (e.g., short-termism)?
Step 3: Eliminate unnecessary metrics and prioritize improvements.
Next we recommend the following steps to identify specific actions to take:
A. Eliminate the “orphan metrics” you identified in Step 1.
B. Make a “long list” of the areas in which your system needs improvement, drawing from the questions you answered “no” to in Step 1; and the input from stakeholders on preferences, cadence, and general concerns.
C. Select the 3-5 areas above that, if improved, would have the most appreciable positive effect.
D. Translate those 3-5 areas into actions to improve, and tackle those first.
This will get you started in addressing some common problems with innovation performance measurement. Be on the lookout for resources for more advanced fine-tuning in the coming weeks. If you want help sooner, email Phil. We’d be glad to review your system against best (and emerging) practices and provide some recommendations for improvement.
1 RTEC (2010). Driving effective R&D performance through effective measurement.
2 Adapted from: Godener, A. and Söderquist, K. E. (2004). Use and impact of performance measurement results in R&D and NPD. R&D Management 34.
Problem: Innovation leaders need to balance Operational and Creative mindsets, but it’s easy to overemphasize one.
Action: Answer 10 questions to review and calibrate your practices and metrics.
As an innovation leader, you have to enable creativity and exploration while ensuring rigor and discipline—you need both the Creative and Operational mindsets.
The Operational mindset seeks constant improvement. People who lead with the Operational mindset emphasize efficiency and want to minimize variability. They’re comfortable with quantitative data and can break any problem down into its component parts.
The Creative mindset seeks constant discovery. People who lead with the Creative mindset thrive amidst change and the unexpected. They’re comfortable with qualitative data and make connections where others do not.
Strengths of the Two Mindsets
We all have a natural leaning, but overemphasizing one mindset can create problems.
Neither mindset is inherently better for an innovation role, and there is lots of potential overlap. The Creative values quality and discipline, and the Operational values ingenuity and problem solving. But just like having a weak side of your body can cause pain or injury, overemphasizing one mindset can hurt innovation efforts. We often find clues to the dominant mindset in innovation measurement systems.
Leaders and organizations overemphasizing the Operational mindset tend to resist the flexibility in approach or changes in metrics that teams may need over the course of front-end projects— those in which you’re figuring out what to make for whom. They might measure adherence to budget and schedule but not learning, the most important output of any innovation project. They may view the primary function of their measurement system as monitoring but neglect its function for communication and buy-in.
Those that overemphasize the Creative mindset may not have metrics at all. If they do, they likely favor measuring activity related to innovation capabilities (think # employees trained) over innovation performance. They might go through the motions of tracking and reporting progress, but don’t really change behavior based on their metrics. And they, too, struggle with communication. People overemphasizing Creative may not translate their results into the first language of different stakeholders, like the C-suite or certain business unit leaders.
So balance is key. As is the case with the body, you have to make an extra effort on the weak side to even things out. As someone who leads with Creative mindset, the creative comes more naturally to me, so I have to work a little harder on the operational. I spend more time reading about quantitative analytics; set objectives and key results for my exploratory work; and seek out collaborators who lead with the Operational mindset.
Action: Review and calibrate your practices and metrics.
Not sure which of the mindsets you’re leading with? Consider the following questions.
- Do you allow for changes in approach and metrics, as teams learn or strategy evolves?
- Do you measure learning?
- Did you involve your team and other stakeholders in the selection of key metrics?
- Do you treat cycle time (e.g., idea to market) differently for front-end projects?
- Do you have too many metrics? (check: can you articulate what decision is made based on every metric you track?)
You (or your organization) might be overemphasizing the Operational mindset if you answered “no” to any of those.
Now consider these:
- Do you measure innovation performance?
- Do your metrics track inputs, outputs, and outcomes?
- Do you track alignment with strategy?
- Are your teams really using your metrics? (check: can they tell you what behavior changes based on each metric you track?)
- Are you able to report your metrics in ways that are meaningful to multiple audiences (e.g., your team, BU leaders, and the CFO)?
If you answered no to any of those, you might be overemphasizing the Creative mindset.
To calibrate, review your “no” answers and identify what you’d change to get to “yes.” And look for more resources on balance from us in the coming weeks. If you want help sooner, email me. We’d be glad to do a quick review of your current practice/metrics and provide some recommendations for better balance given your goals and portfolio mix.
Business leaders and consultants have been talking about the importance of working across functions to improve innovation performance, for decades. But lack of alignment across levels of the organization is just as problematic for innovation, if not more so. These disconnects are not caused by conflicting expertise or business unit priorities, but by entirely different expectations for innovation at different levels in the organization.
In a 2018 survey by KPMG and Innovation Leader 55% of corporate innovators said lack of alignment was their biggest obstacle. So if you’re responsible for growth from innovation, chances are you’re stuck in the middle of this classic clash.
It’s always helpful to hear from people who have struggled with and overcome a problem you’re facing. With this post, we’re excited to launch the Practitioner’s Dispatch, a new series featuring innovation practitioners’ battle-tested advice on common problems. First up is Stewart Witzeman, who has more than 30 years of experience in innovation management. We asked him to give you his best advice on measurement for breakthrough (see also: disruptive, Horizon 3, etc.) projects. His bio follows the post. Thanks, Stewart! Read More
I heard an innovation leader at a Fortune 100 company remark recently, “There are lots of jobless innovation managers out there who will tell you—’if I knew then what I know now, I would have communicated better.’”
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