Today’s show addresses questions from listeners on innovation KPIs.  I’m back in Colorado after clocking 12,000 miles in the mobile Innovators Studio.  On the road, I talked with interesting innovators and analysts.  Taking a break from interviews, I’d like to answer your questions on measuring innovation success.

There are hundreds of Key Performance Indicators (KPIs) to measure innovation success.  What are the right innovation KPIs to use?  What KPIs will give insight into the innovation process?   KPIs should be unique to your organization.  Think through what KPIs will measure and how that can guide innovations and your organization.

KPI Building Blocks

I’ve broken innovation KPIs into categories, like building blocks.  Build up the blocks to get a complete perspective on your innovation effort.  

Six categories for Innovation KPIs:

1. Idea process/managing the idea funnel
   • What’s done to get ideas, put them in a funnel, review, manage and analyze them?
     • Raw ideas
     • Raw ideas validated
     • Ideas prototyped
     • Age of ideas
2. Idea commercialization
   • Innovation idea brought to market.
     • Innovations that became a product
     • Innovations that make a profit
     • Are early customers willing to pay a margin premium?
     • Innovations purchased
     • Are resources in organization aligning to make product a reality?
3. Financial impact
   • Tough to measure - long lag from time of investment to product launch in market
     • Revenue from new innovations
     • Profit from innovations
     • Revenue protected by patents
     • Revenue from patent licensing
4. Customer impact

   • Customer success compared from old product to new innovation

     • What has new product allowed customers to achieve?
     • How many customers have shifted to new?
     • Market share trend for innovation - grabbing from competitors?
5. Organizational impact
   • New products/services have an impact
   • Can pull organization into new category or focus
     • Ratio of sales from old versus new - sales ramping up for new/declining for old?
     • Ratio of profit from old versus new
     • Investments – is investment shifting from old to new?
     • Rate of return on innovation investment
     • Has it driven brand awareness?
6. Pure Innovation KPIs
   • Catch-all
     • Staff trained for innovation
     • Use of formal creativity tools
     • Implementation and use of Idea Management System
     • Structured problem-solving tools
     • Committed resources to innovation
     • Patents/year

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Guidance

1. Pick three to five KPIs from each category that work for your organization.
2. Ensure you have the ability to measure them.
3. Validate KPIs drive the right behavior and achieve the desired outcome.
4. Test/adjust KPIs as needed.
5. Share with the community.

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We’d love your feedback.  What do you think about the five-minute focus in the last segment of today’s show?

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