How to Measure Innovation?

I’ve just read a July 2008 report of a National Science Foundation conference, that brought together a panel of experts to try to figure out a way to measure innovation (click here for the full report).  They started with the observation that we don’t know very much about how to measure the outcomes of innovation, and we don’t know very much about what characteristics make the difference between a successful or failed innovation.

Briefly, they identified four areas that businesses and governments could measure.

  • Measure what innovation is. Determine the rates of return over a project’s lifecycle, and how this looks different for different kinds of innovation.
  • Study how and why innovation takes place, by examining the organizational structures and cultures of successful innovations (this is the focus of my own research).
  • Figure out how to capture the complete range of consequences of innovation, including the downsides of “creative destruction”– unemployment, regional winners and losers, and social responsibility.
  • We need a better understanding of the complete environment of innovation, from globalization to government IT law to tax policy to technological change, all is interconnected.

And then the panel had four recommendations:

  • Pursue new directions in data gathering measuring the net outcomes of innovation. This includes data on innovation processes within organizations.
  • Pursue new directions in measuring the net inputs (costs) associated with innovation.
  • Gather data on innovation processes that span across organizations.  (I like this one, because it acknowledges my claim about “collaborative webs”: that innovation is rarely bounded within the walls of one company.)
  • New information gathering and management techniques could allow us to confidentially aggregate data from many companies, and share it with everyone.

I looked at the list of participants and they all seem very qualified–with expertise focusing on economics, consulting, workforce and human resources, computer science, and business strategy. I didn’t see any of the top creativity or innovation experts, however, which was a bit puzzling. Innovation experts absolutely must be deeply involved in all of the steps recommended by this report, I’m not sure why they weren’t involved at this early stage.

Also see my post of March 4, 2008 about the www.innovationmetrics.gov panel of experts.

11 thoughts on “How to Measure Innovation?

  1. Despite the cautiousness of the wise people who pondered the measurement of innovatin there are validated measurement tools.

    After 15 years research I developed a measurement instrument for SMEs that is based on a model covering strategic management capabilities and a systemically related set of innovaton management capabilities. The instrument has high predictive validity with a correlation of 0.72 between the capabilities it measures and sales growth over six years. The tool also has a database of 1200 SMEs, mainly from Europe. Unfortunately I obtained virtually no support from governments and business leaders in the country that I live in and so my marketing efforts have been constrained. Australia does not back entrepreneurs in the way they are backed in the US.

    Additionally, as a small company I an not yet ready to disclose the research behind the instrument. It may be patented in the US and elsewhere but that has not stopped competitors in the EU with big pockets from copying the early version of the instrument. So until I have a few more runs on the board secrecy is my best options.

    The bottom line – innovation capabilities and the contribution of innovation in SME can be measured in a way that deliversvalue to both SMEs and industry associations/governments wanting to encourage innovation as a source of growth.

    The most exciting breakthroughs in the sector wide appliation of this platform and tool have occured in the edution sector.

    1. I was fascinated to read your post. I wonder what you think of the two major U.S. innovation measuring initiatives, the one in this post and the earlier one at innovationmetrics.gov? Are either of them going down the right path, or are they missing important components?

  2. Keith: Who will you consider to be the top 10/15 leading creativity creativity and innovation experts? I tend to think of “creativity” focuses more upon the individual, and “innovation” focuses upon more upon the institution (firm and country).

    For example, I tend to think of de Bono more of a “creativity” expert because it tends to target the individual.

    1. I agree with you: creativity is an individual having an idea, and innovation is an organization creating value. Regarding the experts, I am thinking of the “usual suspects,” who are typically professors in business schools: Clayton Christensen, Eric von Hippel.

  3. This is headed in the right direction. I authored an article on “Measuring Business Innovation Success” on my blog. Take a look, and provide me your feedback on the same.

    Here is a short introduction:
    “One question remains largely unanswered: What is the universal yardstick, the measurement for the success of a Business Innovation that companies and Innovation Gurus alike can possibly agree with?”

    So how does one measure business innovation success? Can it be measured by a qualitative measure that can somehow guage the emotional and psychological impact the innovation produces on the users (the “AaHa” moments), or a quantitative measure corresponding to the total population of end users using the new innovation (and even helping co-create it), or a financial measure in terms of net new revenue generated for the company that can be attributed to the new innovation? An innovation is only successful if the product or service is able to find and attract new customers who adopt and adapt to it, live by it, talk about it, and refer others to it; ultimately, the innovation must result in substantial new business for the company.”

    Check my blog for the complete article… and provide me your thoughts.

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