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Lack
of Systemic Assessment of Capabilities
"Surprisingly, with all the effort human resource
professionals have put into performance appraisal, there are few
systemic
approaches for defining
capabilities a firm needs to win and comparing them
to what it has on hand."1
Pitfalls of the Five
Classic Result Measures
The five classic result measures
–
performance, quality, timing, financials, and development costs – tell you
what happened, but don't tell you
why. "For example, an 8% drop in
quarterly profits accompanied by a 10% rise in service costs does not tell a
customer service team what its service technicians should do differently on
their next call."1
The Power of
Predictive
Measures
Predictive measures examine the actions and
capabilities that
contributed to the situation. "Knowing that several new technician hires
dropped the average skill level such that the average time spent per service
call rose 15% – and that, as a result, the number of late calls rose 10% -
would explain why service costs had gone up and customer satisfaction and
profits had gone down."1
Return on Investment in Innovators and
Innovation (RoIII)
Innovation is People
InnoBall
Learning SWOT Questions
Gain Sharing
Return on
Innovation Investment (R2I)
Since
innovation by its very definition is intangible and
not easily measured at the
fuzzy front end (especially at the outset of a
new product/service development
program), "the logical place to begin is at the end – at the Return on
Innovation Investment (R2I). Measuring R2I makes the intangible tangible,
thus providing managers, employees and the investment community with
valuable information that
can be used in a number of ways."3
"Like ROI – return on investment – R2I also shows return on
investment, but only from new product innovation
investments, not all investments. It looks at the firm's total
profits from new products (cumulative new profits generated from new
products launched) divided by its total expenditures
for new products. This long-term ratio shows the firm's total return
from new products over a three- to five-year period. This number has two
uses:
-
Descriptive: to demonstrate the
overall effective contribution of new
products.
-
Predictive: to forecast or set goals
for the organization.'3
Don't ignore the other measures and focus on R2I alone
though. R2I is driven by all the other metrics, since all have an impact on
the bottom line.
Remember also, that for R2I measurement to work, the process must be applied
consistently to all new products and services.
Case in
Point
Citigroup
At the heart of the Citigroup's Innovation Initiative was
putting the right metrics in place. The Citibank Division already had an
Innovation Index in place that measured revenues derived from new products
but that was deemed insufficient. The special task force was challenged "to
come up with more meaningful top-line metrics that could be used to
track progress and could be integrated into the
balanced scorecard, and ultimately
tied to compensation of senior managers. The team eventually settled on 12
key metrics. They included such things as: new revenue from innovation,
success transfer of products from one country or region to another, the
number and type of
ideas in the pipeline (and expected new revenues), and time from idea to
profit."2
Humorous
Business Plans:
How To Succeed In Innovation
Growth Risk: "The more you measure and
motivate based on
innovation, the less likely you will have a truly
innovative culture."
~
Stephen Shapiro
Return on Innovation Investment (R2I):
Calculation Formula...
Measuring Your Innovation
Gap...
Measuring Radical Innovation...
Five Classic Results Measures To Watch...
Case in Point
Popular Measures Used in the Silicon Valley...
Case in Point
Dell Computer Corporation...
Case in Point
Intel...
Case in Point
Skandia...
Case in Point
Cisco Systems...
Case in Point
Quantum...
Case in Point
IBM...
Case in
Point
Cargill...
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