Measurements, Metrics, and Innovation

How can we measure innovation? What are the metrics?

A discussion about metrics sounds about as exciting as a discussion about algorithms. But algorithms enable us to do really cool things. Same with metrics.

Measuring Inputs

Haydn Shaughnessy recently wrote in Gigaom about the need for new innovation metrics.

He notes that reputation is often the chief measurement of innovative companies. Outputs, like the number of new products or patents, are also easy to measure. He looks to inputs as a key indicator of innovation capability. That is, where the raw material for innovation efforts comes from, and how it is processed into the final product.

He writes: "We need a set of input metrics that measure how capable companies are, so we can separate reputation from capability and help companies focus on areas for improvement."

I like Shaughnessy's emphasis on inputs, because the practice of innovation depends on them as the sources of innovation opportunity.

Peter Drucker's Measurements

Years earlier, Peter Drucker detailed his own innovation metrics in the book Innovation and Entrepreneurship:

  • Feedback from results to expectations
  • Systematic review of innovative efforts all together
  • Judging the company’s total innovative performance: against objectives, against its performance and standing in the market, and against its performance as a business all together

Furthermore, Drucker would review the following outputs as evidences of innovation success:

  • A new business
  • A new service
  • A greater yield
  • Market leadership

Fast Company's List

Finally, Fast Company detailed the metrics that they use to determine their list of most innovative companies:

  • Vision and leadership within the industry
  • Culture and organization
  • Innovation processes
  • Partnerships and other external relationships
  • Platforms for innovation and growth

I like the Fast Company list, because it is well rounded and includes the essential elements. Of course, it isn't enough to have the elements in place. They must be used and measured.

Me to We

While we're making lists, here are some of my own, which fall within the category of inputs:

  • From me to we
  • From we to me
  • From inside to outside
  • From outside to inside

In other words, are there systems in place that enable individuals to contribute useful information to the rest of the organization? Does the organization have a way to gather input from individuals all the way down, from management to front lines? Does the organization have systems to engage with voices from outside the organization, and integrate outside contributions into its innovation efforts?

Innovation metrics are essential, yet somewhat different compared to other business metrics. Furthermore, although it is critical to measure innovation success, it is unfair to compare the newborn innovative startup to the existing mature business.

Last Word

Peter Drucker gets the last word:

"Only if we assess the entrepreneurial performance of a business will entrepreneurship become action. Human beings tend to behave as they are expected to."