Innovation is a critical process in the success of any organization Christensen, Kaufman and Shih, 2008). In measuring success of innovation, it is critical to look at innovation success from a long-term perspective (Ritter and Gemünden, 2004).
The model that can be used for measuring innovation success if using Return on Innovation Investment (ROII) (Kandybin and Kihn, 2004). This is based on the fact that the primary purpose of innovation in an organization is to mainly associated with making financial progress. The financial impacts of innovation in an organization can be measured using the ROII (Kuczmarski, 2000)
The model for measuring innovation will be based on completion of major goals of the project. As such, the innovation process will be divided into three phases:
Identification of project goals
During the measurement process, it is critical to define the course of action and activities in the project and establish the motivational push for people during the implementation of the innovation process (Dobni, 2008). A vision for the entire innovation is also set at this stage that would allow easier exploration of solutions in the project. The steps that would be needed in the innovation process will then be prioritized and assigned in stages 2 and 3.
Measuring short term deliverables
Short term deliverables for the innovation process will be measured using Key Performance Indicators identified for the project. Successful measurement of innovation would require a clear definition of what the company views as innovation success(Mankin, 2007). Key performance indicators are critical to the successful measurement of any innovation program and success (Kandybin, 2009). This innovation model will use the Innovation Sales Rate (ISR) to measure the success of the innovation. The ISR is a measure of the success in the sales of the new products developed through the innovation process.
During the measurement process, it will be critical to identify various metrics around which the whole process of innovation management can be measured (Rejeb, Morel-Guimarães, and Boly, 2008). Various metrics will be developed for the innovation strategy, partnerships in the innovation process, innovation portfolios and innovation culture. Innovation will be also being measured as per the performance of the new products being produced (Van der Panne, 2007). The average margin rates of the newly developed products will also be used a key innovation metric. However, in companies that have a large product portfolio, this method can be very challenging.
Near term development
Innovation will also be measured using the rate at which the company is developing (Shapiro, 2006). In particular, innovation will be measured by the number of ideas being generated by the people in the innovation team per month. A target can be set in such a way that the company can compare the generated ideas with a particular target. A high performance of innovation can be regarded as the high number of ideas generated by the employees.
It is critical to measure success of innovation because it sets the pace for innovation in an organization. As such, the company needs to narrow down to a particular method that is ideal to the company.
Christensen, C.M., Kaufman, S.P. and Shih, W.C., 2008. Innovation killers. Harvard business review, 86(1), pp.98-105.
Dobni, C.B., 2008. Measuring innovation culture in organizations: The development of a generalized innovation culture construct using exploratory factor analysis. European Journal of Innovation Management, 11(4), pp.539-559.
Kandybin, A. and Kihn, M., 2004. Raising your return on innovation investment. Strategy And Business, pp.38-49.
Kandybin, A., 2009. Which innovation efforts will pay?. MIT Sloan Management Review, 51(1), p.53.
Kuczmarski, T.D., 2000. Measuring your return on innovation. Marketing management, 9(1), p.24.
Mankin, E., 2007. Measuring innovation performance. Research-Technology Management, 50(6), p.5.
Rejeb, H.B., Morel-Guimarães, L. and Boly, V., 2008. Measuring innovation best practices: Improvement of an innovation index integrating threshold and synergy effects. Technovation, 28(12), pp.838-854.
Ritter, T. and Gemünden, H.G., 2004. The impact of a company’s business strategy on its technological competence, network competence and innovation success. Journal of business research, 57(5), pp.548-556.
Shapiro, A.R., 2006. Measuring innovation: beyond revenue from new products. Research-Technology Management, 49(6), pp.42-51.
Van der Panne, G., 2007. Issues in measuring innovation. Scientometrics, 71(3), pp.495-507.