Are you looking for the ideal innovation KPIs to measure the success of your innovation initiatives? When it comes to innovation, there is a seemingly limitless threshold into what can or could be achieved – or wasted. Managing innovation projects successfully requires measurements. You can manage what you can measure.
We’re looking at what innovation KPIs are the best to measure for a true representation of how successful your innovation tactics are.
Innovation KPIs are important, as corporate innovation can quickly become a theater. That is, there can be a lot of ‘performative’ innovation going on without any solid innovation outcomes. Studies have shown that 80-90% of innovation labs fail – often due to focus being given to the wrong kinds of metrics – ideas challenges, churning out prototypes etc.
These failures form a vicious cycle of stakeholders removing themselves, creating high levels of dissatisfaction among intrapreneurs. Who in turn withdraw and leave the initiative which puts innovation on hold or at least pushed back.
In order not to seriously harm any future innovative prospects, a company needs to focus on the right innovation KPI metric. Identifying and monitoring the correct metrics are areas that large companies need to improve upon.
Whereas start-ups are able to innovate by testing a large number of assumptions underpinning their solutions and business models, large bureaucratic, process-driven organisations are unable to operate under this lean startup philosophy. The challenge for these big companies is to understand how best to navigate the field of disruptive innovation that is so fraught with uncertainty and untested assumptions.
Companies with little track record of innovation can really benefit from looking at their innovation programs in the same way that start-ups operate. That is, developing a new idea via different methods in order to assess what works best. This is where working with a digital innovation lab can really lead you in the right direction.
Uncharted innovation is likely to fail unless companies take careful provisions to plan and measure progress using the correct KPIs. There are several steps to achieving this, which ENO8 commit to going through with each client:
Let’s explore these steps and these specific metrics a little further.
This stands for “the One Metric That Matters” and is a concept popularized by Ben Yoskovitz in his book Lean Analytics.
This concept doesn’t mean that there is only one metric that a company should care about. It means that there is a primary metric that should be held in mind as a priority above the others. The way to figure out your OMTM is to define what stage your company is in, and who your target audience is. This will help define what type of company you are going to be. For larger corporations, this is, however, less important as the company identity has already been decided.
But even huge companies can identify what stage their innovation program is at. Yoskovitz outlines several stages:
Any corporate innovation program can align their development to one of these stages. And once they have achieved this, it can help to identify which metric matters most at that particular stage of their development.
The North Star Metric (NSM) was introduced by Sean Ellis of GrowthHackers.com. It is a forward-thinking metric. Within corporate innovation labs, NSM provides focus on long-term sustainable growth – always with tomorrow in mind. Over the last few years it has become a powerful concept that emerging companies in Silicon Valley have used to great effect. This metric is a tool for innovation teams to thoroughly focus on creating long-term retained customer growth instead of more transient surface-level growth.
There is, however, a slight danger in diverting all the attention onto one metric. Heightened focus on one metric can become damaging to others. This is why companies need to employ an approach that also takes into account sub-metrics.
Corporate innovation programs need to find the correct NSM that will keep them thriving…
The Growth Gap is an intriguing metric that is essential for long-term sustainable impact and growth. Innovation teams often focus on evidently important metrics like revenue, idea-generation or customer-generation. And these will all make a strong impression on long-term growth. But revenue and new customers can be created in a multitude of different fashions, from a multitude of different sources. Not to mention the many ideas that have been generated to no avail.
In effect, the ‘growth gap’ represents the gap between the organization’s growth objectives and existing revenues. It is founded on an extrapolation of existing revenues into the future. This forecast is then adjusted for factors like inflation or revenue that cannot be attributed to innovation.
So, for example, if a company can predict revenue of 2 million dollars; then, based on the extrapolation of adjusted revenue, the company might conclude that they were in fact going to generate 1.7 million dollars. So, assuming that powerful economic or socio-political factors down drastically influence the prediction, the gap is 0.25 million dollars. This is essentially the growth gap – the gap that needs to be bridged with new revenue streams. This is where innovation labs come in.
For the most part, innovation labs are – or should be – established to accommodate a company’s growth goals. In uncertain times such as these, they can be instrumental in keeping companies surviving and thriving. They do, however, require tight and rigorous objectives and growth targets as part of an overarching strategy. The ‘growth gap’ metric is perfect in this sense. It is more specific than revenue growth alone, and can be quantified and measured as the company (hopefully) reduces it.
A clear growth gap metric is worth more than all the design sprints put together. It allows for tangible progress management which, in all major companies, is what the shareholders and executives are looking for. At the end of the day, if an innovation doesn’t help plug the growth gap, it has been of very little use to the growth of the organization.
The best way to avoid investing too much time, energy and money into an innovation that will not help, is to use sub-metrics as a way of keeping tabs. It is important to monitor several different ideas from fruition, using various sub-metrics, and then allocate investment gradually into the ones that show the most promise. It’s a case of making many small bets initially, and then upping the stakes once you know which the best horse to back is.
Another benefit of considering several sub-metrics is to give an idea of whether these fresh revenues are successful only at the expense of something fundamental to the company’s sustainability. This could be reputation, compliance or simply customer service.
Finally, when you use a clear NSM, you can carefully align any long-term goals of the team. If this is implemented from the get-go, a good innovation team is able to monitor the program effectively. Then the company can respond to the questions of probability and forecasted growth that may be asked of them with much more certainty.
There is no golden solution to a successful innovation lab. But by balancing the most important metrics – namely NSM and OMTM – there is a much greater chance of providing lasting value. There’ll be much less chance that funding will be withdrawn, and the goal of bridging the ‘growth gap’ is much more likely to be achieved.
Interested in learning more about innovation KPIs? Get in touch today.