Innovation is for everyone, but there are so many different ways of approaching it, it can be devious to know what actually works for your business. Measuring innovation is said to be one of the main challenges of the sector, and it sure is tricky. 

Establishing goals for a company is crucial and innovation is no exception. Either if it is a strategic point in your company, or if you just simply want things to start happening, here you have a quick guide: How is innovation measured?

How and when do you measure innovation results and outcomes?

In order to narrow down the possibilities, a good starting point is defining the role of innovation in your company. Obviously enough, measuring it will be different if you manage a startup, an offline company or a big corporation with its own innovation lab. 

So first, let’s think about innovation and the role it plays currently: are you first approaching it, consolidating it or is it a part of the strategic roadmap?

First stages: Defining quick wins

One of the biggest challenges for an Innovation Department or a startup is to validate ideas and hypotheses towards the board of management, investors or stakeholders. This is why it is useful to set a series of quick wins that show a positive impact of the innovation program or the business idea.

In the first stages, it is advisable to establish execution goals. At Corporate Lab, we established our own first objectives this way. For example, one valid Objective Key Result can be to launch 3 episodes of a podcast, to plan and execute 1 adjacent business model or to develop a small open innovation program during the year. 

Consolidating innovation: Defining KPIs (1 year)

Once you have passed the quick-win stages, you should focus on consolidating innovation. In order to do this, you would need to define KPIs for the short and medium term. 

For example and following previous examples, you may have launched an open innovation program with startups within your company’s sector. In this case, setting goals for the following year is a crucial starting point. You have already passed the initial phase, and now you need to make sure the choice and development of the innovation program actually works for your business.

Defining Return of Investment in Innovation

Establishing return of investment metrics allows measuring resource investment and its result. But establishing a direct connection between a result and the investment in innovation is hard. Depending on the type of innovation program, the numbers for innovation, investment and investment in innovation can be clear or not.

A good metric for this phase is the following, taken from El Libro de la Innovación (written by Alexander Phimister, Albert Torruella and more than 30 experts in innovation). 

RoI of Innovation = (innovation - investment) / investment in innovation

Apart from the challenge of identifying numbers with this formula, you should also consider if this RoI applies to the whole company or just to a particular innovation project.

Thinking long term: Defining KPIs (2-4 years)

If you have passed the consolidation phase, you can now start thinking more strategically and define KPIs for the long term, meaning the following 2 or 4 years. 

Examples of KPIs in innovation

Innovation has many faces. Depending on the type of innovation you’re working on, you would need to set different goals and measure different outcomes. These are some examples of KPIs you can measure that apply to different types of businesses and innovation projects.

1. Efficiency

If the type of innovation you’re working on is related to efficiency, it is likely that you’re working on improving the quality of your product or service, reducing production costs, or reducing production time. 

Time: Short term 

Type of innovation: Incremental innovation

KPIs: Customer retention, production costs, customer churn, time between purchases, loyal customer rate, customer lifetime value. 

2. Business model

Coming up with a different or complementary business model is one of the hardest things. Here, you would need data analytics that compares both results, as well as predictive research that analyzes acceptance in the market in the long term. 

Time: Medium-long term

Type of innovation: Disruptive innovation

KPIs: Performance of the new business model (customer acquisition, retention revenue, future prospects, etc.) compared to current business models. 

3. New technologies and digital transformation

A classic example of applying innovation to a traditional business is going through digital transformation. In this case, many different KPIs can be determined, all coming from your digital channels. If this is your case, you’re in luck, because the digital field is way more transparent when it comes to numbers, customer behavior and feedback.

Time: Short, medium and long term

Type of innovation: Lateral innovation

KPIs: Audience diversity, audience growth, revenue via digital channels.

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Corporate Lab is a venture studio specialized in creating new tech startups for large corporations. If you run a company and want to include corporate innovation in your roadmap, send us a message. We can detect new business opportunities and build new businesses to complement your existing ones, based on data-driven decisions.