How to improve measurement of innovation performance in your organization.

Once you’ve decided you want to do something about how your organization measures innovation performance, knowing what to do next isn’t always obvious. We often have conversations with innovation leaders who get to this point and reach out to us for advice on what to do next. Our advice tends to cover some combination of the following, which we expand on further in this post:

  • Understand whether there are good reasons to tackle innovation measurement now (go to section).
  • Caution against treating software as the off-the-shelf solution (go to section).
  • Offer advice on when we’ve seen it make sense to tackle innovation measurement in-house—and point to tools and resources they can use (go to section).
  • Advise on when it makes sense to bring in outside help, and what to look for (go to section).

What are some signs that innovation performance measurement should be a priority?

Sometimes it’s inescapable: new executive or innovation leadership asks the question: “Are we measuring innovation the right way?” If that’s the case, you’ll likely have to to proceed with a review of your measurement system. If not, consider the next 3 situations.

(1) A new innovation process needs to be measured

A new innovation process almost always requires consideration of how to measure its performance. By “new” we don’t just mean: your firm didn’t have any formal innovation activities and processes before, and now it does. We’ve also helped firms who have had decades of innovation / R&D experience, but who are adding a completely new way of innovating (e.g. a stand-alone “innovation lab”) or who’ve expanded their scope to include innovation activities they weren’t previously (e.g. the focus used to be exclusively new product development, but now includes substantial “front end” activities as well). 

We often get this question from our clients in these situations: given we’re just getting started, how soon does it make sense to tackle innovation measurement?  Every situation is different, but there are a couple of rules of thumb:

  • Consider innovation measurement after you have reasonable clarity and alignment around the purpose or strategy of your new innovation process.
  • Know how you’re measuring your efforts before you’re asked by your superiors or other key internal stakeholders.

(2) It’s been at least 2-3 years anyone reviewed innovation measurement.

 

 

A simple guide to whether you should be reviewing your established measurement system is whether or not it’s been evaluated in the last 2-3 years. Innovation systems tend to evolve quickly: you try new tools and methods, bring in new people, add new measurement capabilities (e.g. from software), and integrate with acquired companies. Measurement systems, on the other hand, tend to be in the “set it and forget it” bucket: no one really has enough time available to take a systematic look and make sure the system is doing what you need it to.

As a result, we often find measurement systems that aren’t performing the functions an organization needs of it. This can lead to wasted time collecting and reporting metrics that no one uses. And, in the worst case, metrics that send misleading signals or create misaligned incentives. So for these reasons, we recommend clients take a least a quick look at their measurement system every few years.

(3) Subtle indicators you need to enhance innovation performance measurement.

More subtle signs you need to consider innovation measurement include:

  • You feel like you need better information or explanations for leadership or other stakeholders—you’re not having high-quality conversations or you’re spending an inordinate amount of time “defending” innovation strategy or specific decisions.
  • You or your teams don’t feel confident in the decisions you’re making—prioritizing and selecting projects, allocating funds to align with strategy, etc.
  • You’re concerned about declining innovation performance in your organization.
  • You’re having a hard time creating a culture that supports innovation AND has the appropriate checks and balances in place (read our post on this subject).

No, innovation management software isn’t the answer (or, at least, not the full answer).

Innovation management software doesn’t tell you what to measure. Sometimes, innovation managers make the assumption that, if they have the right innovation management software, the measurement will take care of itself. If only it were that simple. Innovation management software is a critical aspect of an innovation measurement system.  But innovation management software is designed to enable measurement of as many different factors as possible. This is precisely because what needs to be measured varies so much from organization to organization—software providers have to make their systems flexible. So don’t treat software as the solution. We always help our clients establish what they need to measure first, and then turn to what software should be used, and how to use it.

On a related note, many organizations are finding that innovation software isn’t the best tool for analyzing and communicating innovation metrics. That’s because, notwithstanding the comments above, there isn’t sufficient flexibility with the software to address the very specific needs of their audiences, and the frequency with which those needs are changing. And also because of the need to integrate data from across multiple systems (e.g. product lifecycle management, broader enterprise resource planning systems). As a result, we have found that many organizations are doing much of their analysis and reporting within generic business intelligence software (e.g. Microsoft Power BI, Tableau, Qlikview).

Tackle improvements to your innovation performance measurement system in-house when you have leadership support and the right capabilities available.

Some organizations choose to undertake initiatives to improve their innovation performance measurement system in-house. We’ve seen this work well under certain conditions:

  • There is strong leadership support for the initiative—e.g. from the VP or SVP for Innovation or R&D, or the Chief Technology or Innovation Officer.
  • The owner of the innovation process for the organization has the capacity to closely manage the initiative.
  • Staff with the right skillset and experience have bandwidth to execute the initiative. Those staff need to understand the fundamentals of measuring innovation performance and deeply understand all aspects of your innovation process. How much bandwidth depends on the scale and complexity of your innovation function. If you’re spending 10M+ annually it will need to be one person’s primary responsibility for several months.

If you’re looking for an example of an organization that successfully completed improvements in-house, check out this webinar from Parker-Hannifin Corporation (Frost & Sullivan presented the webinar, but Parker did the work in-house).

If you choose to proceed with improvement innovation performance measurement in-house, there are a few resources that could be helpful:

  • If you like to hit the books, check out our Library—we list academic and other articles and books we think are helpful.
  • If you’re interested in training on the fundamentals of improving innovation performance measurement, send us an email—we have some courses in the works.
  • Check out online “how to” guides. Commodore has several here—you might start with our Guide to Measuring the Performance of an Innovation Portfolio.

Use outside help when you need to move quickly, an independent perspective, or deep measurement expertise.

We find that organizations benefit the most from specialist expertise in innovation measurement when one or more of the following conditions exist:

  • They need to move quickly, and don’t have the internal capacity to move forward.
  • There’s a need for an independent perspective—measurement of innovation performance can quickly get political (you’re talking about how people’s success is evaluated!), so sometimes it’s helpful to have an independent, dispassionate third party lead the conversation internally.
  • There’s no one available internally with deep expertise in innovation measurement—this is pretty common, as most of your best people are already busy managing innovation projects or portfolios and the short-term opportunity cost of pulling them off those activities can be high.

If you recognize yourself in any of those conditions, get in touch—we’d be happy to see if there’s a way we can help.

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