It’s hard to continually manage something you don’t measure in business.
However, because not everything in innovation can be effectively quantified, how can you evaluate your innovation progress?
In this article, you will learn the six innovation elements to measure top innovation KPIs with for innovation success.
Let’s get started.
What is a KPI?
Here’s an easy definition of a key performance indicator, commonly known as a KPI:
A quantifiable statistic that shows how successful a business is in meeting important business objectives. They are used by organizations to assess their progress in accomplishing goals and targets.
Innovation goals and objectives
Prior to the start of every innovation project, an innovation team must first create an underlying innovation strategy which entails establishing objectives that are in line with the overall goals of the company.
Essentially, after you’ve established what you hope to achieve via innovation, you will be able to decide your priorities and position yourself better in establishing which measures or KPIs to
utilize in assessing whether you’ve fulfilled your innovation goals and objectives or not.
Why do you need to measure innovation?
Many people equate innovation with the development of ground-breaking products and services. However, it’s more than just that.
According to its definition, innovation is the process of realizing new products, processes, propositions, or business models to create added value for both customers and employees.
So because innovation is a purposeful and planned activity, it must then be reviewed on a regular basis, just like any other company activity.
This means that there is a vast amount of untapped innovation potential out there waiting to be evaluated, researched, and put to better use. After all, monitoring innovation through the appropriate KPIs not only enhances innovation by itself.
It also provides five additional benefits such as:
1. Fostering ingenuity
Monitoring, measuring, and tracking innovation success is a fantastic approach to promote ingenuity and innovation as vital components of every employee’s responsibilities.
It also fosters, recognizes, and appreciates the attitude of uniqueness, novelty, and creativity that emerges inside your organization.
The more you understand your inventive outputs as a team, the better you will be able to identify and celebrate the persons behind the success of your innovation outputs.
In the process, such an action will inspire them more and encourage them to be more productive in meeting your innovation goals and objectives.
2. Accountability for innovation
Evaluating innovation raises your employees’ awareness of the value of innovation, problem-solving, and new ideas in the company, despite their daily tasks and everyday company routines.
If you routinely review and promote your company’s creative performance, here’s what would happen:
It will drive employees to take on everyday innovation accountability and assume personal roles in building unique solutions and other brilliant methods of completing their tasks and responsibilities.
Recognizing them for their efforts, along with the right strategy and metrics of assessing innovation, will actively encourage all employees — regardless of their designated responsibilities — to be active and accountable participants in your innovation initiatives.
3. Increased efficiency
Several business authors regard efficiency as the enemy of innovation, claiming that genuine innovation occurs when individuals are given free and unconstrained time to think and create.
However, the truth is a little more complicated than what this black-and-white approach portrays:
Businesses that encourage innovation do not have to compromise their employees’ efficiency. Indeed, assessing innovation may motivate employees to be more productive with their creative efforts despite limitations in time.
To consider the possible return on investment for every innovation project they intend to spend their time and resources with.
This is because when employees are aware that their innovation efforts are being documented and analyzed, they become far more serious and careful when it comes to exercising their creative tasks.
4. Economically-effective resource distribution
Most of the time, the creation of new products and services brings the struggle of ensuring that resources are given to kickstart and support the most innovative concepts, processes, and solutions.
Despite this tussle, innovation teams still do what they can to secure the backing they need to proceed with their innovation activities. That includes tracking innovation KPIs.
By closely monitoring and assessing innovation initiatives, businesses can gain the information necessary to effectively obtain and allocate their resources in different phases of the process.
This implies that innovation leaders may successfully design their innovation pipeline by allocating funds and personnel hours where they are most required.
5. Reporting progress to investors
In practice, quantifying innovation with specific metrics is also an excellent approach to placate company investors who have supplied you with funds to innovate, grow, and thrive.
Allowing your sponsors to know the direct advantages of their investment in innovation in detail will make them more likely inclined to support new ideas next time and be accepting of rare innovation setbacks.
Letting them in on your innovation journey also makes them feel that you value their insights, as well as the trust and the confidence that they’ve placed in you. Keep them up to date with every phase of the innovation process and report your progress to them.
What are the innovation elements to measure top innovation KPIs with to ensure innovation success?
Because of the nature of innovation, measuring it may be difficult for innovation teams.
