Monitoring the effectiveness of innovation

Innovation is like a sales funnel, you get prospects in one end and hopefully ‘sales’ out of the other end. The costs associated with generating concepts, clustering, evaluating etc. can be very significant and the business should really understand how these costs are spent throughout the process.

For example, if 90% of your innovation budget is spent on projects that do not become products/features then you probably need to re-evaluate how you are making decisions.

There are two sides to this argument though. If you don’t measure something, you can’t really tell how it is performing. However, the unintended and undesirable consequences of setting metrics can be extraordinary. The easiest way to reduce cancellation of projects late in the process is to cancel everything but absolutely dead certain successes. That is not in the best interests of the company but the metrics can drive you in that direction.

You can only get this right by understanding the requirements of the organisation at the strategic level and then cascade these down as criteria into the decision making process.

This should include understanding the man day and resource costs committed to each point in the innovation pipeline.

Then you can start to assess different projects both against one another and in relation to the existing portfolio.

If you have 20 projects relating to one part of a production process then accepting a 21st is probably a mistake. If all your projects have very high technology and market risk, then you probably need to start some 'safer' ones.

© Copyright Richard A D Jones 2005