Innovation metrics and indicators are often difficult to find and apply. Not many leaders are able to show current dashboards with 3-5 simple KPIs.
Looking at past research there is no shortage of metrics though. In a recent survey over 200 metrics and indicators were mentioned in more than 400 instances of literature. The can be classified by the
- process phase: comparing input, throughput and output metrics, often called leading or lagging indicators
- area of measurement: related to product development, strategy, organisation etc.
- expression in qualitative or quantitative terms.
Drawing up the last decades of academic articles and their interest in KPIs looks as follows:
Innovation metrics in detail
Let us also look at what metrics are most popular in academia:
Numbers or value of patents brought in In-depth Leading/ lagging Quantitive Comparisons between budget & actual (project costs, project duration, revenue forecasting) In-depth Leading/ lagging Quantitive Percentage of employees aware of, sharing the innovation goal, policies and values Rapid assessment Leading Quantitive Rate of generated ideas according to a formal innovation process & informal activities Rapid assessment Leading Quantitive Effective communication internally Rapid assessment Leading Qualitative Effective communication externally Rapid assessment Leading Qualitative Time-to-market accuracy In-depth Leading/ lagging Quantitive Aftersales/market launch proficiency (salesforce, distributional & promotional support Rapid assessment Leading Qualitative Average cost per innovation project In-depth Leading/ lagging Quantitive Corporate goals for NPD program Rapid assessment Leading/ lagging Qualitative
Those top-10 KPI covered by more than 5 articles show a good mix across classifications, however, they should also be assessed whether they provide a good baseline for continuous measurements (e.g. alongside an innovation board portfolio, such as innovation portfolio and balance).
Important top-30 metrics include further measures such as
- Portfolio alignment
- Rate of product ideas approved for stage
- Collaboration with customers, suppliers, competitors, universities
- Portfolio balance
- Average innovation project development time
- R&D intensity (absolute & relative)
- Commitment of resources
- Average number of innovation projects working hours
- Formal post-launch evaluation procedures
- Adherence to a commercialisation schedule
- Technology novelty
- Organisational climate
- Commitment to risky projects (senior management)
- Customer satisfaction indicators for new products
- Recognition of key problems that must be solved with skills that reside outside the organization
- Product planning horizon (years, product generations)
Recommendations for using innovation metrics: Throughput matters
In practice, measuring all kinds of leading parameters with only a superficial measurement is creating more confusion than clarity.
We recommend to use only a few simple metrics but use them across the stages of the process. For example, if you go for patent value than you should look at the conversions of that value over time. This could be patents submitted in ideation, patents filed, granted and finally used in products (or licensed out). The latter stage is well suited for if you prefer value over numbers.
As a second dimension think of innovation horizons to get a good mix and coverage of growth and profit oriented metrics.
If you struggle to focus you must pick higher-level metrics and just go for throughput. Throughput of ideas converting into a paid service gives an ideal value metric. If it is not a paid for product another measure of consumption is needed such as click-through, usage time or selection preference.
Second, the maturity of an innovation organisation should be assessed first to see which drivers are most important. For instance, a “beginner” organisation having just introduced an innovation process might want to add learning metrics (e.g. trainings performed as input and methods applied in projects as throughput metric). A more mature organisation may shift focus on steering, setting challenges and incentives on the input side while diving deeper in outcome metrics such as sales of certain product and service categories.
Finally, some metrics are typical marketing or R&D KPI (e.g. budget/actuals of projects and time to market) that can be easily enriched with innovation metrics.
(1) Nappi, Vanessa & Kelly, Kevin. (2018). Key Performance Indicators and Dimensions for the Innovation Process. 25th Innovation and Product Development Management Conference, Porto. Survey data from osf.io.