How do you measure the value of real innovation?

Innovation – it’s a word used far too often with many connotations that confuse businesses over what innovation is, how they should be trying to achieve it and what the best outcomes of being innovative are.

Swing around and you can point at any statistic that says it’s important – but where are the businesses moving beyond the basics?

There’s a bigger question of relevance – how to measure innovation and set metrics to make sure you’re producing work that actually innovates and re-positions how you work and the experiences you deliver.

Innovation doesn’t relate to one or two parts of a business, rather the entire experience from ideation, to development, getting to market and the customer experience.  

This is important. Businesses can too often make vague assertions at how they’re becoming more innovative, or who the innovative emerging companies are, perhaps we’d have more insight, more impact, more stakeholder or shareholder support if there was a clearer, even if simple, set of metrics to measure the returns innovations are bringing.

Google became well-known during the 2000s for its use of 20% time. But it eventually had to developer stricter processes around this experiment as the company grew – not to stop innovation, but in order to harness that innovation which can actually deliver tangible benefits – and not just ideas.

Measuring innovation on the “in” side of the equation

Consider what’s coming into your business. What ideas are you receiving, and from where? These channels are imperative to harnessing innovation – if you’re reading the same magazines, the same blogs, receiving information from the same organisations, you may bias yourself into making repetitive decisions.

How are you engaging with customers, suppliers or partners in a co-creating way? What messages are you giving to staff, customers or partners about the value of pushing the limits? How many ideas are pitched, how many acted on.  How many new partnerships or experiments? What do you have in thought diversity?

Internal development

The next measurement is how the pipeline in, is progressing beyond an idea.

How are you prioritising ideas? What does the mix look like for initiatives that are incremental vs different vs a radical concept to put your foot in the water.

Consider your pipeline. In the short-term, the medium-term and the long-term, how many things are you doing that are different?

A company like Atlassian, for instance, doesn’t have such a huge marketplace and needs to create products more rapidly. As a result it uses Google’s 20% time idea with a catch – projects are continually monitored and if the leadership don’t feel they’re onto something, then they’re scrapped. It’s about making innovation measurable.

You also need to consider the types of partnerships you have. Who are you working with now, and who might you be able to work with in the future?

Measuring innovation on the “out” side of the equation

Here you might want to consider innovation metrics along the lines of which concepts, ideas, new partnerships or products are in the market. What is the impact on social media? What new customers, new demographics, new services or options are in the market from the process and how are they doing? How long did they take to get to market? 

Brand recognition

Another angle to measure innovation or responsiveness is around how your innovations, and brand as an innovative company, are being perceived by the market. Do your customers believe you’re innovative/relevant? Do you attract new ideas, partners or customer engagement because they think you can do something with that? Do the future employees you’ll want think of you as an innovative, forward thinking place to be? This in turn will accelerate the cycle.

To truly measure your innovation, all four of these areas don’t just need to be measured but truly mastered. Most companies are getting the language together around the need to be innovative, and measuring some of these four factors is a really simple way to make innovation tangible, and to truly accelerate innovation as a way of working.

Kate Eriksson is the head of innovation at PwC Australia’s Digital Change services. A stalwart of the digital industry, Kate’s experience and network spans across some of the most iconic digital businesses in the world such as Google, Facebook, Skype and Twitter.