In business, it would be impossible to continuously manage what you do not measure.
But in innovation, not everything can be properly quantified. This is the reason why it is imperative for organizations to find the proper measures to evaluate certain innovation aspects.
That being said, what are the different metrics that organizations can use in evaluating innovation growth? And how can measuring these indicators help in making decisions regarding innovation activities?
In this article, you will learn about what an innovation KPI scorecard is and why it is essential for companies to measure innovation performance.
What is an innovation KPI scorecard?
A KPI scorecard is a document that contains a certain set of statistics that quantifies the organization’s success in relation to a specific performance metric like profit margin, total revenue, overall labor effectiveness, and many others.
Using it enables innovation teams to integrate particular indicators in demonstrating a comprehensive picture of a company’s performance.
As it displays overall KPI performance in a simple visual format, decision-makers can make statistically-backed changes to refine their operations and business performance.
KPI-based scorecards emphasize how valuable it is for companies to use carefully analyzed and streamlined data. This way, innovation activities, tasks, and objectives are evaluated thoroughly.
Hence, these statistical records accelerate the assessment of progress to ensure long-term business success.
Monitoring scorecard analytics is crucial in obtaining a realistic grasp of your KPIs, specifically in determining whether your innovation efforts, projects, measures, and activities are bringing value to the organization.
Why is it important to measure your innovation performance?
Innovation is a significant process for the organization’s survival — which may require the use of company resources or even energy, effort, and time. It must be measured regularly for proactive monitoring of progress.
However, not every company understands the value of innovation, nor prioritizes it enough to spend time in assessing it. This implies that there is a tremendous amount of untapped innovative potential waiting to be evaluated, analyzed, and put to better use.
Furthermore, measuring innovation performance helps businesses move forward as it identifies what initiatives are beneficial in improving their market position and confirms whether you’re on the right track or not (particularly whether something has to be changed at a given period).
You may use innovation metrics to determine whether you’re engaging in enough activities and if you’re doing it right to achieve desired outcomes.
In short, measuring innovation performance assists you in:
- Making your resource allocation methods more efficient
- Holding people accountable for their innovation tasks and responsibilities
- Evaluating the efficacy of your innovation efforts
While evaluating innovation is beneficial in most situations, it is important to remember that some parameters are ambiguous.
For instance, the number of new products released in a year does not always reflect how much progress you have made in terms of innovation.
In fact, introducing two functional and well-received products in the market is likely to provide far greater results than launching twenty mediocre products. In business, sacrificing quality for numbers is rarely a good idea.
In other words, picking the right metrics all boils down to identifying what you want to accomplish and carefully assessing your actions to make sure that they support your objectives.
The Innovation Metrics Framework
The finest ideas resolve complexity. Understanding that innovation success happens because of how cohesive some factors are, it is imperative to address innovation issues and risks by:
- Grouping related metrics to guarantee effectivity and balance in assessments
- Combining both input and output metrics to maintain numerical integrity in evaluating initiatives that fuel the allocation of resources and development of skills, including return on investments
Categorizing interrelated parameters provides a comprehensive set of indicators that address significant innovation drivers.
The three categories to examine for any metrics portfolio are as follows:
- Return on investment: This metric focuses on resource investments and money returns. The results may establish limits on innovation management, particularly if it invalidates the significance of strategic projects, initiatives, programs, and other activities in relation to the organization’s total investments in pursuing innovation growth.
- Leadership: Leaders and senior managers must promote a culture of innovation inside the business to support innovation programs intended for growth. In this category, inputs and outputs are measured differently. The expenditures, resources, and attitudes required to obtain outcomes are referred to as input metrics, while output metrics pertain to the desired results that the business has in this category.
- Institutional capacity: This refers to the skills, knowledge, resources, technology, platform, facilities, and equipment the company utilizes in realizing innovation, which helps an organization in focusing on its developing repeatable methods for sustaining innovation.
What key indicators to include in your KPI scorecard?
The indicators in your KPI scorecard are divided into two major categories:
- Conditions for success
Results-based metrics only involve product metrics, while conditions for success include structures, capabilities, culture, and strategy.
Results-based metrics refer to product metrics, which are also called ROI metrics.
These metrics focus on tracking your outcomes like:
- New products released
- New markets accessed
- Patents obtained
- And income generated from new products introduced
When businesses are still at the beginning of their innovation lifecycle, it would be a good idea for them to track product-market fit for new innovation activities, including the current vs. predicted breakeven time for new products.
Conditions for Success
Structures are composed of the company’s:
- Leadership and organizational structure
- Tools for innovation management
- Infrastructure (facilities, technology, equipment, etc.)
- Other resources that allow the optimal application of foregoing innovation capabilities
The organization’s designated structure metrics must help accelerate processes like innovation management, selection of ideas, allocation of resources, implementation of trial runs, and the deployment of innovation activities.
You can also measure structure-supporting features like:
- Absolute or parallel funding provided for innovation and R&D
- Pace of the innovation’s build-measure-learn feedback loop
- Time spent for the development of ideas in every phase of the innovation process
Capabilities pertain to the different types of organizational capacities for developing and sustaining innovation with a particular focus on people. As such, this group of metrics refers to the different skills, talents, insights, and knowledge of employees.
It may also include a company’s information and financial capital in creating innovation. Capability metrics may also involve the number of new tasks offered to employees or the team’s degree of talents and expertise.
While it might be hard to ascertain direct effects on culture, implementing a culture of innovation in the workplace can largely impact the ability of employees in generating new ideas and transforming them into projects that may benefit the organization.
With a culture that strongly supports innovation, people feel motivated and inspired to continuously learn, improve, and experiment.
Coupled with the freedom to execute their ideas even on a minuscule scale, accountability improves and initiatives are driven by employees to a better organizational environment.
Some of the major supporting input indicators in this area are the following:
- Hours invested on development against operations
- Total volume of ideas, proposals, and projects generated from employees vs. the management
On the other hand, output indicators that track the company’s overall progress in this category may include:
- Number of employees that participated in the organization’s innovation activities
- Rating of employees regarding the company’s innovativeness
- Number of workers taken for innovation workshops over time
Strategy refers to the methods that the management applies in making a conscious choice between a number of viable choices in order to achieve certain results.
It involves the company’s approach in attaining organizational goals and long-term success, accompanied by the right leadership, resources, direction, and techniques — which may involve using the right tools, people, and equipment in running initiatives.
Since every company has its own strategic vision, the connection between strategy and innovation is extensively discussed among businesses.
As such, strategies must be reflected in the way that projects are executed, and measurements in this area must be in sync with both the company’s objectives and innovation perspectives.
Examples of strategy metrics include:
- Amount of time spent on strategic innovation
- Number of business leaders that obtained innovation training
If you’re looking to revitalize your firm or if your team lacks experience in innovation management, the aforementioned measures can help.
Measure Innovation Performance Through KPIs
To be successful, innovation must be measured regularly. Organizations that do not measure their innovative performance are missing out on a significant opportunity for growth and improvement.
By grouping related metrics, combining input and output measurements, categorizing interrelated parameters, you get a comprehensive set of indicators that address significant drivers of innovation success.
To make it easier, you can use an innovation dashboard to help build reports from integrated data sources and relevant performance indicators.
The one you can use from Accept Mission allows you to include relevant information as well as target the right audience in providing actual insights for a thorough evaluation of innovation performance.
Learn more about Accept Mission’s Innovation Software by going on a feature tour.