5 Innovation Metrics (KPIs) Every CEO Should Care About
Are your innovative strategies paying off? As a CEO, innovating is part of the job description — but do you know if it's actually making a difference in your company? It’s time to get down to data-driven business. These five key performance indicators, or KPIs, are essential pieces of information that all CEOs should know about when gauging their innovation strategy's success. So grab a cup of coffee, sit back, and brush up on these metrics that can help you drive vital innovation — and prove its impact on your bottom line.
The need for innovation metrics
Companies need to measure the success of their innovation through KPIs to ensure they are achieving success with their innovative projects and initiatives. Innovation metrics help businesses better understand their efforts' outcomes, identify improvement areas, and optimize resources. They also provide visibility into how new products are performing in the market, helping companies identify customer needs that may need to be more easily visible. A set of innovation KPIs allows companies to track progress over time and make informed data-based decisions.
Breakthroughs in technology and business models can significantly impact the bottom line of any organization, so analyzing these metrics is crucial to understanding how innovations are helping your company grow. Yet an overemphasis on financial results can lead you down a safe path that prevents truly groundbreaking ideas from taking shape — it's essential to keep both views as part of your decision-making process when considering new investments and innovation strategies.
How to measure innovation
Innovation can be measured in various ways. One of the most popular methods is to look at growth metrics, such as sales and profit. For example, suppose a company launches a new product or service, and they experience an increase in sales or profits compared to the same period during previous years. In that case, this is likely a sign that the innovation was successful. Other metrics like customer reach, engagement, or market share can also measure innovation success. Additionally, surveys and focus groups can be conducted to measure how customers perceive the innovation and how it affects their behavior. Qualitative methods like interviews with stakeholders can also provide more insight into the impact of an innovation on organizational culture and processes.
A video recently released about our partnership with BNP Paribas showcased some of the impressive KPIs achieved during the collaboration. The data revealed that the partnership had accelerated 51 startups, with 62 proof of concepts — 37% of which went into production. Additionally, BNP Paribas observed an impressive rise in users totaling over 150,000 since the start of the collaboration. This example demonstrates just a few of the many ways that companies can measure their metrics for innovation. By focusing on these KPIs, organizations can better target areas for improvement and maximize their return on investment from collaborating with external partners.
Which innovation metrics are most important to CEOs and why?
1) Return on investment (ROI)
This metric tracks how much revenue and profit a company has generated from an innovation initiative. It is vital for corporate innovation because it helps companies evaluate the success of their efforts, determine which initiatives are worth continuing or expanding upon, and measure the financial impact of their investments in innovation.
2) Time to market
This metric measures how quickly a company can market a new product or service. It is crucial for corporate innovation because it allows companies to identify opportunities to improve efficiency and speed up their ability to launch new products or services. Additionally, by understanding this metric, companies can make informed decisions about when to invest in new initiatives and when to focus on improving existing products and services.
3) Idea Generation Rate
To remain competitive, companies must identify and develop fresh concepts quickly. This metric looks at employee creativity by measuring their involvement in the invention process to assess potential areas of success or stagnation. In doing so, organizations can nurture new products and services that could spark ongoing innovation.
4) Cultural Impact
This is an important KPI for corporate innovation plans because it reflects how successful a company’s offerings are to its target markets and can be a barometer of acceptance. Companies must understand how their products, services, processes, and strategies resonate with different cultures worldwide to stay competitive. Cultural impact can include regional or national tastes and preferences, local regulations, religious customs, social norms, technological capabilities, and economic resources. By considering cultural nuances when developing innovative solutions and products, companies can ensure they reach the broadest range of customers and maximize success. Investing time and research into understanding cultural context allows companies to create more meaningful connections with customers, ultimately leading to greater market penetration and sustained success.
5) Customer Satisfaction Score
A key metric for corporate innovation as it can provide insight into how well the company is responding to customer needs in a timely and effective manner. A good customer satisfaction score can indicate that a company is meeting its customers’ expectations and innovating in the face of changing market demands. This metric can also help inform an innovation plan since companies would want to use customer feedback to identify areas for improvement, focus on developing new products that meet customer needs, or adjust existing products to match those requirements better. Furthermore, customer satisfaction scores can be used to measure customer loyalty and demonstrate the effectiveness of various marketing campaigns. All these insights are invaluable to developing an effective and successful innovation plan that caters to customers’ wants and needs.
How these innovation KPIs can be tracked and improved
Innovation metrics and KPIs are essential for tracking, measuring, and improving corporate innovation. They provide an objective basis for evaluating progress and must reflect the company’s goals and values. Data from internal sources such as surveys, customer feedback, market research, and financial reports can be used to measure innovation performance. Additionally, external sources such as competitive landscape analysis, industry or technology trends, and customer sentiment analysis can be used to identify opportunities for improvement.
In the above video, we see Heikki Koponen, Manager of Startup Sourcing and Market Analysis at Fortum, note the importance of intangible assets in innovation KPIs by mentioning that "the metrics tend to be activity-based and not so much impact-based." It’s not enough to measure activity but rather impact-based metrics should be used as well. This is a crucial concept for any organization looking to make breakthrough advancements through their analyses. He, and Robert Stenekes, who is the Director of External Innovation at ICL Group, also go on to mention a few innovation metrics that they look out for as well:
- How many startups has your business been engaging with?
- How many pilot projects have they been running?
- How many technologies are you screening?
- How many collaborations are you starting?
To stay ahead of the competition, it's important to understand that intangible assets can be just as valuable — if not more so — than tangible ones. Take Netflix for example; while their customer recommendation algorithm and other strategies may not appear on financial statements, these investments into culture and employee training are what have put them at the top of the industry leaderboard.
To ensure successful innovation, it's essential to identify tangible and intangible data points that will inform the associated KPIs. These metrics could measure customer satisfaction with a product or service, patents registered in a given timeframe, or the time taken to launch new products or services — all necessary information that should be included when establishing an effective plan. On top of this, the strategy requires outlining how resources are allocated towards relevant projects and initiatives and ways for teams within organizations to collaborate effectively while leveraging cutting-edge technology via procedures like obtaining real customer insights promptly.
The importance of communicating innovative strategy to all members of the organization
With any successful innovation project, it is vital that the CEO and leadership team make strong communication a priority. Research from the University of Technology Sydney indicates only 29.3% of employees understand their company's strategy — but with clear goal setting and progress sharing transparently communicated throughout an organization, collaboration towards achieving objectives can become much easier for all involved. Organizations can create an environment that encourages creativity and collaboration across teams by having regular updates on progress and celebrating not only successes but failures as well. Communicating KPIs keeps everyone in sync, making innovation projects more likely to succeed.
Innovation metrics are crucial for successfully executing innovation plans
NEXT: Building a Corporate Innovation Strategy with New Business Ideas
Taking the proper steps to measure your corporate innovation can make all the difference in how far you and your organization can go. Leaders should continuously strive to improve their understanding of the KPIs that matter most for innovation success, so they can track progress and course-correct where necessary. Understanding these metrics will also help managers resource and prioritize initiatives with confidence. Clear communication surrounding established performance measurements is critical in engaging team members and inspiring more significant investment in innovation from within. Sharing successes or shortfalls doesn’t have to feel risky — it’s crucial to encouraging team learning, experimentation, and risk-taking from within.
Want to learn more about mastering innovation? Explore our seriesInside the Corporate Mind today to continue to build your toolkit for successful corporate innovation.