I met with a former client last week to get caught up on life and his work in innovation. He leads the innovation and product development program office for a large, global life sciences corporation. The primary responsibilities of the group are management and execution of the portfolio management and program review processes, resource allocation, and innovation performance reporting.
A recent Harvard Business Review article suggested that resources for new innovation initiatives in most companies could easily be freed up simply by killing a portion of what the authors called “Zombie Projects,” initiatives that lurk in the unsanctioned shadows of the organization. In firms without a disciplined portfolio management process, the zombies are often running the show.
Over the past few weeks I have written about ten different innovation metrics. While innovation is complex, and there is no single secret to success, the most powerful lever available to the Chief Innovation Officer, however, may be the measure, analyze and act cycle. Innovation thrives on clarity and a good measurement system can generate insight into what is driving results.
The final measure in this series is ultimately the one that really matters: Innovation Return on Investment. While most of us are seeking growth from innovation, we must also compete for investment capital and be good stewards of the firm’s resources as we pursue that growth. The innovation ROI metric attempts to demonstrate that we are delivering returns on capital in the form of incremental margin. The simplest form of the metric is incremental gross margin from innovation divided by total investment in research and development.
Over the past several weeks I have been writing about innovation measures and metrics. Some of these have been output measures, either real results or proxies for business results, others have been predictive or process health measures. Each has a place on an executive dashboard designed to provide a view of innovation engine performance.
Earlier this week, I recommend reading Scott Anthony’s article in the December edition of the Harvard Business Review titled, “Building an Innovation Engine in 90 Days”. The paper describes an approach to creating what the authors call a Minimum Viable Innovation System (MVIS) in a very short period of time. The main point of my earlier post was that the new Chief Innovation Officer must execute projects using the MVIS approach while building a more robust and sustainable innovation business system.