Measuring Innovation – Using Key Performance Indicators
In a recent article I proposed a model that helps businesses better understand their readiness to lead their industry. Leading an industry requires competencies and skills to both establish new industry standards as well as envision the next stage of products & services. The drive to pursue these advantages, as well as envision the future of your industry, is both dependent on the businesses existing competencies and assets as well as the business culture that leverages them. Key performance indicators are needed to evaluate the business’ ability to execute these competencies and assets, and confirm outcomes are achieved.
Continual scanning of the business’ external & internal environments for opportunities is one way to identify opportunities for innovation. Tracking key performance indicators (KPI) is also crucial to evaluating the business’ health and sustainability. Ted Jackson at ClearPoint Strategy (March 5th, 2015) emphasizes the following KPI categories:
- Financial Metrics
- Customer Metrics
- Process Metrics
- People Metrics
The Balanced Scorecard Institute (2011) adds to this list with four categories to track your business’ ability to support and leverage opportunities for Innovation:
- Number of New Ideas
- Quality of Ideas
- Effective Implementation of Quality Ideas
- Achievement of Desired Outcomes
A business scorecard approach was discussed previously in a post presenting a training program for introducing servant leadership to your business. The business scorecard represents a methodology that can be used for individual projects as well as the larger enterprise system in which your business functions. One of the advantages of using the business scorecard approach is that a system’s view of the organization (and its key performance areas) is emphasized which incorporates all key stakeholders into the planning and project execution stages. This approach also seeks to avoid any unintended consequences that often result when executing a complex (or cross systems) project without enough input or support.
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The key performance indicators, and business domains, tracked with your business scorecard is determined by the businesses’ planning documents. Identifying these key performance indicators (KPI’s) is often the responsibility of the executive team but should also take into consideration feedback from representatives of other stakeholder groups, market trends that will influence your industry and market niche, as well as your business’ risks and OPPORTUNITIES!
The Business Scorecard Approach often identifies and tracks financial, customer, internal processes, and learning & growth (Values Based Management, 2016) but can also be used to identify and track other key performance indicators. The business domain, and sub-metrics tracked, will depend on the business’ industry and market niche as well as its goals. Whether your business seeks to achieve classical (incumbent, captured market) objectives or be adaptive, visionary, or innovative (Ohr, April 25th, 2016) the business scorecard approach can help with monitoring the performance of your business plan/or project.
What are your business goals and what key performance indicators are you monitoring? Are these KPI’s focusing on innovation or on refining existing business competencies? Share your comments below.
Balanced Scorecard. (2016). Retrieved April 27, 2016, from http://www.valuebasedmanagement.net/methods_balancedscorecard.html
How Do I Measure Innovation? (2011). Retrieved April 27, 2016, from http://www.balancedscorecard.org/portals/0/pdf/howtomeasureinnovation.pdf
Jackson, T. (2015, March 05). 18 Key Performance Indicator Examples Defined. Retrieved April 27, 2016, from https://www.clearpointstrategy.com/18-key-performance-indicators/
Ohr, R. (2016, April 25). Key Innovation Issues for the Near Future – Part 1. Retrieved April 27, 2016, from http://www.innovationexcellence.com/blog/2016/04/25/key-innovation-issues-for-the-near-future-–-part-1/