How to measure innovation performance – objectively

Industry thrives on new ideas. But not every innovation project is worth long-term investment. How can companies tell tops from flops as early as possible?

Out of 100 product ideas, only five will reach commercial maturity. This may sound disillusioning, but it is the norm in the technology sector, according to a recent study by the Institute for Applied Innovation Research (IAI) at the University of Bochum. When it comes to the question of how companies can increase their innovation success, the attention often falls on the development process. In recent years, the focus has been on newer methods such as agile working and design thinking. However, there is something that is just as important as the innovation process: the strategic management of projects.

Are our current projects (still) paying off on our goals? How well are they progressing? And when is it time to bury some ideas? It seems obvious that companies should answer such questions regularly. But in practice, innovation monitoring proves to be complicated, especially in international corporations. Projects at various R&D locations, from external development partners and investments in start-ups need to be assessed. Not every company has the complete overview. But it can be produced relatively quickly: with an Innovation Performance Dashboard.

Identifying redundancy, preventing loss

The dashboard makes transparent which innovation projects are running worldwide, what status they have and how much money is flowing into them. The data will often reveal surprises. For example, when several teams are working on very similar ideas. Or when resources for less promising projects are obviously used to defend one’s own annual budget. The reports can be tailored to different user groups. Top management, for example, is given a decision-making basis showing where synergies can be exploited and resources can be better deployed. Department managers can analyze their project landscape in detail, and assess the strengths and weaknesses of different teams more accurately. Project managers are given the opportunity to track project progress more closely and compare it with a departmental or company-wide benchmark.

Transparency is the main goal, but not the only advantage of the Dashboard. Reporting can also initiate a closer coordination between head office and customer-facing locations. After all, the trick is to align innovations with a global strategy without neglecting local peculiarities or discarding good ideas because they do not fit into the big picture at first glance. Those who are close to customers and those who make central decisions about investments should coordinate closely. Regular reporting will simplify this exchange.

How to motivate project and department managers?

Nevertheless, the Innovation Performance Dashboard is only as powerful as its database. This is where the project managers come in. The goal is to keep their data up-to-date on a daily basis – which many will find an annoying additional burden. Pressure from above is not necessarily the best way to collect status updates – which leader likes to be forced to comply? As early as the Dashboard is being created, the company should involve as many of the future users as possible and respond to their wishes to make their work easier. When the Dashboard goes live, a soft and a hard specification for data maintenance can be communicated at first: Daily updates are desirable, with a mandatory monthly deadline. Once the Dashboard is established and the advantages become apparent at work level as well, shorter maintenance intervals can be realized more easily.

For project and department managers, reporting offers a number of advantages. For example, they no longer need to create their own presentations for regular meetings, but can present the project status directly in the Dashboard. In the long term, best and worst practices can also be derived based on consistent criteria: Within and across departments, development teams can learn for the future – both from success stories and abandoned projects.

* Original study available in bookshops: “R&D Management: Making more of scarce innovation resources” (2017).

17.02.2020, Grosse-Hornke

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