Measuring Performance for Corporate Innovation
Unfortunately, life is never simple — and defining the right way to measure success for your initiative isn’t either.
There’s no silver bullet.
Firstly, there’s no one correct KPI for any initiative. The worst answer to any question is ‘it depends,’ but each program and project will, and should have, its own North Star. If you are building a new internal productivity tool, uptake and user engagement may be your key metric — but, for a new product or service, revenue generation might be the right KPI.
Many corporate innovation teams are focused on ROI, which makes sense in the bigger picture, but can often lead projects to focus on short-term returns. ROI will be one key metric for Horizon 1 Innovation, but longer-term breakthrough innovation rarely delivers a solid return on investment in the short term, so why use this as a metric?
Nonetheless, Pearson’s Law states ‘that which is measured improves. That which is measured and reported improves exponentially,' so we must find some way to measure the success of individual initiatives.
You should consider having KPIs for your innovation portfolio, as well as KPIs for each initiative in that portfolio. Firstly, we’ll discuss how to measure KPIs for your initiatives, then for your portfolio as a whole.
Stage > Measurement
First of all, what stage is your initiative in? For startups, we see pre-product, product-market fit, and expansion as three high-level stages each business goes through. We can map this to corporate innovation by reframing it as awareness, engagement, and growth. Finally, an important concern for corporate innovation is internal stakeholders, as key decision makers can often be responsible for the survival or termination of a program.
Within each stage, we have different ‘platform’ performance indicators:
- Awareness: focus on customer feedback, qualitative interviews, internal/stakeholder engagement.
- Engagement: revenue, especially monthly recurring revenue, is one of the best indicators to track, as well as repeat buy/renewals.
- Growth: focus on the lifetime value of your customers, as well as their acquisition cost — grow the former, lower the latter. This is a good time, as a corporate, to be reviewing the ROI, as this is when VC would be doing the same for a startup.
Another consideration is your business model. Depending on the model, transactions, user engagement, or even clicks could be key success metrics. Overall, the right method to determine your metrics isn’t simple. You need a clear understanding of what the business is trying to achieve, the way your initiative or product generates value, and the stage that it’s in. Just make sure you’re not tracking vanity metrics and really focus on measuring success.
KPIs for an Innovation Portfolio
An individual project has specific measurement needs; but, for your innovation portfolio as a whole, you’ll need a different set of measurements to track your holistic approach to innovation. One of the fundamental principles of Lean is validating ideas, hypotheses, and opportunities with the minimum possible investment — in time or in money. This is where startups are exceptionally powerful.
For startups, this capacity is critical as they need to keep their burn rate low, but for corporate innovation programs, operating in a lean manner should enable them to validate opportunities faster. Because of this, we believe that ‘time to market’ is a key metric to track — how quickly are you validating your project or initiative against real users.
As well as time to market, cost efficiency is enormously important. If you are able to solve a customer problem quickly, but at massive cost, it will be very difficult to find a sustainable business model that can support your initiative. The cost to bring an innovation to market should be another portfolio KPI that you are tracking, so that you can better understand your average cost to validate. For external innovation, such as partnering with a startup, this could be a $25k Proof of Concept, or the resource cost spent on a partnership, while for internal innovation this cost could be much higher.
When we bring these two metrics together, speed and cost, we are left with a North Star metric for companies with an innovation portfolio — opportunity validation performance. How much does it cost and how long does it take to find an opportunity and validate it? If you are able to track this metric, you should be able to better understand your innovation performance.
Innovate Today, Measure Tomorrow
Measuring performance effectively for corporate innovation is difficult, but not impossible. Setting the right indicators should help you decide, on a project level and on a portfolio level, whether you’re achieving success with your corporate innovation efforts.
If you want to learn more about some of the ways we we help our clients deliver corporate innovation, check out RocketSpace's Corporate Innovation Services and see how we can help accelerate your innovation needs.