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What I Learned: Measuring What!? Innovation!?
June 16, 2008

What I learned this week ... came from two connected blog posts that I read on metrics and measurement of innovation. I am asked how to measure innovation all of the time by companies looking to identify opportunities or measure the results of an innovation or a PLM initiative. But I have to wonder, are we trying to measure a ghost? Can you really measure something as intangible as innovation? I say yes and no (maybe I should be a politician?) 

Read these First
The blogs both provide some good food for thought. The first was from Paul Sloane on the British
Quality Foundation (BQF) blog and the second was a follow up on Innovating to Win. On the BQF blog, Mr. Sloane discussed a number of metrics based on conversations from a very interesting industry session he had run. He rightly points out that most metrics are based on results, or backward looking. He mentions a Boston Consulting Group report from 2007 that recommends metrics broken into inputs, process, and output. I like this construct because it takes a step toward measuring something that can be improved - or better yet it measures something that can be measured as opposed to the ambiguous term innovation. The end result from the
conversation was that everybody should have metrics, that they should be added to a balanced scorecard for high level attention, but that there is no perfect solution to this timely challenge.

The second post from James Todhunter provides some good suggestions for ways to measure innovation based on metrics for process, project impact, and value building. The focus on process is critical, because that is where changes can be made. I think that the focus on value is also an important aspect. After all, shouldn't innovation be about driving greater levels of company value? If not, why are we innovating at all?

What is Innovation to You?
I propose that before you measure innovation, you have to define it. Not a general definition that
belongs in Wikipedia, but one that is driven by your corporate strategy. For example, one measure
suggested is the number of patents. This measure could be perfect for some companies but damaging in
others. Why? Patents are costly in terms of time, effort and money. Some companies have moved away
from patenting everything that they discover to only patenting those that will protect a piece of
intellectual property (IP) that they plan to leverage. Other companies may choose to defensively
publish into the public domain. Why? They protect their right to use the IP at a much lower cost
than a patent. They can spend those additional resources on more innovation instead of legal
protection for IP that they may never use. If the patents metric is used (and tied to compensation, hopefully
to align corporate to individual goals) then the company would file more patents, but potentially
fail to be more innovative. Which is right? It really depends on your market, your competition, and
the speed at which innovation occurs in your specific product category. Some patents are outdated
before the paperwork is filed. This is just one example of why there aren't any easy answers to measuring innovation. 

My Point?
My only point is measure what matters to you. Measure what you want to improve. Sorry, was that one point or two? If speed to market is the primary driver of profitability, measure it diligently. Maybe measure it in detail, splitting time to design freeze, time to manufacturing launch, time to global launch, and time to full scale
production. Start with a business strategy, and then determine the best way to measure the achievement of the strategy.

So those are some more thoughts on measuring innovation, I hope you found it interesting. I appreciate the other bloggers for bringing it up and sharing their thoughts, I hope this extends them a bit and I don't mean to suggest anything different from what I am saying. Let us know what you think about measuring innovation.

Posted by Jim Brown on June 16, 2008 | Comments (0)