The ambiguous nature of innovation work shouldn’t steer us from setting metrics and measuring outcomes... “What gets measured gets done.”
Innovators, especially those who use design principles and practice, love to talk about process. Sometimes that happens because the processes are new for our clients, but often it is because the work is relatively ambiguous. We have a plan for where we are going, but we want to leave room for learning something transformative or room to change course. And our clients are often up against quarterly targets and business goals, or are under pressure to come up with the next winning service or product. The business engine often directly opposes the innovation engine in the way it works and in what success looks like.
The ambiguous and flexible nature of innovation work shouldn’t steer us from setting metrics and measuring outcomes. In fact, it should push us all (designers, consultants, and clients) to get clearer on what success really means. To make innovation work sync up with measurement in a way that enables the work, we need to think of measurement in new ways.
Brian Quinn, in his Forbes article Why Measuring Innovation Matters, reminds us of the old management adage “What gets measured gets done.” That oldie but goodie has stuck around because it is true. Avoiding setting innovation metrics or setting the same metrics as we would for business-as-usual projects because we don’t know how else to do it is inviting the failure of that innovation effort. And that’s sad and unnecessary. It’s not as difficult as you think.
There is no great consensus among innovation experts on the one best way to measure the results of innovation. However at The Moment we’re noticing some patterns of measurement that work well. Our clients are using the following three principles to define outcomes and measure success throughout the innovation process. These might be right for you.
Measure validated learning
Here we’ll take a page from The Lean Startup methodology. Validated learning is one of the core pillars of the methodology. It is the process of demonstrating empirically that your innovation teams have discovered truths relevant to the success of the innovation project, or the success of your products and services. Setting a system and milestones in place to capture validated learning changes the way progress is viewed and success is tracked.
Learning milestones are not an after-the-fact good story to cover up a failure. They are a system that demands learning as you go, and demands that you acknowledge the learning. They use hypotheses to provide clarity on what we plan to learn, and leave space for the unexpected to occur and be documented.
Within the Lean Startup approach is the idea that at learning milestones you either affirm you’re on the right track or you may pivot. Startup businesses and legacy businesses alike can use the principles of learning milestones to structure project evaluation and success criteria, for they work in both contexts.
How can I set up learning milestones for my project?
To measure validated learning, set up learning milestones for your innovation team. Here is an example to set up your learning milestone:
“By this date, we will measure our learning on the following: customer needs, product usage patterns, and service pain points.”
Framing your learning milestone this way sets up specific questions your innovation team knows they have to answer. In order to answer questions and back those answers up, the innovation work needs to be done, and done well. By framing these efforts as learning milestones, innovation teams are not married to being right about a hypothesis. They just need to have uncovered important truths and know they will be rewarded for getting to those truths.
Not all innovation metrics are financial
Many of our clients measure the success of their innovation work using financial metrics. And why wouldn’t they? Brian Quinn writes, “Financial measures are attractive to use, because they’re typically readily available, easily defined, and connected to outcomes that various stakeholders (from managers to investors) care deeply about. However financial measures alone can’t tell you if your innovators are discovering distinct insights into what consumers want and need in their lives. They can’t tell you if your mission is attracting partners in the surrounding ecosystem to help you fulfill it.”
Our client, TIFF (Toronto International Film Festival), engaged us a year ago to conduct design research with their audience to uncover opportunities to attract new audiences, refine current programming, and help the organization live out their audience-first strategy. The research validated some assumptions and brought to light new insights about the TIFF audience, going so far as to uncover a new audience segment, with wants and needs of their own.
This research was packaged and shared in such a way that it immediately became a usable piece of work. That’s code for “it didn’t collect dust on the shelf.” Immediately after sharing the research outputs and insights, two project teams began using them to refine existing programs and imagine new programs for the coming year. By doing so with us at their side, they built innovation project skills and mindset that brought the research even more to the fore.
The outcomes of that project, and others like it, will not likely show financial gain right away. Thus, financial metrics may reveal failure where it doesn’t exist, and ignore successes that have become assets for future innovation work.
What are some non-financial metrics I can track?
Innovation outcomes can be expressed as innovation efforts to facilitate:
- Organizational capacity
- Innovation knowledge
- Methods to accelerate innovation
- New or improved tools to deepen innovation quality
The trick is to find — and measure — what works in your ecosystem. Besides financial metrics, what is important to your organization? Often topics like customer engagement, customer experience, relationships, and interdepartmental collaboration can embody alternative measures of success. Financial metrics are important, but make sure to dig beyond them to set your innovation teams up for success.
Measure a system of outcomes
Creating a system of outcomes and measures starts with getting clear on where the business or business line is now — with lots of data to support that big picture. The system should be broad enough to measure early, mid-term, and later outcomes because that’s the way innovation work is experienced. Much of the success happens along the way. Then make a hypothesis based on projected learning milestones. Your hypothesis should outline what you think will happen (measurably, in both financial and non-financial terms) when learning milestones are reached.
Here are some ways to measure a system of outcomes:
- Risk adjusted net present value of the innovation pipeline
- Number of projects killed and money saved as a result
- Speed to market
- Revenue related to the the work
- New customers related to the work
- Number of new offerings launched and the success of those offerings
- Lessons learned from both failures and successes
- Increase in the number of real and qualified problems at the top of the innovation funnel
- Staff capability to do the work, and do it well
- Innovation culture metrics: how your organization is changing as the work is done
And remember, innovation work should ideally be executed as part of a portfolio, not as lone projects in a sea of status quo efforts.
A well-crafted innovation portfolio creates a system of learning within and among projects. The portfolio will accelerate learning milestones and help your organization mitigate the inherent risks of innovation work by diversifying efforts. Measuring all of the projects within a portfolio with the same system of metrics can help to evaluate which ones are succeeding and which ones are failing or in need of a pivot.
So go forth and start your smart measurement of innovation projects. And we’ll leave you with this thought: If you are putting all this effort into innovation projects, isn’t it worth your time to measure the work in a way that enables the people and the outcomes?