A Roadmap To Innovation Part 3: Measuring Your Innovation Program’s Success
This is the third and final installment of an exclusive three-part series of articles from Alex Goryachev on how CEOs can create a roadmap for successful innovation programs.
Congratulations, you’ve made it to the end of my “Roadmap to Innovation” series and hopefully have a budding innovation program in the works. Thus far, I’ve spoken about aligning innovation with your business strategy, building your teams, overcoming key obstacles, funding your program, and incentivizing all employees to participate (check out part 1 and part 2). Although you may be eager to put your game plan into action, it’s a good time to take a step back and establish metrics to gauge the success of your programs and continuously improve upon them. Metrics are crucial. Here’s why.
Measuring Innovation: It Can Be Done
As I’ve said before, innovation is not about technology – it is a mindset and attitude that is foundational to the competitive progress of the business. But because it is an abstract concept, measuring or benchmarking innovation programs is often easier said than done. I’ve found that many companies get stuck focusing on traditional financial metrics (such as rate of return and net present value) and lose sight of some of the less concrete, yet equally important, “soft” metrics (such as the number of customer touchpoints, ideas generated and employee participation rates). Fortunately, businesses that are true innovation leaders are beginning to collect both types of metrics, according to KPMG and Innovation Leader’s Benchmarking Innovation Impact 2018 report.
Of the companies surveyed, more than 60 percent track revenue generated from innovation products as a KPI. Other popular metrics included the rate of return (tracked by 28 percent) and efficiencies gained from innovation (23 percent). However, a quarter of respondents said they did not track any financial metrics. Of that group, 31 percent were classified as the “least mature” innovation programs, so it’s fair to say that they are still learning the ropes and determining their areas of focus.
Here’s where you can get ahead: Determine what you want to measure and how you will do so before you embark on an innovation journey. If you don’t know where to start, select two or three KPIs that support your overall business goals (such as increasing sales by the end of the quarter or improving operational efficiencies by 50 percent), and focus on those metrics. You can always readjust your strategy once you realize some quick wins.
The Value of Soft Metrics
While financial data is crucial to garnering C-Suite buy-in, soft metrics can make even deeper impacts company-wide. Frankly, your employees – your greatest innovation assets – probably don’t care about revenue or net value; they want to know how your program is making an impact on their everyday work and the world at large. So what kinds of “soft” metrics should you collect? KPMG’s study showed that customer touchpoints and learnings/insights generated are tracked by 64 and 55 percent (respectively) of companies with mature innovation programs. Innovators also tracked the number of applications, employee participation rates, number of ideas generated, and hypotheses tested.
In my experience, the most impactful metric is employee engagement and participation. After all, innovation is about people. If you can benchmark the number of employees actively participating in your program or project, you can more easily recruit interest for future endeavors. When employees see their peers sharing ideas and collaborating on innovation projects, they are more likely to jump onto the bandwagon. For example, at Cisco, we found that 52 percent of our employees across all 14 functions in more than 90 countries participated in our most recent Innovate Everywhere Challenge (IEC). That’s a 6 percent jump from the previous year’s competition. But we don’t keep this metric a secret – we regularly share it across our employee base through Intranet sites, social media, blogs, and marketing collateral to continue to drum up support. It will be exciting to see another uptick in participation in next year’s IEC – a testament to the power of tracking and sharing meaningful metrics with your stakeholders.
We also track a wide variety of other soft and hard developments, such as the number of patents generated, number of venture ideas submitted, revenue produced, industry presentations, demos made, collaborations on our Innovation Hub portal, number of volunteer mentors, and “angel” investors, and more.
As you identify which metrics you want to track, prioritize those that support your long-term innovation goals. Never track metrics “just because.” You need a reason why you’ve chosen to track that metric. And lastly, don’t get so caught up in metrics that you lose sight of your innovation initiatives and what you are actually trying to achieve: Transform into a culture empowering every employee to innovate solutions that outpace the competition.
What Makes a Winning Innovation Program?
While the priorities of each organization might be priorities different, I’ve noticed a core group of common characteristics among those with the most impactful programs. First, winning innovation programs encourage risk-taking – innovators aren’t afraid to explore truly transformational ideas and learn from every failure or achievement. Successful innovation programs also align their initiatives with overall business goals; they know their “why” and “what,” and then they track metrics that support the overall mission. They build partner ecosystems, making their customers, vendors, service providers, and outside experts (government agencies, academia, local startups) a part of their co-innovation efforts. Last, they encourage inclusive teams that embrace the diversity of thought and backgrounds.
No matter where your company is on the innovation spectrum, I encourage you, the CEO, and your C-Suite team, to get proactively involved. Don’t just participate from a distance or check in with your teams on a quarterly basis – be a champion for innovation. Lead by example and help your organization break down cross-functional silos, inspire and engage employees, secure adequate funding, and extend your co-innovation partner ecosystems. Remember: Innovation is not a “one-and-done” project or annual exercise. It must be ingrained into every aspect of your business to come out on top in today’s rapidly changing, digital economy.
Meanwhile, if you have questions, get stuck, or need an innovation therapist, don’t hesitate to contact me at email@example.com, follow me on Twitter, and add me on LinkedIn.
This article originally appeared in Chief Executive on October 29, 2018