Corporate innovation has been growing in recent years and a variety of players are increasing their investments in this space. However, one of the key success factor behind these innovation programs remained under appreciated: performance metrics. What are the key metrics to measure the success of a corporate innovation program?
In this article, we explore 5 key points in relations to performance metrics in relations to corporate innovation programs:
- Metrics before launch:
Rule number 1 is to agree on the metrics for success prior to getting started. If you do not do this, the metric always defaults to Return On Investment (ROI), the bread and butter for almost all corporations.
From an innovative perspective, ROI can get you into trouble. This is not because the project cannot eventually deliver ROI, but because ROI is a lagging indicator that takes a while to show up. Don’t let people use “What’s your ROI” to sink your program.
2. Objectives before metrics:
Most innovation programs serve tactical purposes such as:
- Increase firm-wide innovation capabilities
- Increases idea generation and throughput
- Reduce costs or time to market
Knowing the objective is the key in setting the right metrics.
For example, take idea generation and throughput. A form of objective under this purpose would be something like:
“We need our people to generate more good ideas”
The objective becomes increasing the number of ideas generated and an associated metric can be % of employee generating and contributing ideas. An ideation workshop can be used to improve on this metric. Ultimately this is about employee engagement.
Another example to increase the perceived firm-wide innovation capabilities can be expressed as something along the lines of:
“The market expects more innovation from the firm”
The objective becomes about the market expectation. The innovation efforts can be focused on PR for market-focused publications and media. Ultimately this is about the share price.
3. Have clearly defined objectives and be ready to provide analysis
Taking the example of idea generation, the best outcome is always stated in a simple and easy-to-understand manner such as
“We generated 1,300 new ideas in 3 months”.
Be ready however to support these numbers with unique individuals who submitted ideas, how many people opened and read the announcement and corporate PR email and the eventual conversion rate to funding for these ideas.
The flip side of these ‘clear objectives’ is your year 2. Say we had 1,300 ideas generated in the first year. 50 of them were accepted into the corporate incubators, of which 5 were selected as winners. However, as of year 2, nothing has been implemented and these ideas have not been established as a core part of any business divisions. Given this background, maybe only 130 ideas would be submitted in year 2.
In addition, from a corporate reporting perspective, even if one of the projects does eventually become a success and is added into a core business unit (the ROI finally comes in), the ROI generally accrues to that business unit. The innovation department will still look like a cost centre in the books.
4. Actionable Metrics
One idea is to tie metrics to action and base this on acceptable assumptions such as:
Teams with more market insights performs better or teams need to develop research and run experiments to gain market insights
Therefore, the number of experiments (or experiment velocity) and the number of insights generated (insight velocity) over a period of time becomes ‘actionable metrics’.
5. Where is The Perceived Value
Sometimes the metric can be structured in other ways. Say that a general go-to-market product cost $1.5 million to go from idea to product launch. If we can prove that the idea has no market validation through experiments, and the innovation team cost is $500K during this time, that’s a $1 million cost saving. Saving $1 million by shutting down a bad project may not be as sexy as earning $1 million in new revenue. But it is ROI nonetheless.
Conclusion
The 5 considerations above should be a part of any strategic planning for corporate innovation program. Ultimately, for corporate innovation teams, the C-suite is always your customer, and you have to focus on what the customer wants.
This article is produced by Hashcademy — a education platform focused on building content and talent in technology, entrepreneurship and professional services. The platform currently has over 40,000 users across 20+ countries globally.
