Innovation measurement

Overview
Firm-level perspective
Executive’s view on measuring innovation performance
Key metrics
Systemic view on innovation measurement in organization
Example from business – client of BCG
Industry-level perspective
Factors which matter
My conclusion

Firm-level perspective

Some general facts 1 (according to BCG survey, 2009)
73% executives believe measuring innovation is important
32% executives are satisfied with their company’s innovation-measurement practices
46% executives said that they actually use such practices
52% executives said they use up to 5 metrics
27% executives attempt to drive innovation by linking employees incentives to innovation metrics

Some general facts 2 (according to BCG survey, 2009)
Companies consider themselves
most effective at measuring innovation outputs (revenue growth, shareholder return, brand impact, acquired knowledge)
less successful at tracking innovation inputs
(people, funds invested)
not effective at measuring the quality of their innovation processes ( input ? output)

Key metrics of innovation measurement
Metrics used
total funds invested in growth projects
revenue from new offerings
allocation of investments across projects
projected VS actual performance
average development time per project
number of projects that meet planned targets

Key metrics of innovation measurement
Alternative metrics
percentage of sales derived from new offerings
number of senior inventors allocated to each innovation
number of patents and awards earned by staff
number of project-quality tests passed successfully
gains in market share (including cannibalism)
ROI

A lot of metrics can be introduced
Langdon M. “Innovation metrics”, 2008

Systemic view on innovation measurement

Example – technological company

Industry-level perspective

Measuring technical efficiency of innovation performance
Industry aspects
Environmental (institutional) aspects
Size aspects

Inputs Weights Processes
% special employees in total staff
% employees involved in innovative activities
% time spend on innovative activities
% employees with masters or university degree
% employees with training financed by own company
% companies with relatively more advanced machinery and equipment
made use of national innovation and technology subsidies
has written down innovative plans
ISO certificate
cooperate for innovative activities
measures customer satisfaction systematically

Outputs
number of patents
new product/services for industry + number of upgrades
new product/services for country + number of upgrades
number of different innovative activities
Eventually, is it possible to try to measure technical efficiency effectively?
– My answer is NO,
we make too many assumptions, and we are exposed to subjectivity