Economy, Strategy & Finance Briefs

If Innovation is Everything, It’s Nothing: How to Strategically Measure What Matters

September 10, 2019

When The Conference Board’s Chief Economist Bart van Ark and his team announced their new Signposts of Innovation work in 2015, I was fortunate to have been a member of the organization’s Innovation Leader’s Council already for several years. At the time, I was serving as Chief Economist and Head of Corp. Innovation for Underwriters Laboratories (UL LLC). This new effort by The Conference Board to help innovation practitioners define and measure the success of corporate innovation seemed, at once, an obvious way to make an important contribution to the field, and also an answer to what so many of us had been wrestling with in the prior decade – namely, how to help our Executive Teams and Boards better understand, appreciate, and increase their investments in corporate managed innovation programs and practices.

For many of us, it was a common theme that CEOs and CFOs were increasingly bearing down with targets, goals, and KPIs for us to meet, and we all sought ways to benchmark against each other, and also to broaden the conversation about innovation beyond traditional business norms. Recognizing this, Bart and his team endeavored to catalogue the most common vectors or signs of innovation progress, and also associate those with various metrics that have been utilized and demonstrated to add value in different contexts. When they first started out and conversations about how to define “innovation” itself became winding, nuanced, and various, some of my colleagues suggested the task was really too enormous for even a well-respected Chief Economist to take on. There were definitely skeptics about the capability to really define and measure something that seemed so inherently subjective, depending on the audience.

Given my own enthusiasm for the project, I was asked to contribute as a Senior Fellow to the group, and have thus met with the team a number of times over the years to review progress and posit ideas on how to move forward in the future. The things that always stood out for me were, first, the ability of the work to empower innovation practitioners to have a conversation with their leaders about strategic innovation focus in any given year, and how to measure the results (see for example, What Companies Like Most about Using Signposts of Innovation and Five Ways Companies Use Signposts of Innovation). Many times, in companies, things like metrics and expectations are a one-way street, with targets imposed from above, in the way that the business has become accustomed to doling those out and reporting on them. That might work better in the core businesses, where there are many known facts about customers, company operations, products and services, and the industry/market itself. However, when it comes to innovation, there’s still a lot that the executive team needs to understand and then be able to make choices about regarding its philosophies and drivers, not to mention the tools, techniques, and approaches it will favor. Expanding the business may still be the goal, but we are now developing new competencies and capabilities at the same time, which also need to be monitored and measured.

In some sense, businesses will always want and need to process some things as “apples-to-apples” comparisons, so it’s fair to have innovation targets that zero in on value created from products and services developed in the last few years. Those kinds of results are obvious to track and gauge. However, what about the value of driving an innovation culture or being better prepared to work as diverse teams, breaking down silos and introducing cross-industry approaches? How would something like that be better defined and then seeded into metrics systems for the Innovation Team (driving organizational design, experimentation, and technique), but also Human Resources (identifying and hiring people with ideal cultural characteristics for innovation), and perhaps other units devoted to Training and Change Management within the organization. The Signposts work makes it possible for Innovation leaders to frame these kinds of opportunities for their organizations, and then lead the way with identification of associated metrics (both qualitative and quantitative).

It's well-known and documented that many successful innovation efforts are driven from a shared sense of purpose or mission for an organization. Whether that’s a drive to be more sustainable, to provide people more options and mobility in their lives, or to make the world a safer place to live in, tapping into the power of an overarching goal is critical for companies and innovation leaders. Signposts of Innovation demonstrates how ideas about issues like sustainability can be tied to brand metrics, public perceptions of the company, and also cultural impacts. The work points the way forward for innovation leaders to broaden and deepen the conversation within their organization’s leadership about their most critical missions, and how they will band together to achieve them. How will they know if they are headed in the right direction?  Leaders frame and decide these things. The Conference Board is thus empowering us leaders to do exactly that in the field of innovation.

Finally, I would say that in applying the Signposts work, Innovation leaders should invite an on-going dialogue about risk-tolerance in decision-making. As someone with experience in rolling out enterprise decision-making processes and tools to support innovation, I’m familiar with the way that the tools themselves are able to constrain our thinking. While constraints are often positive and actually necessary to frame innovative thinking, sometimes they simply become too binding. Being able to be flexible to understand when metrics should be rigorously applied and then when we can/should relax the metrics and scrutiny a bit to get more qualitative assessments and let things take shape a bit more is a fine skill, and perhaps also something of an art. When in doubt, challenge the system a bit. It’s most common for companies to stifle innovation too early by putting ideas under the weight and scrutiny of evaluation along the lines of the known business. Learning how to relax those views, allow some breathing space for new ideas to take shape, but also knowing when to build guardrails forward to support the idea as it takes shape is an opportunity for all to discover and, once again, is an area where the Innovation Leader can really shine.

See author Erin Grossi and Michelle Proctor, Director-Innovation, FedEx, share insights on Metrics Choices and Their Impact on Innovation Leaders at Innovation: The Culture/Metrics Summit, December 10-11, 2019 in New York City.