Perspective # 4 - Measuring Innovation

Measuring Innovation: The logic is simple: if you can’t measure you can’t improve.

Measuring innovation was a much debated topic at the Ben Franklin Forum on Innovation at the Wharton School recently. As per Jim Andrew, Senior Vice President and Head of Innovation at the Boston Consulting Group, many different ways exist to measure innovation, “We have found in our work that companies should measure three main things, First, you should track the outputs of the innovation process. Next, you also need a set of measures to track the inputs. This is where innovation can be most precisely measured. People track the amount of money they spend on research, and they also track specific people. In our experience, human capital is in much shorter supply than financial capital. The scare resource is always your best people. The third area is the effectiveness of your process. To sum up, you’ve got to measure inputs, outputs, and process performance.”

Authors Tony Davila, Marc Epstein and Robert Shelton present in their book Making Innovation work a measurement system based on Balanced Score Card. As per this system, one should measure the following:

Inputs: resources devoted to the innovation effort. People, money, equipment, office space and time, plus intangibles like motivation and company culture.

Processes: combine the inputs and transform them. These are real-time measures that track the organization's progress towards the creation of outputs and can be used to help keep its innovation initiatives on course.Outputs: are the results of the innovation efforts.

Output: measures describe what the innovation efforts have delivered and are focused on key characteristics such as whether the company has superior R&D performance, more effective customer acquisition or better customer loyalty.

Outcomes: while outputs describe quality, quantity and timeliness, outcomes describe value creation. These measures capture how the innovation effort has translated the outputs into value for the company and the net amount of the value contribution.