Innovation isn’t tangible. Even the innovation funnel is multidimensional, which means that there is a wide range of possibilities and real-world consequences for your business.
While many of these outcomes will be concrete advantages for the present and immediate future, others may be more difficult to quantify, frequently requiring years or even decades to materialize.
Because of this, a solid strategy to KPIs is critical for analyzing the effect of your innovation project and its commercial value to your clients and your organization. But creating a structure that accurately represents the impact of your program is a difficult undertaking.
That is why, in order to effectively track, monitor, and manage your innovation performance, you must employ these innovation aspects to measure top innovation KPIs, along with their appropriate metrics for innovation success.
Capability refers to all the various talents, knowledge, and skills that an organization has for developing and managing innovation. It relates to the employees’ distinctive insights and technical expertise.
Furthermore, it addresses their latent knowledge and other information sources of the company, as well as the organization’s financial capital dedicated to developing innovation.
Examples of these are:
- Number of employees with innovation training
- Innovation potential
- Employees’ competencies and abilities (efficiency and productivity)
Structures related to the organizational structure, procedures, resources (the proper tools to assist innovation management, such as innovation management software), and infrastructure of the business that allow the aforementioned skills to be used effectively.
Examples of these are:
- Funds spent on innovation projects
- Time spent on every innovation phase
- Educational allowance for innovation study
3. Leadership and Strategy
Strategy is linked to the tactics used by the management to make smart and purposeful decisions from a number of plausible options in order to accomplish certain outcomes.
It entails the company’s methods and techniques in achieving organizational objectives and long-term progress, supported by effective leadership, proper distribution of resources, evidence-based directions, and carefully analyzed procedures.
This may include the use of the appropriate tools, people, and equipment in executing innovation initiatives.
Examples of these are:
- Number of executives trained or are currently in training for innovation
- Number of ideas given by the management
- Number of innovation training given by company leaders
- Number of projects and activities directly supervised by business executives
Although it may be difficult to determine an innovation’s effects on culture, fostering an innovative culture in the workplace may have a significant impact on workers’ capacity to generate new ideas and turn them into initiatives that benefit the organization.
Examples of these are:
- Employee engagement
- Number of employees that participated in the organization’s innovation activities
- Number of workers taken for innovation workshops over time
- Dedicated time for innovation experiments and activities
- Brainstorming sessions in a month
- Rating of employees regarding the company’s innovativeness
The byproducts of innovation initiatives in the organization are referred to as results.
Examples of these are:
- Number of ideas generated by stakeholders
- Number of ideas from employees
- Number of actionable ideas
- Number of innovation projects completed
- Projected Profitability of innovation projects
- Number of new products and services launched
The overall effects of innovation initiatives on the business and its clients are referred to as impacts.
Examples of these are:
- Actual Profitability
- Employee Satisfaction
- Employee Retention
- Revenue generated from innovation projects
- Number of innovation awards
- Customer feedback
How to measure innovation effectively
Here are three important tips to remember when measuring innovation:
1. Understand beforehand what you are trying to accomplish upon the formation of your innovation goals
The appropriate metrics or KPIs that you should use for measurement highly depend on the goals that you’ve set before starting your innovation activities.
2. Avoid being too punitive in measuring innovation
Make this process simple. If you focus too much on metrics, you risk encouraging your employees to hit good numbers, rather than being truly innovative. This is especially the case if you decide to make innovation KPIs part of employee performance reviews.
Remember, innovation takes time, and not every creative concept can be measured as easily as the next. You wouldn’t want to discourage a potentially world-changing idea just because it didn’t seem financially feasible in its early stages.
3. Always choose relevant KPIs
The six components of innovation described above are a combination of input, output, quantitative, and qualitative data. However, at the end of the day, the decision as to what metrics to monitor and include will always be yours.
Just remember to strike a balance between these measurements in order to get the right mix. Again, take a look at your goals and objectives, and think about what kind of metrics or KPIs fit them best.
Measure your innovation performance regularly
Organizations that do not track their innovative performance are passing on a huge chance for development and progress.
Through grouping similar measures, merging input and output data, and classifying interrelated factors, you can get a comprehensive collection overview of indicators that address innovation success.
Learn how to turn to measure your innovation performance regularly and how to turn your organization into an effective engine by reading our free ebook on innovation.