In business, there is an old adage, “You get what you measure.” But the big question is, will you get what you want? Too many innovation-measurement systems are designed in a way that inadvertently creates undesirable behaviors. They measure the wrong things, resulting in poor results. In general, there are four types of innovation measures:
1. Activity/Capability Measures. These measure the activity associated with participation in your challenges and the overall innovation program (e.g., number of registered solvers, number of submissions per challenge, percentage of time invested in innovation.)
2. Solve-Rate Measures. These subjectively measure how well you solved your challenges (e.g., percentage of challenges partially solved, percentage of challenges completely solved, potential value of solutions).
3. Implementation Measures. Finding solutions to your challenges is not enough. You need to implement the solutions in a cost-effective and timely manner (e.g., percentage of solutions implemented, time to market, implementation costs, percentage of on-time product launches).
4. Value Realization Measures. These measure the actual value accrued (e.g., increase in revenues, reduction in costs, percentage of revenue from innovations introduced in last six months, overall Return On Investment).
Of course we want our innovation efforts to result in value — the last measure — as this is where the rubber meets the road. But sometimes value realization can take years or, in the case of pharmaceutical companies, decades. Therefore, you need the first three measures as a way of monitoring progress with your program in the short term. These are leading indicators that can help predict long-term success.
The first category is useful in measuring trends over time for things like community engagement, effectiveness of internal communications and quality of challenges.
But sometimes measuring activity can be misleading.
When working with clients, one of the most common activity measures is the number of solutions submitted for a given challenge. But this often leads to misleading results. Which is better: getting one hundred solutions or getting only two solutions? Although most people intuitively think that one hundred is better than two, this is not necessarily true. As pointed out earlier, it is not the absolute number that matters but rather the proportion
of good solutions to bad solutions. If you received one hundred solutions where only two of them were exactly what you needed and the other 98 were duds, this would be worse than getting just two that were right on the money.
The key is to make sure you understand the unintended consequences of your measurement system, especially when it comes to activity measures. If used properly, these measures can help you drive higher solve rates.
Higher solve rates do not always lead to greater value. High solve rates with low value can indicate the following problems with your innovation program:
- Poor implementation. You are unable to convert solutions into finished products/services.
- Poor commercialization. Your solutions do not meet the needs of the market/customers and therefore do not generate revenue.
- Poor relevance. Your challenges, although solved, are not important enough to “move the needle” of the organization’s innovation efforts.
Measures are important for helping track your innovation efforts, and they can help diagnose potential issues, but it is important to measure the right things. Simply shifting what you measure can significantly impact the results.
Peter Drucker once said, “If you can’t measure it, you can’t manage it.” Yes, measures play an important role in innovation. They give a snapshot of performance, they provide early detection of potential issues and they drive behaviors. The key is to use the right measures in
a way that helps, rather than hinders, innovation