Innovation management assessment and measurement is both art and science. The perception will come from the usage you’re doing with metrics.
Digital brings both unprecedented opportunities and risks to businesses today. Innovation becomes simply creating value by solving simple or complex problems. Innovation comes with a risk of failure; many say that innovation won’t happen without enough failures.
Every innovation pursuit has a risk in it. Therefore, it is important to set guidelines for monitoring innovation pulse and handling risks in a structural way.
Monitor the pulse of innovation risk management: The primary focus of innovation risk monitoring and management would be to identify and control risks that can be addressed through financing, market understanding, competitor analysis, identifying the space of opportunity, defining the scalability of the products/services, as well as what timescale to allow before making a go/no-go decision.
Part of innovation is about not knowing how and for what you will use the budget; and some innovations need to be fed with resources while others get better by “starving” them. From a finance management perspective, consider what capital you are prepared to risk in making the innovation – never let this be so much that losing it will cripple your business if it cannot obtain the funding to continue to move towards fulfilling its core mission.
Monitor innovation capacity and culture pulse: Monitoring the innovation pulse of your organization is to help the leadership team make an objective assessment of the business’s innovation capability; and read the organization’s cultural expression, with the goal to build the working environment in which creative thinking and experimenting are encouraged.
Some companies use innovation quotients which integrate both numerical and qualitative information that relates to innovation success. Besides the hard numbers or numerical success indicators, it is important to bring more qualitative information that is crucial to understanding the health and well-being of the firm’s innovation efforts. Always keep in mind, the goal of innovation assessment and measurement is to build innovation capacity and capability, not add another layer of complication.
Monitor innovation performance management: The variety of innovation studies showed that the innovation success rate is not proportional to the amount of R&D investment. It means the more money or resources you pour into the innovation initiative do not guarantee higher ROI from innovation effort. Therefore, monitoring innovation management performance is critical to improving the innovation management success rate.
Assuming an organization believes that metrics can lead to continuous improvement and improve innovation effectiveness, it won’t be just a matter of explicitly communicating the intention behind metrics, but a matter of guiding the leadership team via an in-depth understanding of the purpose of doing that and engaging on that, with the goal to build innovation capacity.
Only innovation can keep businesses cross sectors relevant. Risk is part of innovation, especially for breakthrough innovation. Risk management needs to be an integral component of innovation management. The success of innovation management is never an accident; it’s a holistic management process with an embedded risk management mechanism, and an iterative thought-out planning and execution continuum.