Measuring innovation can lead to unintended consequences. Here are eight ways to avoid the traps.
1. Measure innovation alternatives, not just the current program. When assessing the impact of an initiative, always ask, “compared to what?” Don’t fall into the trap of measuring only what the company is doing today. Rather, measure it against the next best alternative. For example, if you are using a ideation methodology like S.I.T., be sure to measure the effectiveness of using S.I.T. versus another ideation method. Understand why you are using one method over another by forecasting results from the alternative. This re-frames the question from “does this method work?” to “does this method work better than this alternative?”
2. Measure inputs, not just outputs. Companies are quick to judge innovation initiatives based on the yield of ideas. A better approach is to be mindful of what the company puts into innovation. Measure activity such as number of training sessions conducted, number of employees skilled at a methodology, and man hours used in innovation workshops. Benchmark these against competitors and other relevant companies to gauge whether you are investing enough.
3. Measure quality, not just quantity: People focus too much on quantitative measures because they’re easier to collect than qualitative ones. Quantitative data seems more objective. Simple measurements like “number of ideas generated” may seem valuable on the surface, but these can lead to the trap of “idea churning” just to hit big numbers. One way to avoid this trap is to assign a panel of independent reviewers to do a qualitative valuation of all ideas generated. Develop a standard rubric or use existing methods to evaluate the creativity of ideas on a qualitative basis.
4. Measure to improve, not to judge. Hold people accountable for what they do to improve innovation activities. It is tempting to judge employee performance and reward them for innovation output. This can lead to the unwanted rivalry between employees. Avoid this trap by looking at how managers set up “cockpit indicators” and use those indicators to make changes. Have they created a closed loop feedback process to continuously improve innovation?
5. Measure novelty, not impact. Senior leaders want to know the “bottom line” impact of innovation. When they see ideation results, they respond with, “Yes, but how many of these actually made it into the marketplace, and what revenues were generated?” This is a trap because so much of the impact is dependent internal and external factors. Holding employees accountable for impact will cause them to avoid the truly novel and game-changing ideas. They fear being punished for pushing great ideas that fall outside their category. To manage this dilemma, managers need to think more in terms of finding the “innovation sweet spot,” that place somewhere between disruptive and incremental. The right balance between risk and reward is more likely to occur here.
6. Measure future potential, not just past results. Managers must be forward-looking so they can spot which innovation initiatives will make the firm more competitive. Looking backward at past results is like looking through the rear-view mirror to drive a car Avoid this trap by analyzing where to invest in product, process, and service innovation. Quantify the value of innovating in key areas. This will help you find your leverage points quicker, ahead of the competition.
7. Measure execution, not just ideation. Executing and launching new products takes financial and human resources. When poor execution delays a product launch, companies are hit with a cost that is often unnoticed. Poor execution delays the revenue stream that a new innovation will earn. Given the time value of money, that financial loss can be staggering. Avoid this trap by forecasting the net present value of delayed product launches. Then, hold teams accountable for that cost when delays occur.
8. Measure the immeasurable. Some aspects of innovation are immeasurable. But they should still be contemplated by the management team. For example, ideation sessions can cause employees to reconsider and move away from their long-held “pet” ideas. This sets employees free to move in new directions. Though immeasurable, its enormously valuable when employees give up mediocre ideas and focus their energies on more promising ones.