Innovation Metrics

The Freakonomics Blog recently posted an interesting article on measuring innovation.

A panel of Ashish Arora, John Seely Brown, Seth Godin, Bill Hildebolt, Daphne Kwon, and Mark Turrell were consulted for their insights. Insights from the panel included:

• Develop process metrics as well as outcome metrics - but treat them carefully over time, as the frame of reference for innovation is constantly evolving
• Maintain an appropriate portfolio of incremental innovation, architectural innovation and disruptive innovation
• Measure additional profit in relation to the investment on innovation
• Measure the number and value of patents held
• Take enough risk and push enough boundaries, measured by the rate of failure, whether failures are "along the right path", and the source (e.g. organisational levels, divisions, etc) of the failures within the organisation
• Strictly define what counts as an innovation, and measure on an ongoing basis expected benefits, realized benefits, and an appropriate set of process and stakeholder engagement metrics.
  

The Australian Government Kicks Off an Idea Campaign

Australia recently voted in a new Government late last year, and one of the first acts of incoming Prime Minister Kevin Rudd was to open up an Idea Campaign, called Australia 2020, to solicit the best ideas for Australia as a country in the period going forward to 2020.

Ideas have been sought in the following categories:

• Productivity Agenda - education, skills, training, science and innovation
• Australian Economy - the future of the Australian economy
• Sustainability and Climate Change - population, sustainability, climate change and water
• Rural Australia - future directions for rural industries and rural communities
• Health - a long-term national health strategy – including the challenges of preventative health, workforce planning and the ageing population
• Communities and Families - strengthening communities, supporting families and social inclusion
• Indigenous Australia - options for the future of Indigenous Australia
• Creative Australia - towards a creative Australia: the future of the arts, film and design
• Australian Governance - the future of Australian governance: renewed democracy, a more open government (including the role of the media), the structure of the Federation and the rights and responsibilities of citizens
• Australia's Future in the World - Australia’s future security and prosperity in a rapidly changing region and world

A political activist group, GetUp!, has also set up a forum for members to contribute and discuss ideas for submission to the forum - and GetUp members who are delegates to the summit will take members' ideas forward to the government.

The period for submissions has recently closed, and submissions are now being considered.

The Australian Government initiating an Idea Campaign is a terrific step forward. It would be nice to see this kind of Idea Management activity integrated into democratic government on an ongoing basis, not only in Australia but around the world.

Steve Shapiro on Idea Management Systems

Steve Shapiro, a prominent innovation author and consultant, wrote recently on his blog that

A large bank in England asked their employees for new ideas using an idea management system (a tool). Unfortunately the executives never implemented any of the ideas causing a massive rebellion by employees and the eventual dismantling of their innovation efforts. Leadership must show a commitment to innovation. It must not be viewed as another project. It must be treated as a way of life; a never ending mindset.

Shapiro's core point about the necessity for organisations to develop and maintain an innovation culture, with sustained leadership executive commitment to funding and managing the innovation initiative effectively, is a key point and is well taken.

However, it is important to note that the phrases "executives never implemented any of the ideas" - and Shapiro's related suggestion on his blog post that innovation initiatives are often not sufficiently well funded to invest to a significant enough extent in the most promising innovation ideas - is not in any way in conflict with the usefulness of Idea Management Systems as a tool for managing innovation outcomes.

This is because the whole point of an Idea Management System is to maintain a pipeline where ideas are assessed and a portfolio of the most promising ideas are invested in. Providing the necessary funding for the Idea Management System to work is as axiomatic as providing the budget the marketing people need in order to implement, for example, a lead generation strategy, or the budget for a project to succeed. A well conceived and implemented Idea Management System will allow appropriately qualified and informed individuals to systematically test ideas against established commercial and technical criteria, and provide sufficient funding to invest in a portfolio of suitably promising ideas.

While there is a wide range of manners in which an Idea Management System can be set up, and a variety of appropriate funding schemas could be considered, there still remains the necessity to apply best practices in Idea Management when implementing the Idea Management solution.

Like any significant organisational process, an Idea Management System needs to be properly designed and implemented to achieve the desired outcomes.

2008: The Year Of Idea Management?

Over at Business Week, Bruce Nausbaum is making his predictions for innovation in 2008. Bruce writes:

The demand for innovation is soaring in the business community . . . nearly all CEOs and top managers who have learned the language of innovation are now seeking the means to make it happen. It took the Quality Movement a generation to change business culture. The Innovation Movement is still in its infancy, but it's growing fast. You can see that in the vast changes taking place within the field. Companies are demanding new tools and methods to execute that change within their existing organizations

Idea Management Systems are one of the central new tools and methods for consistently achieving significant innovation outcomes, and for managing innovation with the same degree of rigour and discipline as other core business functions. Idea Management is a mature and evolving toolset that's ready for more consistent and widespread adoption, and companies are likely to increasingly focus on Idea Management as a key point of differentiation and competitive advantage through consistent and repeatable innovation across products, services, processes and business models.

