How do you set objectives for driving innovation? Here’s a simple and practical framework: 3 innovation metrics for measuring your team’s performance.
Use these metrics to start benchmarking your current innovation performance and identify opportunities for improvement.
Innovation Metrics: ideas, action, impact
For each of these metrics – ideas, action, and impact – you can benchmark, set objectives and measure performance:
New ideas are the source for all innovation, start by measuring the number of new ideas generated that meet some basic evaluation criteria (for example: is the idea in-line with business and brand strategy?)
Ask yourself: how can we be more effective at gathering, evaluating and nurturing new ideas?
How many of these ideas are carried through into action? What is the estimated scale these projects? (Establish a simple evaluation criteria, for example: small, medium, large.)
Ask yourself: how are can we be more effective at taking ideas into action?
What is the actual financial and business impact of the new ideas? Measure revenue, profitability, fit to strategy / goals.
Ask yourself: are the ideas paying off? Are we innovating at the right cadence? How does this match to our market, our competition and our strategy?
Types of innovation
Peter Drucker identifies three type of innovation:
There are essentially three kinds of innovation in every business: innovation in products or service; innovation in the marketplace and consumer behavior and values; and innovation in the various skills and activities needed to make the products and services and to bring them to market. They might be called respectively product innovation, social innovation, and managerial innovation.
- Product innovation
- Social innovation
- Managerial innovation
Innovation Metrics: Examples
Once you’ve started to benchmark your current performance you can start to set objectives.
Here are some examples of the objectives we’ve described.
Under each I’ve given an example of the 3 different types of innovation defined by Peter Drucker:
- Product innovation: generate 10 new product ideas that will open up new markets
- Social innovation: generate 5 new ideas that will shift consumer behaviour into lower cost channels (eg: web-based customer service)
- Managerial innovation: generate 15 process improvement ideas that will reduce variable costs
- Product innovation: test market 5 new products
- Social innovation: implement one new channel to engage with consumers
- Managerial innovation: initiate Six Sigma projects to improve two process that will have a major impact
- Product innovation: generate $5m of incremental revenue from new products
- Social innovation: shift 20% of customer service interactions to the web
- Managerial innovation: achieve variable cost savings of 20%
Identify the types of innovation that are likely to be of most value to your business and setting clear objectives against which you can measure business performance. You will quickly bring a sharper focus onto innovation within your teams and your business.
To Wrap up
- Start to benchmark your innovation activities using 3 innovation metrics: the ideas generated, the action taken, the business impact
- Use these measures, and your benchmarking results, to identify opportunities for improvement.
- Agree innovation objectives with your team.