How to Measure Innovation
Innovation is a fuzzy concept compared to concrete goals like revenue or conversion rates, which are easy to quantify. Trying to measure it is kind of like trying to count the wind. While we highly recommend learning ways to measure your innovation program, you probably shouldn't waste your time trying to count the wind. True innovation doesn’t always provide steady financial returns, nor does it entail implementing as many ideas as possible—but you have to measure it somehow if you want to understand whether the process is working.
A practical approach for how to measure innovation should be holistic. A strong innovation program should:
- Increase employee engagement.
- Improve your employer branding.
- And lead to financial success in the long term.
Learn how to measure innovation using these concepts, and you can find out a lot about how innovative your company really is.
Measure Employee Engagement
Innovation can lead to major breakthroughs, but remember that it’s not just about immediate revenue and cost savings. Innovative companies have more engaged employees, and that’s one of the biggest benefits a culture of innovation provides.
When employees feel that their creativity is valued and encouraged, they become personally invested in the company’s success. They take more pride in their work and strive for higher performance—not because they have to, but because they identify with the company’s values and mission and are motivated to help achieve them. The result is improved morale and productivity, and employees are more likely to stick around for the long run. There’s no better employee rewards program than a culture of innovation.
To this end, look at more than just successfully implemented innovation projects. Count the number of employees involved in the innovation process—even those whose ideas aren’t implemented. This will tell you a lot about employee engagement and whether your employees feel like their ideas are being heard.
Measure Employer Branding
Another advantage of an innovation program is how it can change the outside perception of your company as an innovative force in your industry. This can be a powerful long-term effect, but how do you measure your company’s image when it comes to innovation?
One way to measure your company’s branding as an employer is by analyzing social media engagement. We’re not talking about Karen’s posts demanding to speak to the manager. Discussions on Twitter, Facebook, LinkedIn, and other social media channels reveal how people perceive your company from the outside. Do they see you as trendy? Old-fashioned? Disruptive? These sentiments generate interest in your company and influence the type of people who want to work there.
An innovation program needs innovative employees to succeed, and innovative employees are attracted to innovative companies. This can seem like a bit of a catch-22, but it allows you to build a positive feedback loop: commitment to innovation gradually improves your employer branding, attracting more creative people to your company who can continue to innovate. Of course, it takes time and commitment, but this is how a culture of innovation is built.
Employee engagement and employer branding are key innovation program metrics, but at its core, innovation is about generating and implementing new ideas. When considering how to measure innovation, project success will always be an obvious metric.
When measuring innovation from a financial perspective, make sure you take the right approach. The traditional ROI metrics you use to evaluate everyday projects and improvements are fine in those contexts—but innovative ideas aren’t traditional. They’re bold, disruptive, and sometimes risky.
In that sense, innovation is a lot like funding a startup. When venture capitalists (VC) evaluate startups, they don’t rely on traditional metrics. If they did, no one would ever get funded because virtually no startup is a totally safe investment. Instead, VCs use funnel metrics: they start with a large number of opportunities and gradually reduce them to the most lucrative ones at the bottom of the funnel. On average, a VC firm rejects 100 opportunities for every one that ends up being funded.
This strategy is simple: VCs are not looking for safe bets—they’re looking for the next big thing. Their returns are driven by a small number of their most successful investments. They understand that most of their investments will yield very little or no return, which is acceptable because one successful startup can more than make up for all of them. This is why VCs cast a wide net, then identify the startups with the potential for big exits instead of near-term cash flows.
Sound familiar? The VC funnel system works a lot like the innovation management process. Think of your employees' ideas as startups. Most of them will probably never be implemented, just like most startups never get to an IPO or acquisition. But if one idea out of every 100 is a potential gamechanger, it's worth taking in as many as possible. The other 99 percent aren't failures—they're part of the process of finding that one great idea.
Don’t focus on short-term ROI, or you’ll be disappointed. Innovation requires an appreciation for the long game. If you have a robust innovation process, it will take time until the potential becomes a reality—but it will happen.
Need Help Deciding How to Measure Innovation?
When you join KICKBOX, you’re not just getting another software package—you’re joining a community of some of the best innovators around. Get advice on how to measure innovation at your company from a network of badass experts via the Innovation Ecosystem—one of the many tools included in our KICKBOX innovation management program.
Getting Started With rready
The KICKBOX program facilitates bottom-up innovation by tapping into your employees’ knowledge and helping them go from idea to implementation. It includes our online platform that integrates the entire innovation process, providing scalability and visibility, enabling you to understand how to measure innovation in your company.
rready can help your company develop and implement an effective innovation strategy and build a culture that continuously inspires your employees, drives productivity, and boosts your bottom line. Give your teams the tools to encourage innovation and set them up for success. If you're rready to take the next step to become a force of innovation in your industry, contact us today.Get started today