Investing time and money in an effective innovation program is almost always a good investment. Fresh ideas, new revenue streams, and different products or services can breathe life and energy into an organisation, and the uplifting effect a healthy innovation system has on team culture is undeniably positive.
But is your innovation program effective? The innovation game can be costly, and feel-good outcomes are not enough. We need innovation to generate real, tangible returns. Fortunately, while innovation has many esoteric benefits, it also has several more tangible outcomes that can be tracked, measured, and reported on as required, so you can clearly demonstrate value.
Establish the goal posts
The first step to defining a return on innovation investment involves understanding the objectives. What does success look like for your organisation? Where are we now, and where do we want to be in the future? For this, you will need to establish an innovation strategy, incorporating input from the board, senior management, and other business areas. It is not enough to operate in an innovation silo and develop your own objectives. Any goals for an innovation project need to be intrinsically linked to the wider organisational strategy and serve the objectives of other business units as well. Every department manager should be able to understand how the innovation activity will benefit them. From there, you can move on to defining the best metrics for your organisation to measure progress towards those goals.
Get the team on board
Successful innovation programs require active participation from across the organisation, and a plentiful flow of ideas. Engagement not only influences the quality of the ideas flowing in; it is an indication of organisational culture as well. Healthy organisational culture leads to peripheral benefits, such as improved productivity around business-as-usual activity, not just new innovation outcomes.
Staff engagement with an innovation program can be measured by the number of ideas over time, the number of contributors, the amount of engagement (ie. voting, discussion) with the ideas after they have been submitted, and employee sentiment surveys. Idea management software can make this easier, enabling innovation managers to easily monitor engagement with an innovation program both at the enterprise level and at an individual challenge level.
Engagement with external stakeholders such as research organisations or collaborative partners may also be a measure of success for an organisation, particularly those who are seeking to embed themselves in the ecosystem of a particular sector, market or industry.
Show them the money
Managing the budget is important, so some metrics will need to revolve around finance. Measure the income generated from sales of new products or services. Monitor the operational cost savings gained by automation, process improvement or other improved efficiencies. Carefully track the expenditure required to run the innovation program. Make sure your financial reporting fits neatly into the systems and templates used by your CFO.
Track your conversions
It is important to measure implementation to determine the efficiency and effectiveness of your innovation program. How many ideas generated versus how many ideas implemented is a basic metric to start with, or put another way: how many shots does it take your team to score a goal? You may also want to measure how long it takes to implement a successful idea. Your stage-gate process for assessing suitable ideas for progression will be a key factor in this process, and you will find that tweaking the stage-gate process often has a very visible flow-on effect to your implementation metrics.
Remember the fans
As a follow-on step to implementation, measuring adoption of the idea once it has been developed is a key metric that can show value of the innovation program to the rest of the organisation. By using adoption as a regular, reportable metric, stakeholders become more important in the innovation process. Stakeholders are thus more likely to be engaged earlier in the process, which ultimately drives uptake and sales down the track.
The rules might change
Your innovation goals and metrics will change over time. Know this, and factor in regular revision of your innovation strategy so you can recalibrate your objectives and how you report on progress.
Stay in the game
Finally, don’t forget to account for the cost of doing nothing. Yes, innovation programs cost money to plan and operate. Yes, some innovation projects will result in significant financial gain, and some will not. Innovation is, by its nature, a risky game. But be sure to factor in the very real risk of the deterioration of core business if innovation is not implemented. Having no innovation program at all is a sure and steady path to obscurity, and perhaps the most costly option of all. Sometimes the simplest return for your innovation investment is that you get to keep playing the game.
