How do you measure innovation?
By Vincent Heeringa,
It's hard to measure innovation. I guess you need to rely on a suite of metrics that would include growth in patent registrations, technology graduates, elaborately transformed manufactures, revenue derived from copyright and licensing. Does anyone know of a formal measure of innovation that can be applied to a total economy? Love to hear from you if you do.
Comments
Thomas Scovell
Interesting that in asking how to measure innovation two of your suggestions are in fact things that _stifle_ innovation - patents and copyright.
The argument that these foster innovation by facilitating fiscal rewards for those who do is… just not the case. "Innovations" that come out of a desire to make money are invariably incremental improvements - plays around the edge of existing ideas and the economic boundaries.
Real and useful innovations come out of a desire to change the status quo (and dare I say, "the world") - whether it will reap fiscal rewards or not.
An innovative economy should be measured by improvements in socio-economic conditions, literacy rates, participation (not just consumption) in the Arts, strength of public debate, and so forth.
Not what you were after - sorry!
Grant Wells
Vincent, the OECD Oslo report did some work on this and defined a whole pile of innovation parameters/metrics. Check out the innovation element thats been introduced into the govts business performance survey.
http://www2.stats.govt.nz/domino/external/web/prod_serv.nsf/htmldocs/Innovation in New Zealand 2003
http://www2.stats.govt.nz/domino/external/omni/omni.nsf/outputs/E3704797B0360851CC256EF5007DD639
Simon Young
Clive Gilson, co-author of Peak Performance, might be good to talk to. I spoke to him a while back and he said "Academics have been trying to create a theory of innovation for the past twenty years. Until you've got that, you've got a bag of hammers."
Full article, including info on the Fujitsu innovation index, at http://idealog.co.nz/ip-page/features/nz-scrapes-by-on-innovation-report-card.html
Vincent Heeringa
Sorry about the weird formating thing everyone. I'll get our IT guys onto it. Must be a Mac thing ;>
Simon Young
And apparently the Economist has had a go at measuring innovation, according to Dan Pink's blog:
http://www.danpink.com/archives/2007/05/whats_the_most.php
(apologies in advance for any funny formatting - must be a mac thing!)
Nathan Baird
Hi Vincent,
You are right in wanting to measure it. To be an innovation it must add value. Otherwise it is just being different for the sake of being different.
Here are a couple of ways that companies measure innovation, which could easily be modified for an economy:
- Percentage of sales. Highly innovative companies like Gillette have 50% of their sales coming from innovations launched in the last 3-5 years. What percentage of NZ exports come from new innovations from the last 3-5 years?
- A mix of base to radical innovations. This is more to get a balanced portfolio of innovations. Companies, and why not economies, look for a balance of; base, incremental, next generation and radical innovations from their efforts. How does NZ's portfolio of innovations compare with other countries? What percentage of our exports are base and what percentage are incremental? What should those percentages be? Have we got such targets?
As a country we should define the role of innovation in acheiving our economic and social goals. Innovation goals could then be set to measure our success, but also to provide a sense of direction and purpose, as well as criteria for allocating funds and support to innovating companies.
Some help and/or food for thought I hope.
Cheers Nathan
Vincent Heeringa
Thanks for the thoughts, fellas. (hey, it's all fellas. Where are the women on this web site?) Nathan, how do you square the need to keep innovating, ala Gilette, with the problem that most innovations fail to live up to their expectation. I'm not talking abut improvements, but genuine new products - I've read that 2/3 or even 3/4 will fail to meet ROI. That's a costly approach for a country to take, right?
Nathan Baird
I do agree innovation is costly, but I also think you risk even more by doing nothing, which is what I took out of your road to no where article.
You could stop making the 2/3rd's that fail! So how do you do that? How do you minimise the risk? Do the right projects in the right way. The right projects are those that have a true insight, a true consumer/customer need. Even if it is a technological breakthrough there still has to be demand for it e.g. 3G phones, how many people are using these? And when you've got that real insight, you know it, you feel it in your gut. Even then you're not guaranteed success though. Next you've got to meet that insight with a creative idea and finally you've got to execute it right. I've launched a new product where we had a great insight, but we got the idea and execution wrong. We learnt from that and will go back and get it right next time.
grant wells
Clayton Christiansen draws a nice parallel between our present understanding of innovation in a business context and our understanding of quality in manufacturing 20 years ago. Back then we assumed that random events affected the tolerances to which we could manufacture. With time we now understand the sources of those errors. Similarly today we believe that innovation and the success of new businesses are largely determined by random events - therefore, he reasons, sooner or later we will also understand and be able to mitigate those sources.
