From the Blog
: Typically the success of companies is measured through growth, revenue, and profits. Measuring these milestones is relatively straightforward and provides a good indicator on a company’s success or failure in the marketplace. Another equally important way that companies can achieve success – through innovation – lacks the same established metrics.
There are many different ways to achieve success, including growing sales of an existing product or optimizing manufacturing to improve yields and reduce costs. Pursuing these approaches exclusively will ultimately lead to a plateau; product lifecycles reach an endpoint due to changing markets and optimization brings increasingly diminishing returns. For a company to pursue continual growth, it needs to invest in solid innovation strategies to provide reliable sources of new growth.
One common approach to growth is adjacent innovation, where a company takes something it already does well and tries to reach a new set of users. However, knowing where to invest to encourage this kind of innovation is a complicated due to the lack of metrics. As a result, consistent innovation is often an elusive goal for many companies. To assist in the identification and design of effective metrics to measure innovation, Pleora Technologies surveyed businesses in the Kanata North Technology Park on their approach to innovation.
Surveyed companies that do measure innovation largely focus on two areas:
- The number of new ideas generated by employees or through a company-sponsored innovation process;
- Time required for these ideas to become profitable.
There are a few potential problems with this approach. Measuring the number of new ideas may encourage creativity, but generating a large number of ideas that don’t reflect the capabilities or culture of a company will have no benefit to its bottom line. Measuring time before profitability is problematic, in that it prioritizes short-term results where the best ideas may have a long return on investment.
Many of the companies surveyed acknowledged their dissatisfaction with their methods of measuring innovation and plan to revisit their metrics. Just over 40 percent of the surveyed companies reported that they have no metrics around innovation.
Using this data, Pleora has generated new metrics that could help businesses measure innovation more effectively.
Measuring the number of generated ideas is helpful, but it must be partnered with the number of implemented new ideas. How many ideas turn into projects and products? The number of acquired customers, new designs, patents and technical standards, profit, revenue percentage, and cost savings derived from innovation all help determine the bottom line value of ideas.
Surveyed companies often highlighted that they struggle with encouraging new ideas. Providing an online resource for employees to easily post new ideas is one solution. A committee can then review submissions and begin development on good ideas, while also providing feedback on rejected suggestions. This helps provide employees with a formalized means to submit ideas, while eliminating ineffective and impractical suggestions early on to prevent wasting resources.
A company “town hall” highlighting successful ideas could compliment the online resource and create an innovation-friendly company culture that encourages all employees to share. Providing a quarterly reward for the best idea could be a good incentive for bringing strong, applicable, and creative ideas to the table. Having this kind of open-minded workplace can also make a company a more enticing workplace for employees.
Due to the unpredictability of innovation, metrics that measure innovation aren’t as foolproof or reliable as the tried-and-true growth, revenue, and profits. However, the use of metrics can increase the awareness around encouraging innovation, and be a useful tool in tracking success in the innovation process.