It will be interesting to see what 2008 brings for Idea Management.

What Practitioners Want To Know About Innovation

Innovation Tools recently conducted a survey of innovation practitioners to determine the most important innovation issues to practitioners. Over 250 people responded, representing a broad cross-section of industries and geography.

The responses were grouped by Innovation Tools into 9 topics:

1. Defining innovation and making it saleable and practical to senior management
2. Sourcing and managing ideas to come up with the best innovation opportunities
3. Connecting innovation to business strategy - and getting funding and executive support for medium and long term innovation initiatives
4. Identifying the best processes and tools to satisfy the needs of all parties to the innovation initiative
5. Building and sustaining an innovation and entrepreneurship culture
6. Measuring innovation outcomes across all stages of the process - and motivating the organization to deliver across all stages of the innovation process
7. Finding or building the people and capabilities to be successful in innovation
8. Organizing to drive innovation in our company and across the value chain - with particular reference to decision rights and accountabilities
9. Identifying the characteristics of innovation leaders at different levels of the organization - and recognizing and rewarding them

I think the list is terrific - comprehensively covering some of the key issues in innovation.

I would however be tempted to make a slight tweak to the topics list - the rewards and incentives to motivate employees (which appear in topics 6 and 9 and relate strongly to 5) could, I suggest, be usefully be brought out into a separate 'incentives and rewards' topic - bringing the list to a 'top 10' topic areas for innovation.

Idea Management Systems, while playing a very explicit role in relation to topics 2, 4, 6 and 8, also relates very strongly to topics 1 and 3. Idea Management Systems provide the rigour and repeatable results in innovation that are saleable to senior management. Idea Management Systems also align innovation activity with business strategy through implementing a Stage-Gate system that is necessarily aligned with business strategy as ideas are considered, screened or tested at various early stages in the innovation process and business strategy and objectives necessarily define the evaluation or screening criteria.

Unique World Implements Custom Idea Management Solution

Australian BRW Magazine's December 6-12 2007 edition has a brief article on Sydney company Unique World and its delivery on its innovation goals through the implementation of a custom Idea Management System.

Unique World is a small (A$12M turnover) company developing innovative solutions based on Microsoft technologies. Unique World appointed a head of innovation, who coordinates the process by which staff themselves propose, evaluate, and promote new ideas to management.

The system received 20 ideas in the first week and receives an average of 2 to 3 ideas being posted on the intranet weekly. A committee made up of (non-executive) staff uses a template marking system to score each idea on set criteria, for example whether it aligns with the organization's objectives and values. The committee decides which ideas to do further preliminary work on before putting a business case for the idea to the management group.

The article discusses two products arising from the Idea Management System: Record Point, a "low cost and user friendly alternative to records management systems" and an internal project impact matrix that will be used to estimate customer benefits of a particular solution prior to sale.

Unique World's CEO sees the system as combining the benefits of a staged investment appraisal process with harnessing the innovation of Unique World's employees.

The article argues that:

"No company is too small to systematise innovation. Nor is it too nebulous a thing to come to grips with."

Booze Allen Hamilton Global Innovation 1000 Survey - 2007 Report Released

Booze Allen Hamilton have released their report for the third Global 1000 Innovation Survey outcomes.

The report confirmed that "as in years past, we found no statistically significant connection between the amount of money a company spent on innovation and its financial performance." High-leverage innovators - "the companies that, compared to other companies in 2006, got a significantly bigger performance bang for their R&D buck" - achieved "better sustained financial performance than their industry peers while spending less on R&D."

The report found that:

When listing the reasons for their success, [high leverage innovators] all mention two key factors. The first is strategic alignment: They work hard to align their innovation strategies closely to overall corporate strategy. The second is customer focus: They all have processes in place to pay close attention to their customers in every phase of the innovation value chain, from idea generation to product development to marketing.

While the report did not focus specifically on company's approaches to Idea Management, Idea Management concepts permeated the report, particularly in relation to "customer focus." High-leverage innovators:

" . . . all have processes in place to pay close attention to their customers in every phase of the innovation value chain, from idea generation to product development to marketing."

Customer focus is a key element in idea generation, particular for organizations following a "need seeking" innovation strategy.