Assessing innovation is not an exact science. Its exploratory nature makes it difficult for executives to judge success, often because there’s no clear line of sight between the investment and the outcome.
“While early indicators are often ‘soft’, like team morale — or very simple, such as the number of ideas generated — they also come with high uncertainty in their ability to predict ultimate business success,” says Peter Skyttegaard, Senior Director Analyst, Gartner. “In fact, this is often the very purpose of the innovation effort — to remove much of the uncertainty about the viability and feasibility of ideas.”
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To better assess the business value of innovation, executive leaders should select a combination of input, process and output measures while the innovation program is being undertaken. Early measures will help determine whether the program is on track, as they measure activity and progress. Result measures prove business value but are only observed later.
Step 1: Innovation inputs
In this category, tangible, objective inputs such as employees assigned and funding are measured, however, these cannot stand alone. Large organizations often unconsciously kill innovation simply because the default behavior is to perform business as usual.
It’s equally important to monitor softer, more subjective measures, such as a culture that embraces innovation, as well. Questions such as “How safe is it to try something new?” or “How much creative space are individuals given?” can be measured on a 1- to 10-point scale.
Step 2: Innovation process
The health of the innovation process is measured along with the team’s productivity. Innovation process metrics are a leading indicator of innovation outcomes. They take into consideration the number of ideas, the time taken for the ideas to get through the process and the number of innovations that resulted in improvement over the past 12-month period.
Step 3: Innovation outputs
The most important measure is the quality of the innovation itself. It is, however, a lag indicator and can often take years to co-relate the innovation project, its deployment and its ultimate benefit to the enterprise.
Measurement criteria include the level of success of the delivered innovation after three years. If this isn’t possible, quantitative analysis should be done, such as the number of people who have adopted the innovation, financial benefits or the achievement of operational efficiencies.
It’s also important to include metrics that measure what was learned from failures. Many times, a failed outcome points to a leading indicator such as governance, team, culture or process, and provides insight into what can be changed for the next time.
“Before starting the process, be clear about the reason for innovating, how the organization will know that it has innovated and what will be done to change as a result of what has been measured,” says Skyttegaard. At the same time, also “be prepared to mix objective hard numbers with subjective measures such as feeling and morale,” he says.