As to determinants of successful innovation now - my personal opinion is that the new work around Demand-Side Innovation is king. There is no new supply-side innovation in an iPod, its entirely a demand-side play, meaning desirability, repeating customer contact points and a complete end-to-end solution. The ongoing demand generation features were designed into the product right from the start. Forget supply-side innovation (cheaper/faster etc) its the ability to generate ongoing demand streams that are king.
Matt Cooney
Direct link to the Economist Intelligence Unit report:
www.eiu.com/Innovation
New Zealand is at 22, a bit behind Australia and just scraping past Hong Kong.
There's a summary of the methodology and the findings on the site, too:
www.eiuresources.com/mediadir/default.asp?PR=2007051403
Paul Le Comte
Ian Taylor of Animation Research here in Dunedin (Virtual Eye - Americas Cup), did a stunning piece in the ODT yesterday arguing thhe (non)merits of doing nothing. Not exactly a piece about measuring success or innovation, more a reflection of what is the downside of doing nothing, when risk taking and innovation go hand in hand.
His article was in reference to the debate that has become rather nast and personal about the new Dunedin Stadium. The two sides on the should-rates-pay-for-this debate have become rather antagonistic, so Taylor was trying to put some perspective and meaning back into the debate.
His summation, is that when TVNZ quit Dunedin many years ago, he had two paths (the blue pill or the red pill - whops wrong movie), take the gamble, borrow the money and try something or pack up and leave. Further when business oportunities like providing animation for the Americas Cup came along at a huge cost, the question was "what is the cost of doing nothing?".
Business and innovation is inherently risky, yet his article demonstrated that with the right skill, knowledge, determination and of course timing, that doing the alternative to nothing is inheriantly positive.
Sorry not exactly a matrix of innovation, still worthwhile read, if only the ODT provided some decent free content… I guess get down to your local library, or email the ODT, it's a very good article.
Vincent Heeringa
Thanks Paul. You know this blog posting has received a disproportionate amount of comment. Maybe I should ask questions more often. Anyhoo, it's got me thinking, do we need to develop the Idealog Innovation Index? It could be a regular metric that we publish (every six months) but maybe also forms the basis of a consulting business - innovation audit type thing. Nathan? Andy? You guys run the research side, we'll supply the publicity and sex, and someone can sponsor it. Hey, TelstraClear …
Louise Webster
Ideas Accelerator has created and produced a product based on measuring best practice organisational innovation performance. It called the Innovation Monitor and is a survey that measures the culture and climate of innovation and innovative thinking and the impact that this has on the outcomes and output of innovation practice, new products services and performance improvements.
The Innovation Monitor survey has been used as a way of identifying areas to help teams and leaders improve aspects of innovation such as, working together better, assessing risk, communicating more effectively, being open to new ideas, listening to others, acting on ideas and suggestions, etc, etc.
The Innovation Monitor will;
•identify areas where you can improve your innovation performance
•identify key drivers that impact on your organisation’s ability to drive business growth and increase performance through innovation
•identify and measure innovation outputs and outcomes
•benchmark your results against a measure of best practice innovation performance (based on OECD standards)
•provide you with information that will assist you in building great environments that embrace innovation practices
•form a plan / strategy for improving innovation performance across your organisation
Tha Innovation monitor measures innovation across the following 4 areas;
1. Strategies and Core Competencies:
Business Strategy
Organisational Development
Personal Development
Leadership
2. New and Improved Systems and Processes:
Knowledge Sharing and Communications
Team Dynamics
Performance Improvements
3. New and Improved Products and Services:
Research and Development
Customer Loyalty and Retention
4. Financial Measurement and Reporting:
value Measurement
Portfolio Management
Anyone who would like to view the product in action is welcome to call me on 021 484 208 or view more information at www.ideasaccelerator.com to access sample reports.
Cheers Louise Webster - Director, Ideas Accelerator Limited.
Vincent Heeringa
Good one Louise. I should have remembered that!
Raf Manji
This is a good question to ask and as an aside it's always good to ask probing questions. As it happens i don't think innovation is an easy thing to measure at all. Some of the methodologies presented above make sense in a limited way but given our globalised world i think we need to see innovation as a global movement.
One person's idea written on a blog may be the seed for a new business elsewhere or a change in direction. We're all hooked into the process of innovation all the time.
Innovations are new ideas, new systems, new ways of doing things not specifically new businesses, number of patents or investment.
I think the conditions for innovation are more interesting. Freedom and space to think and create, great technology infrastructure, reasonable annual sunshine hours, large tax credits for R D expenditure (even if that means pottering about in the shed), minimal govt interference if possible.
So focus on that and the rest will come but we shouldn't be too precious about it. I'd be happy if i never saw another OECD report again…now that would be a great innovation :-)
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