RETURN ON INNOVATION ROI NN

RETURN ON INNOVATION (ROInn) How do you measure return? How much did it cost to make? How much did you invest into infrastructure? How much did you make on sales? Return on Investment = (sales – costs) / investment Transaction cost and market response based formulas Does this apply to measuring return on innovation?

ROInn Issues What are the direct costs? What are the indirect costs? How do you account for lag between learning and performance? How do you measure customers who left before buying? How do you measure the future benefits of todays innovation? How do you measure the learning benefit of failures?

Of those who do use innovation metrics, they cite three main reasons for doing so: To provide strategic direction for innovation activities To guide the allocation of resources to innovation projects To diagnose and improve overall innovation performance

What does get measured?

TYPES OF METRICS USED? Most likely are simple outcome metrics such as: Revenue growth due to new products or services Customer satisfaction with new products or services Number of ideas or concepts in the pipeline Less likely are input metrics or performance metrics such as time to market or time to breakeven Red hearing measure: R&D Spending WHY!

INNOVATION FRAMEWORK

INNOVATION METRICS FOR BEGINNERS

INNOVATION METRICS FOR VETERANS

LESSONS Innovation is a learning process, therefore frequent failures should be expected. Measuring the innovation process and its results should be part of the process through which to improve learning (learning about learning). Develop a comprehensive set of metrics that are simple, meaningful, and intuitive. Resist the temptation to track every conceivable parameter. Resist the temptation to track the easy tangible parameters. Include at least one or two customer-driven metrics. Reassess the results and the metrics against the goals and objectives.