When a company is about to make an investment, small or large, the return on investment, time to break even, profitability, margin and time at market are measured. The calculations are often based on direct financial returns, although indirect financial returns are often included in more complex metrics. There are compensation models that favor short-term results, which in turn benefits owners with short-term horizon of their holdings, as opposed to those who invest in building long-term value.
In a world where life cycles are becoming shorter and shorter, or better expressed, faster and faster, and also requires parallel cycles of new products and services alongside the main cycle, the requirements for innovative capacity increases. It is not only the compressed life cycles that affect us. Also the absolute need for sustainable consumption and sustainable industrialism implies new requirements and opens up for new opportunities. How do we navigate amongst these foaming waves?
Need to navigate
The modern western society has in the past 50 years rapidly been weighted towards a knowledge economy. How, then, should our workers treat and address their creativity and loyalty? Well, probably against the workplaces which offer best opportunities for personal development, which requires us to steer the creativity to areas where we can create an outlet for the results. The outlet is naturally where we create the greatest value in relation to the risk involved, in minimum time and at minimum cost in relation to the expected return. Again Return on Investment. But, is this the right way to operate corporate activity? No, the companies who work in a serious way with their innovation have obviously a functioning portfolio-thinking in which strategic and tactical, direct and indirect initiatives share the resources. To balance this portfolio, it must be aligned with the operational strategy.
Well, financial, strategic, tactical, direct and indirect results in a confusing mix. In addition, a concept which is available on a valuation level, but rarely is communicated consistently throughout the organization is Innovation. Have the managers today the opportunity to pursue innovation with the same excellence as other investments? Only if we agree on the definition of each organization, create targets and measure the processes, can we head for the results.
An introduction to Innovation metrics
Innovation Pioneers International is an organization founded by networking innovation experts in the leading Swedish companies. The purpose of the network is to aggregate, produce and distribute practical innovation knowledge and to run a continuous Innovation Agenda. One of the first projects to be pursued by Innovation Pioneers is the project Metrics. Apart from this Book of Metrics, a tool for selecting metrics has been worked out. It is our hope that the reader of this publication finds guidance on how to measure and manage the innovation process.