How To Tell If You’re Getting An ROI On Your Innovation Program
In her latest post for B&T, innovation specialist and founder of Inventium, Dr Amantha Imber (pictured below), offers her tips on how to tell if your plans for innovation are actually doing any good at all…
I had a meeting with the head of innovation at a large insurance company last week. He had been in the role for a few months and was finalising his 2018 program of works and asking for my advice. I asked a question that I ask in every meeting like this one: “What are your specific goals, and what metrics will you use to measure your progress towards these goals?”
I was met with a slightly defensive look.
“My goal is to implement an organisation-wide innovation program and build innovation capability.”
“Yes, I understand that,” I replied. “But how will you know if you have achieved that, and how will you track progress along the way?”
“I’ll just know,” was the reply I was met with.
Clearly, this isn’t good enough. And this innovation head is far from alone in his approach to measuring innovation efforts. For most companies, tracking their innovation program’s performance is an after-thought. And unfortunately, it is a very costly one as it means they will have no clear way of demonstrating the ROI on their hard work.
Here are three strategies to consider when planning how to will measure the return on your innovation program.
- Set a baseline
When you are at the beginning of your innovation journey, you need to set a baseline. This is the only data-driven way to accurately assess and track the work you are doing.
Many organisations resist this strategy. They claim that they know they are bad, so why would they waste time and money on an assessment to confirm this?
The reason is simple: how on earth will you know the return on your innovation efforts if you don’t have a clear and objective baseline?
When Mirvac launched its innovation program several years ago, it conducted Inventium’s Innovation Maturity Index to benchmark its current performance. Eighteen months later, the company was able to run the same assessment again and directly compare results. This enabled Mirvac’s innovation head to collect data that showed an enormous ROI on the investment in its innovation program.
Specifically, the assessment demonstrated a 54 per cent uplift on the key drivers that create a culture of innovation and a 39 per cent uplift on organisation-wide employee capability to be effective innovators. In addition, the assessment showed a 118 per cent uplift on the effectiveness of the company’s innovation process.
The AFR’s Most Innovative Companies list (www.mostinnovative.com.au) provides an excellent opportunity for organisations to benchmark themselves and set a clear baseline. All entrants receive an Innovation Benchmarking report as part of entry.
- Measure inputs and outputs
When companies do start to measure innovation performance, the focus is almost always on outputs. These are often financial metrics, such as amount of revenue driven by new products and services.
However, the problem with only measuring outputs is that it is an incomplete measure of what is going on. To fully understand your innovation program’s ROI, you also need to track and measure inputs. Inputs might be in the form of number of people trained in innovation skills, number of ideas submitted, amount of money invested in running ideas through experiments, and so on. Only after measuring inputs will you start to analyse the impact they are having on outputs.
- Understand the impact of culture and process.
To have a holistic approach to measuring innovation, companies also need to track variables that mediate (that is, strengthen or weaken) the relationship between input and output variables. The two most impactful variables on this relationship are innovation culture and innovation process.
There are very specific variables that lead to a culture of innovation, such as having a positive attitude towards failure and risk-taking. When an organisation ranks high on innovation culture drivers, the relationship between inputs and outputs will strengthen.
In addition, it is important to track the effectiveness of your innovation process. For example, measuring how quickly ideas move through your innovation process will strengthen the relationship between your input and output variables.
AustralianUnity track the speed at which ideas move through their innovation process on a quarterly basis. Once every three months, the senior leadership team review how long each active idea spends in each stage of the process and makes adjustments to constantly look at speeding up the process.
So if you have invested resources in an innovation program, make sure you are tracking if those resources are delivering a positive ROI for your organisation.
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