Survey finds that organizations need to be better about measuring innovation: BCG study
Way of thinking Add commentsBoston Consulting Group recently released the findings of its latest innovation survey, entitled Measuring Innovation 2009: The Need for Action, and it contains some intriguing findings, which I would like to summarize for you here:
Only 32% of executives surveyed were satisfied with their company’s innovation measurement practices.
Most executives (73%) believe that innovation should be tracked as rigorously as other business operations, but only 46% say that the company actually does so.
According to BCG, 10 to 12 metrics are necessary to do an adequate job of measuring innovation, considering how broadly it can be applied in the average organization. But a little over half (52%) admit that their company uses five or fewer metrics.
Why don’t companies do a better job of measuring innovation? The BCG study identified these factors:
- Uncertainty about which metrics to use (32%)
- It’s not a priority (31%)
- Lack of support from top executives (12%)
- The cost of instituting effective measurement program (8%)
What are companies measuring? The BCG study identified these components of innovation, in order of declining importance:
- Overall profitability (79%)
- Customer satisfaction (75%)
- Incremental revenue growth (73%)
- Time to market (59%)
- Idea generation (55%)
Other metrics that the respondents cited include R&D efficiency, time to volume, portfolio health and life cycle performance (each over 40%)
In general, survey participants felt they were better at measuring innovation outputs (results) then inputs (resources such as people and money).
Respondents were also asked if their company had to be limited to three innovation metrics, which ones would they use? The top five were revenue from new offerings (56%), projected versus actual performance (36%), allocation of investment across projects (32%), total funds invested in growth projects (29%) and number of projects that meet planned targets (23%).
One final area that the BCG study looked at was which innovation metrics are employees being encouraged to pay attention to? This is where the rubber meets the road, one of the true measures of the effectiveness of an innovation initiative. If innovation remains a group of platitudes but the average employee does little to support it, then chances are that the organization’s innovation initiatives are not going to get off the ground.
According to the BCG study, few companies are utilizing incentives to compel their employees to pay attention to specific innovation metrics. Only 27% of respondents said their company consistently ties incentives and rewards to their innovation metrics.
There’s a lot of valuable data here – I highly recommend that you read this report!
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