Innovation Metrics: Balancing Short- and Long-Term Goals

What is short-term innovation?

Short-term innovation goals involve immediate and specific objectives that companies pursue to yield quick results. They align with the SMART goal framework, namely they are Specific, Measurable, Achievable, Relevant, and Time-bound. These actionable strategies contribute to the organization's short-term success, ensuring specificity and measurability in their outcomes.

For instance, introducing a new feature to an existing product or launching a marketing campaign to boost sales are all short-term innovation initiatives with clearly defined goals and short timeframes.

What is long-term innovation?

Long-term innovation in contrast, focuses on the grander scheme of things, encompassing visionary aspirations that may not yield immediate results but possess the potential to revolutionize entire industries. These ventures are often characterized by their high-risk, high-reward nature. 

A prime example of a long-term innovation goal is SpaceX's audacious mission to enable human exploration and settlement of Mars, a colossal undertaking that may span years, if not decades, before fruition.

This long-term innovation approach frequently embraces BHAGs—Big, Hairy, and Audacious Goals, as demonstrated by ambitious endeavors like developing sustainable energy solutions for a carbon-neutral future. 

Balancing the two

Companies cannot afford to focus solely on quick wins or far-reaching dreams. They need a harmonious blend of both to thrive. The Three Horizon Model provides a valuable framework for achieving this balance. It recommends allocating resources across three horizons:

1. Core Business (Horizon 1)

   This is where short-term innovation thrives. It involves optimizing existing products, services, and processes to generate immediate revenue and sustain the core business.

2. Adjacent Opportunities (Horizon 2)

   Here, companies explore opportunities that are slightly more futuristic. These initiatives aim to expand the business into new markets or customer segments while still leveraging existing capabilities.

3. Breakthrough Innovations (Horizon 3)

   Horizon 3 is all about long-term innovation. Companies invest in disruptive ideas and technologies that may not yield returns for several years but have the potential to reshape industries.

Short-term innovation goals provide the necessary revenue stream to fuel long-term innovation. They fund research and development efforts, support experimentation, and create a stable foundation for taking risks. Without short-term wins, companies may struggle to survive long enough to see their long-term visions come to fruition.

Revenue & profit

An inability to measure impact is cited as the second biggest barrier to innovation. Monitoring the revenue, as well as the profit, is arguably the easiest way to see whether a project or product is a success.

This is especially important for short-term innovations as you will gain a clear answer whether you should persist with it or not. When monitoring long-term innovations, the revenue recorded right now might not be as important. Yet, the figures can still be helpful to indicate where things stand.

Market share

Beating the competition is a priority in both the short and long-term future. Therefore, measuring the market share must be one of the top key performance indicators in your analysis.  This can be calculated by dividing your number of sales over a set period by the total sales made in the industry.

Your organization can decide what signals a suitable market share while future innovations should look to boost the market share over time. When employees test their ideas, the impact on market share should rank high.

Customer satisfaction

Innovation often revolves around customer-centric ideas. Even when it doesn’t, you cannot ignore the importance of client satisfaction. After all, innovations will be destined for failure if there is no demand for them.

As well as desirability, it is necessary to collect feedback and monitor overall customer satisfaction. This will highlight when short-term innovations need adjustments and can also point you toward possible solutions.

Social impact

The main driving forces of innovation are customer experiences, revenue growth, and product development. When balancing short-term and long-term innovation goals, though, it’s equally important to measure social impact.

Consumer expectations regarding this have grown exponentially and will only continue to grow. Innovations that improve the world through responsibility are certain to outperform those that don’t. Measuring the steps that can be taken in the immediate future as well as the long-term future is crucial. 

Input metrics

All the above metrics focus on measuring the output, but it is equally crucial to track the input. The appropriate metrics include budget demands, time spent, prototypes, and feedback. Aside from ensuring that your resources are used appropriately, it feeds into the prospect of sustainable innovation and continuous improvement. Whether looking at short or long-term goals, knowing that the company moves in the right direction will allow you to act with confidence. 

Measuring innovation success

Whether short-term or long-term, measuring the success of innovation requires a different set of Key Performance Indicators (KPIs) than traditional business metrics. Innovation Accounting comes into play here. 

For short-term innovation, KPIs could include metrics like product adoption rates, revenue growth, and customer satisfaction scores. However, long-term innovation KPIs may involve tracking progress towards milestones, patent applications, or even the nurturing of innovative culture within the organization.