The relevance of profitable innovation activities is obvious: With emerging technologies – such as AI - companies need to keep track of their innovation activities and targets in order to prevail against the competition. When discussions turn to the immediate financial impact, even the most robust innovation activities are quickly undone. Thus, it requires innovation metrics that are actionable, informative, and measurable to steer innovation activities towards desired future goals.
In this article, we provide you with a better understanding of the key innovation metrics that take strategy, organization, culture, and operation into account, and introduce you to the tools you need to feed and transform your innovation KPIs so they better represent progress towards your innovation targets. For more insights, download the full whitepaper How to Steer Innovation Activities by KPIs.
Let's first get an understanding of the two different approaches that can be taken when tracking innovation metrics: vanity or action.
The vanity metrics are popular, but not necessarily beneficial. They focus on the current impact, neglecting possibilities in the future. Commonly they keep track of:
Vanity metrics create feelings of comfort but lack concrete next steps to act upon. Instead of paving a path through the jungle of possibilities, they merely show the status quo. For this reason, it is more effective to use a different type of metrics that are actionable, informative, and measurable.
Actionable metrics can result in informed business decisions and subsequent action. Actionable KPIs are characterized as:
However, many organizations fear to use innovation KPIs because they do not want to limit creativity or use vanity metrics for the sake of simplicity. The downside of vanity metrics is their merely look good on paper. In contrast, actionable metrics relate input and output factors and provide concrete indications of whether innovation activities are moving in the right direction, changes are needed, and value is being delivered.
A well-elaborated system of actionable innovation KPIs is the single solid base to control activities and justify investments in innovation.
There are 4 categories of innovation metrics that you should consider in steering your innovation activities: strategy, organization, culture, and operation. To successfully steer your innovation activities, you should employ some or all of the following prolific KPIs.
The innovation strategy metrics include your strategy and positioning targets. Your KPIs are set to measure your progress in reaching your future competitive advantage. They help you to manage your strategy capabilities and operationalize your goals, action fields and future markets.
Vision & Mission KPIs
Pictures of the Future
Planning & Goals KPIs
As you might have noticed, KPIs in the innovation strategy metrics are frequently quality-related.
The innovation organization metrics guide your organization and governance. They measure your progress in aligning people and processes to your innovation objectives in order to help manage the coordination process.
Structure & Process KPIs
Transparency & Synergies KPIs
Overall, the KPIs in the innovation organization metrics are a mix of quality-related, time-related and cost-related. In this way, they ensure the efficiency and effectiveness of your organization.
Using the innovation culture metrics, you can measure your progress in engaging your innovation community. The KPIs within these metrics ensure a high engagement level of actors inside and outside your organization and thus help manage the engagement capabilities.
Language & Understanding KPIs
Boundary Spanning KPIs
Taken together, the KPIs in the innovation culture metrics are mostly a mix of quality-related and time-related metrics. Their role is to ensure efficient and effective collaboration in your organization.
The innovation operation metrics allow you to control your insights and operations. Their KPIs are used to measure your progress in executing innovation projects with excellence. This way they help you to manage the individual steps of your execution process.
Project Excellence KPIs
Solution Design KPIs
Overall, the KPIs in innovation operations metrics are a mix of revenue- and cost-related metrics. Their role is to ensure the conversion of effort into value.
Simply limiting yourself to all of the KPIs listed is not enough: You need to feed your metrics with the right data to gain insights. This data includes internal as well as external operations to your innovation activities. We collected 5 ways to mine data with varying strengths and weaknesses.
A/B-testing is designed to test either customer acceptance of two identical versions of a product, each with a variation, or customer behavior in two test groups. This helps you maximize your outcome with minor changes.
Approximations build on logical arguments to estimate complex concepts, e.g., in the sales forecast or total addressable market. Once you have collected several assumptions, they can be tested.
Person Journey Observations
This idea is based on the customer journey, mapping the steps a person takes to go through to accomplish a particular job, like ordering something in an online store. From this, you can learn what might go wrong and how to fix it.
A prototype merely depicts the core functionalities of your solutions. It helps you to collect data quickly and more cost effectively than a test of the finished and polished solution could do.
The most known and purest form of collecting data is collecting occurrences. These can be figures from successful experiments, incoming sales or money spent. They form the basis for controlling innovations over time.
Innovation activities can be steered and fed in several ways by using a set of actionable metrics taking strategy, organization, communication, and operation into account. Forget about vanity metrics and start to get real control over your activities to justify investments and maximize success.
The ITONICS Innovation Software helps organizations to take their innovation management to the next level. If you want to learn more, visit our product overview or get a free trial of our software.