How to Measure Innovation Value
My definition of Innovation is “Something New that Creates Value”. The SOMETHING can be a product or service, and increasingly in the future will be information innovation. The NEW could be to that area (core), that company (adjacent), or truly new to the world (disruptive). But how do you measure the CREATED VALUE of your Innovation project? And how do you define value targets in the business case, so your Innovation project gets approved and implemented? Especially when the value could be one of a number of different dimensions including cost reduction, greater headcount efficiency, a speed / time improvement, a reduction in risk, revenue growth, increased customer satisfaction or a quality improvement. Value is “in the eye of the beholder”, meaning what people perceive as value, varies from person to person and is relative to the situation. So, if the Value is dependent on the observer, (ie. your customer or beneficiary), then it makes
sense to measure the CREATED VALUE using metrics that are meaningful to them and can easily be measured by them and others.
Innovation distinguishes between a leader and a follower. – Steve Jobs
One approach that works well, is to create simple VALUE STATEMENTS. These are quantifiable metrics, that all have a Starting Baseline, (where are we now?), a stretch Target Level, (where do we want to get to?), and a Target Date, (when do we want to get there?). These Value Statements are co- developed with the customer/beneficiary using their language. For example, “we want to reduce the time for this process from 10 days to 2 hours, by the end of June”. Or “we want to reduce the number of people required to complete this process from 185 to less than 100, by the end of this year” The challenge with Innovation projects, is often not the ability to generate creative ideas, but the importance of a powerful Business Case that gets approved and implemented. Given that most companies do not have spare people sat on the benches waiting for work to come along, the Innovation Business Case needs to be significantly powerful in terms of value potential, to ensure business support. The customer focused Value Statements are built into the Business Case for the Innovation project. Using language and Value Statements, aligned to real Customer/Beneficiary need helps garner business support and provide the leverage to move people and resources from other projects and work, onto your Innovation project.
Typically, during a good ideation phase a number of potential ideas are identified. The Business Case can therefore be made more powerful, by including a combination of short, medium- and long-term activities, (or core, adjacent and disruptive ideas). With 2 3 different parts of the business case, each has its own Value Statement. This also helps deliver short- and long-term benefits, typically low risk / quick wins and longer term, more disruptive value. So, to summarize, I recommend developing Value Statements with your Customers/Beneficiaries, each with a Starting Baseline, Target Level and Target Date. Then build 2-3 Value Statements into your Business Case.
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