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Innovation Maturity – How can it be measured?
Questions you ask:
- How do I increase our innovation performance?
- How do move up the innovation maturity ladder?
- How do I measure innovation results?
The first step to any improvement is the decision to take it.
Like any business change, there needs to be a strong answer to the question about why this journey should even start and know what the destination will look like. Will it be worth the considerable effort?
The effort to improve innovation is a strategic question, that sits in a set of questions and answers including, What, How and When. When you can answer that, you will have taken a significant step forward in your understanding of the material in this book.
The idea to improve can come for several reasons. It could be a CEO-led idea that motivates the organisation to improve because of raw ambition, a competitive threat or a vision of transforming the firm. It could be the result of an emergent movement in the organisation welling up from below as change agents in the company to identify a new direction.
Having decided to improve the innovation system, to make TIM front and central, how would you go about organising this idea; how would you put the necessary structure on such a change initiative?
A starting point is to scope this discussion using the strategic landscape. Understand the timeframe, bring in perspectives on the topic and go to work on answering the Why, What, How questions. The advantage of using the strategic landscape is the natural momentum it will develop and getting buy-in from other stakeholders. It will also flesh-out out new perspectives and enrich the improvement question.
The innovation maturity model is a way to assess the current position of the company, set the next step and the ultimate ambition. Innovation and technology mastery is somewhat contingent on the company and the sector. We can probably all cite companies that are obvious masters from those consistently breaking the mould of possibility. Apple is an obvious master. Masters are those at level 4 or 5. But level 3 is a reasonable point to aspire to in the medium term.
Scoping your transformational agenda
This next stage comes after the decision to improve is taken and the first scoping conversations have been completed.
The service transformation model[1] has been developed and applied for organisation transformation specifically for innovation and technology strategy. It is systemic because it operates on the TIM system. It develops an upgrade plan from examining the current situation across all relevant elements of the TIM system and it projects into the future state.
The model considers practical ways to address performance gaps that bring down the overall performance of the TIM system. By assessing the system, priorities for improvement are identified and the first improvement agenda is set up.
And it’s organised a bit like a roadmap. At the top layer are items including business strategy, vision and mission and business targets. Also, Top Layer items are customer experience and market channels.
In the Middle Layer is value creation for the future including products and service provision. And the key mechanisms to deliver those products or services.
Bottom Layer items or enablers are items related to people combining skills, experience, behaviours and mindsets that are vital strong delivery of innovation and technologies. Also, people-related are the roles responsible, considerations about performance and rewards, diversity, inclusion, engagement, communication, culture, leadership style and purpose. Also in the transformation thinking are items that relate to the organisation such as its structure, its location, governance and infrastructure.
Other enablers for strong innovation and technology performance include IT tools including ideas management and product portfolio management systems. Finally, concerning enabling external relations are the third party suppliers, providers and partners in the company’s ecosystem.
The management of all these activities should be measured and tracked with performance modelling and relevant Key Performance Measures key indicators.
To operationalise this model, we need a solid assessment of the starting point. Taking a look at global best practices in innovation across relevant sectors can be informative in setting the bar. The innovation and technology management and assessment comprise an online question bank of over 100 questions. This should be taken by a representative and informed number of individuals from the different aspects of the TIM system. Further perspectives can be added to complete the picture in subsequent planning workshops.
This is all underpinned by the foundational tools described earlier in the book including landscaping, roadmapping, opportunity and feasibility assessment, make versus buy and technology intelligence.
By applying this model, we can use it to inform and guide our thinking to move from a current state to a desired future state or a required future state to deliver high-performance innovation systemically.
Key Performance Indicators and Measures
Metrics are important management tools and need to be in the mix of the innovation management system. They do useful jobs such as aligning the goals of research, development and engineering to the business objectives. They help innovation leaders make decisions and keep track of those decisions. Metrics align the behaviour of the organisation in guiding individuals through the different levels of the organisation to help with the execution of plans and strategies (Neely 1998). Metrics are powerful because they drive the behaviours that the management team wants to see. For example, metrics associated with open innovation can force researchers aligned to internal innovation to preferentially seek external collaborations and be rewarded for it.
The ultimate metric is the return on innovation investment as captured in Total Shareholder Return.
Getting specific, I invite you to think about metrics in three main types. This way breaks us out of being a “Results Orientated Company” to select metrics associated with the innovation business process: Input measures, process measures and output measures.
Appropriate versions of the chosen metrics should be tailored to the accountability level where the activity is being carried out. Top-level management will align with the company dashboard or Balanced Scorecard.
The design of the KPIs should be done after the innovation strategy and governance design is completed. We can advise how to do this through an innovation KPI workshop. The following table gives some examples of KPIs to use.
Table 1: Innovation Key Performance Indicators – KPIs (Selection)
| Area | Input KPIs | Process KPIs | Output KPIs |
| Business strategy | Percentage mix of projects by the strategic driver | Spend rate vrs driver | Market Share trends
New Product Sales |
| Financial targets | R&D as percentage of Turnover, broken down by the ‘golden ratio’ (Incremental / Breakthrough / Radical) | Average project costs;
Total cost of innovation efforts |
Percentage Sales from new products / enhancements;
Percentage sales from new services;
Percentage Cost savings from process innovation;
Return on innovation investment;
Earnings from patent licencing; |
| Portfolio management | Number of innovation projects; | Average break-even time;
Average time to market;
Percentage mix of product/Process/Service/Business process projects;
Percentage of projects considered killed too late;
|
Percentage sales from new offerings
Percentage projects ultimately considered a success. |
| Customer experience | Customer contact time and degree of intimacy; Information exchanged with the customer; Customer throughput time; |
Customers involved in workshops | Customer satisfaction |
| Collaboration and Partnerships | Number/proportion of joint disclosers of new technology | Assess partners on value creation rather than volume.
Number/proportion of jointly filed patents |
Value/proportion of value of innovative products arising from the partnership |
| IP and Technology intelligence | Number breakthrough patents | Number of improvements made to innovation process | Number of patents received/commercialised/Licensed |
|
People, Capabilities, Talent |
Number of people working on innovation.
Percentage of employees involved in innovation.
Number of ideas per source (e.g. internal, customers, suppliers, academia);
Number of ideas considered per year;
Efficiency of external links |
Staff satisfaction.
Key skill gaps and gap closure action progress.
Measurement of staff understanding and commitment to innovation.
Number Innovation Practitioners.
Number innovation workshops (e.g. Roadmapping)
Number Promotions on technical ladder |
Key Responsibility Areas of senior leaders to show results in 2 years |
| Project Management | Milestones achieved Cost vs budget |
Earned Value | Project Cost vs budget |
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Rob Munro delivers strategic innovation services to companies, universities and government agencies giving business and innovation leaders the practices, tools and confidence to achieve best in class innovation results. Please contact me to discuss ways to bring greater effectiveness to your innovation processes.
Read more about my service to organisations for innovation planning in improving innovation results.
NOTES
[1] Service transformation model by the Consulting Partnership.