The importance of measuring innovation: advantages and the main KPIs
In today’s fast-changing business world, it’s vital to manage projects with innovative approaches. However, simply recognising the importance of innovation in project management isn’t enough. Measuring innovation matters because it helps optimise resources, manage risks, and achieve project goals more effectively. By quantifying the impact of new ideas, organisations can adapt better, stay competitive, and create new opportunities. Measuring innovation turns abstract concepts into clear progress markers, enabling teams to make informed decisions, ultimately leading to growth and success.
As one of the most widely-known and influential thinkers on project management pointed out years ago, measuring is fundamental to being able to manage.
Figure 1 | Quote by Peter Drucker
1. Advantages of measuring innovation
Only by tracking the innovative actions taken by your organisation will it be possible to foster its growth. Correctly measuring innovation through formal metrics and the right KPIs will have great benefits in your organisation such as:
Promotes innovation accountability and motivates your team:
By measuring innovation, you can inspire your team to prioritise creativity and new thinking in their daily tasks. Regularly evaluating your company’s innovation progress and sharing the results encourages your staff to think innovatively every day and take ownership of discovering fresh solutions. Furthermore, measuring innovation will motivate your team by showing them that their contributions matter, boosting their enthusiasm to do even better.
Encouraging innovation doesn’t necessary mean organisations have to sacrifice staff efficiency. Measuring innovation can actually make people more efficient with their creative work and help them think about the potential gains from each new idea.
Optimises resource allocation:
When making new products or services, there’s a challenge to allocate resources for the most innovative ideas. Often, companies do this without clear direction. But by keeping track of innovation KPIs and metrics, businesses get better information to decide where resources are needed the most. This helps innovation leaders invest wisely in the most important areas and shape their innovation plans effectively.
Keeps investors happy:
In practical situations, using specific metrics to measure innovation is also an effective method to satisfy company investors who have funded your growth. When these supporters can see the actual benefits of their investment in innovation, they’re more likely to support new ideas and understand that occasional innovation failures are part of the process.
These are just some of the many advantages that monitoring and controlling innovative actions can have for your organisation. But how exactly can this ephemeral process be measured?
2. The main KPIs to measure innovation
KPIs, or Key Performance Indicators, are tools that organisations use to measure and track their activity. These measurements help them understand if they’re achieving their goals and where they might need to improve. KPIs not only make the company work better and faster, but also show employees where they can get better too, that’s why they are also essential to measure innovation.
To make it easier to understand and explain the different KPIs that can be used to measure innovation, we’ve organised them based on their nature and specific characteristics:
1. New releases metrics:
Whenever a new product or service is lunched, it’s important to measure the resulting sales revenue. This metric can be very useful to measure the value of innovation over time. Some specific KPI’s are: percentage of revenue from new products, revenue from those sold to new customer segments, revenue coming from services versus products, etc.
2. Financial metrics:
These are quantitative measures used to assess the financial performance and health of a company. Some of them are: return on innovation investment (ROI), cost savings through Innovation, new product contribution to sales margin, etc.
3. Staff competency metrics:
These KPIs can also help strengthen a culture of innovation throughout a business: number of new ideas generated and implemented, time spent by the team on innovation actions, time to market: how quickly a company can market a new product or service, % of employees trained in the innovation process, etc.
4. Management metrics:
Measure the impact of a good innovative leadership: employee recognition for innovation, cultural impact, customer satisfaction score, number of active innovation projects per division or business unit, etc.
Figure 2 | KPIs to measure innovation
3. The process of measuring innovation
To correctly measure innovation, these KPIs should be integrated into a fluid process where each step is defined and controlled:
- Collect, evaluate and track each idea: everyone in the organisation should be able to submit any idea they have. Once it’s been recorded, it should be categorised to facilitate its evaluation. The corresponding committee should then evaluate the idea and provide periodic status updates.
- Estimate the costs and benefits of each of them: this analysis can help identify possible barriers/risks when implementing an idea, or it can help seeing the added value it can bring to the organisation.
- Follow up the implementation: once an idea is approved, it’s important to keep track of all the real variables involved through its development. This process should involve a detailed analysis of the idea’s costs, time, scale, resources, tasks, requirements, etc.
- Calculate the return on innovation investment (ROI) of each idea: it’s fundamental to measure the real results an organisation has with the money that’s been invested in innovation. This will give a real image of the impact the innovative practices are having on the company.
Figure 3 | The process of measuring innovation
At Consulcad, we offer market-leading innovation tools that will help you simplify and automate the idea generation process. Get in touch with us to request a demonstration and see the potential this tool has!
If you need assistance with Innovation and Project Management, contact us.