The 3 KPIs for Innovation
You are probably measuring your innovation teams in the wrong way.
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Part of the problem with innovating is that it is hard to measure your success. Many groups will work for a long time struggling to develop new ideas, refine them, and measure their likely success. For a long time, the team may feel as though it has not accomplished anything tangible. Indeed, from the standpoint of finished products, it is often difficult to tell the difference between a group that is appropriately focused on innovation and one that is just loafing.
That is why it can be hard to track the progress of innovation teams.
Rather than trying to measure the success of innovative outcomes, though, it is crucial to focus instead on whether the process being engaged. If teams working on innovation are doing the right kinds of activities, then it is important to trust that results will follow.
What is the group learning?
Innovation teams are trying to do something that has not been done before. That typically requires drawing knowledge from one area of expertise to another. In order for innovators to do that successfully, they must be expanding their base of knowledge continuously.
That means that it is important to evaluate teams on what new knowledge they are acquiring. How many articles from scientific journals have they read? How many books have they explored? How often have they engaged in conversations with other members of the company or outside subject matter experts to learn new things?
It is also important for the group's learning to be focused both on what is known about the problem being solved as well as on other areas that are not obviously related to the problem on the surface. Many innovative problems are solved by analogy, and so it is not always obvious where the key insight is going to come from.
In this vein, it is valuable to make sure that the group members diverge in their expertise. The more different branches of knowledge that team members develop, the more likely they are to find valuable nuggets that can provide new perspective on the problem.
Groups that continue to learn continue to be inspired by the new things they encounter.
How many ideas are being considered?
Studies of creativity make clear that quantity and quality are highly related in creative pursuits. The groups that come up with the best ideas tend to come up with the most ideas.
That means that you may not be able to evaluate whether any particular idea a group is working with is on the road to success, but you can assess how many ideas are being considered overall. Groups should report the ideas they are considering, even the half-baked ones that seem like non-starters. It is valuable to know that innovation teams are exploring the space of ideas as widely as possible.
To that end, when evaluating the ideas a team has developed, it can be useful to explore how diverse the ideas are. That is, when you look at those ideas, do they all seem to be variations on a common theme, or do they seem like distinct solutions to the problem. When a team is truly looking at the entire space of ideas, then the concepts they have examined should be distinct rather than clustering around a particular potential solution.
Is the market being evaluated?
Often, instructions for developing innovative ideas tell teams to ignore the constraints on the problem at first. And it certainly can be valuable to consider a few off-the-wall suggestions when working on a project.
At the same time, quite a bit of research suggests that the most creative ideas emerge as a result of the constraints on the problem. Human memory tends to gravitate back toward tried-and-true solutions to problems. Adding core constraints to the statement of the problem actually enhances creativity rather than hindering it.
A key source of the most important constraints on innovation problems comes from the market. What is the maximum price that people or firms are willing to pay for a particular solution? Are there types of solutions that people will not be comfortable with? What is the time frame for launching an innovation?
The answers to these questions often provide hard limitations on what viable options can be considered. In this way, teams are forced to find ways to adapt the ideas they generate to the realities of the world and marketplace.
To that end, a key element of innovation is doing regular evaluations of the market for the group's products and services, understanding customers' expectations and budgets, and keeping current with technical developments from other firms. In addition, groups should test new ideas against the market early on to get a sense of whether those ideas have any chance of succeeding if they are pushed forward in the development process.
Ultimately, teams that engage in these types of behaviors regularly are doing what is required to be successful at launching successful new ventures. Firms need to get in the habit of evaluating the process of innovation rather than its outcomes.