Rethinking Innovation Metrics: Moving Beyond Inputs to Measure Outcomes
On July 6th, the latest edition of the European Innovation Scoreboard (EIS) was published by the European Commission. It is a comparison of how countries are doing in innovation. It always fascinates me to look at how different entities measure innovation and so I took a deeper look into it. A couple of things immediately stood out to me:
1. Innovation outcomes are only attributed to SMEs (Small and medium enterprises which are defined as companies of 5 - 250 employees). There is no specific consideration given to larger organizations other than measuring R&D expenditure and non-R&D innovation expenditures in the business sector. It seems to me that one of the indicators of a strong innovation nation is reflected in the innovation outcomes of organizations beyond 250 employees as well. What this means is that larger organizations in this report are measured on their inputs rather than outcomes. During my years at HP this was also the case where in order to show our level of innovation we were asked about the amount of resources being invested in innovation R&D. The challenge here is that, in general, this is very hard to measure. What is considered innovation R&D and what is not is a loaded topic in any organization to begin with. At Spyre we believe that the term “innovation” should be about the ability to create new products and services that customers will pay and/or change behavior for. You could be burning tons of R&D and non-R&D budgets till you’re blue in the face but without outcomes that does NOT make you innovative. It makes you irresponsible.
I’d recommend the following more objective KPIs:
a. Revenues from products and services released during that year that did not exist three years prior.
b. Number of new products and services released during that year.
2. There’s a total lack of reference to the strength of community in a measured country. Coming from what was named “Startup nation” and referring to research done at Stanford, one of the clear indicators of a thriving innovation ecosystem is the strength of the network that brings together entrepreneurs, experts, investors and regulators. It is actually something that can be measured in a rather straightforward manner and I was surprised there was absolutely no reference to it in the EIS.
When you look at your own organization and ask yourself how to measure its level of innovativeness, here are a few good KPI’s to consider:
How many products and services did you release this year?
How much revenue did you generate from products and services that were not yet released three years prior?
How many new ventures were generated that brought together corporate entrepreneurs, subject matter experts, and management?
What do you think? What KPIs are used to measure innovation in your organization? Schedule a 15-minute call with us, and we will provide our input.