Would you drive a car, without a dashboard?
It would be an interesting ride, if you don’t know how fast you are going, how much fuel is still in the tank, or if the engine is overheating, right?Such is the case with many companies, investing in innovation, without a dashboard,
…. and then wondering what happened?
Quick recap of Balanced Score Card
A balanced scorecard is a business dashboard to track and improve various internal functions of a business and their resulting external outcomes. It provides data with a cadence, for managers to make better decisions for the organization. It includes financial and non-financial data to reinforce good behaviors by isolating areas that potentially compete for scarce resources. These areas involve employees, quality, customers, and finance. Managers can easily identify factors hindering company performance and outline strategic changes looking at the company as a whole.
From innovation perspective, one must track metrics that represent EFFORT and metrics that represent RESULTS of investment in innovation activities. There are various ways to slice and dice the top 10 metrics. For now, let us stick to traditional categories.
Effort can be tracked through Internal $ investment requested/approved/actuals; External $ sponsorship sought/secured/actual s; and business development $ for innovations in pipeline. These numbers can be normalized to prior year sales, for bench-marking purpose.
Results are best tracked from sales of new products and services that did not exist ‘few’ years ago, where ‘few’ is typically one development cycle time for the industry.
Best effort metric is Voice of the Customer – frequency, and market volume fraction of VOC data gathered/analyzed which feeds the company road map.
Best result metric is customer feedback on innovation. Does the customer view you as a Follower, Forecaster, or a Trendsetter?
Process and Product Perspective:
The effort here can be tracked through number of new ideas/concepts generated/funded; number of active funded projects; and Progress on those projects. A useful metric that also overlaps with financial aspects, reflects the portfolio management – Projected Tangible ROI of portfolio over the 3-year period.
The results show up as improvement in competitive advantage in terms of product/service performance improvement and cost reduction; and perhaps number of Patents filed.
Gamification techniques with relevant empowerment (effort) and rewards (results) metric helps improve employee engagement and build a culture of innovation. This is a bit tricky and needs special handling.
Over the last few years, traditional balanced scorecard has been extended to include additional value-added parameters. For all of our clients, we include tracking of strategic execution and risk management as well. We define goals with a tolerance band; and identify individuals responsible for tracking and controlling each metric. For some of our proficient clients, we have establish forward looking predictive analytics for pro-active management, and even secondary level 2 dashboards for additional leading indicators.
Although not mandatory, it is recommended that innovation dashboard align with the company top level business dashboard.
How do you measure innovation? Is it working?