The focus on innovation has been moving to the value within organisations’ people: not only employees but also stakeholders and consumers. Being the human factor a new fundamental driver, how are companies gauging innovation results and capabilites? What metrics are they using?
According to McKinsey Quarterly: The Online Journal of Mckinsey & Co (2009), the main indicators ranked by importance by the 722 organisations surveyed are:
/ Revenue growth due to new products or services 16%
/ Customers’ satisfaction with products or services 13%
/ Quantity of ideas or concepts in the pipeline 10%
/ Expenditure on R&D as a percentage of sales 8%
/ Sales share of new products/services in a given period 8%
/ Number of new products or services launched 8%
/ Return on investment in new products or services 4%
/ Number of R&D projects 6%
/ Number of people dedicated to innovation 4%
/ Increase in profits due to new products/services 4%
/ Potential of the complete portfolio of new products/services to meet growth targets 3%
/ Changes in market share resulting from new products/services 3%
/ Net present value of the complete portfolio of new products/services 2%
These choices reflect the ‘people factor’ in innovation, namely, customers’ satisfaction with products and services and the number of people dedicated to innovation. Nevertheless, bearing in mind companies’ specific goals, many others can be suitable, as shown in the following table. Examples are the effort expended on cultivating an innovation culture or capabilities development and the investments made or the wide-ranging outcomes of innovation processes.
Which of these should we choose? Do they fit the needs of our specific innovation management programmes? These questions become even trickier if we know that the output of one phase becomes another phase’s input. Cause and effect overlap.
Reviewing the literature on innovation management, Henry Edison and his colleagues, in their paper Towards Innovation Measurement in the Software Industry (2013), reported 232 metrics in use by business managers and leadership, across industries. How can you then avoid the analysis-paralysis?
FROM THE START:
How can you measure innovation management?