Here is something I know is true. Innovation drives value and without math there is no innovation.
Now, I have a confession to make. I flunked high school math. I didn’t see the connection, the application, or the relevance. It wasn’t until I entered the business world where I made the link between math and how we measure success. It makes a lot of sense, but I know this is a realization many have not made.
Take a look at this concerning statistic identified by McKinsey.
You can see there is a gap between what leaders are trying to do and what they are measuring. So, how you do you know if your innovation efforts are getting the results you need? Not only results but where you should focus your time, your investment, and the future of your business. What is that magic number that indicates your effort was a success? There’s no way around it, you need to measure and analyse the data. It’s critical, and it’s the only way to move forward with confidence and drive profitable growth.
Let’s get to work. Choose the metrics that matter most.
It might not be obvious what those key metrics are, and they may not be easy to find. You don’t need to be a math whiz to do this, but you do need to take the time, have those meaningful discussions, and put in the work to identify which metrics matter most to the success of your business. Here are some of the most important metrics to consider:
Identify and Quantify Leading and Lagging Indicators
Leading indicators are key activities that can predict results. Consider activities like number of employees trained in innovation; how many idea generation and problem-solving sessions, learning cycles and experiments take place; prototype, and market research tests; and how many projects are in the pipeline.
Once you have identified your leading indicators, start focusing on outcomes that show the results of your activities. Measure lagging indicators like project ROI, percent revenue from new products and services, increases in efficiency, and costs avoided. These lagging results will allow you to assess the effectiveness of your leading efforts.
Create a metrics dashboard. Focus on the three measurement buckets.
To help select and organize your metrics, it’s best to align them with the three key areas that affect the success of your business. This will help simplify and provide a clear picture for all involved. And by fulfilling these buckets, it can greatly contribute to creating a culture of innovation.
1. Return on investment metrics. ROI metrics address two measures, resource investments and financial returns. The fiscal discipline helps justify and recognize the value of strategic initiatives, programs and the overall investment in innovation.
2. Organizational capability metrics. These metrics focus on the infrastructure and process of innovation. Capability measures provide focus for initiatives geared toward building repeatable, sustainable approaches.
3. Leadership metrics. Leadership metrics address the behaviours that senior managers and leaders must exhibit to support a culture of innovation within the organization, including the support of specific growth initiatives.
So, where do you start?
Just begin! Choose three to five metrics and start measuring. You’ll quickly find that you learn as you go and where no financial data is available, measure the activity.
Use project metrics to build initial pipeline reporting and put it on a dashboard. Make the numbers visible monthly. This will drive interest and investment in effort by aligning team and individual success to the metrics and strategic direction. Because at the end of the day, where there is no math, there is no way to measure success, and there is no innovation.
I would love to hear your ideas. Please share and reach out at any time!