How to Measure Innovation: Essential KPIs & Best Practices

The practice of measuring innovation (and doing this correctly) is important because it lets you:

• See exactly what impacts innovation initiatives had and speak to the value of past projects.?
• Understand which ideas were successful (and which flopped) so you can avoid repeating mistakes and know where to focus future ideation.?
• Dig into your processes and gauge the health of your innovation pipeline to see where you experience bottlenecks, what skillsets or types of insights you lack, and how to work more efficiently.?

Most of all, it lets you approach innovation more strategically. Namely, you can’t just assume an idea was successful because it was successfully launched; you may have expended a ton of resources on a product idea that customers weren’t interested in or automation software that really doesn’t save you that much time. You have to measure the short and long-term results after launching ideas to gauge their impacts accurately.?

We’ve been working with innovation leaders for over ten years , helping them establish and improve their innovation processes, so we compiled this guide of best practices to measure innovation initiatives and make more data-driven strategy decisions.?

We review the most important KPIs to track and how to approach measuring innovation at different maturity levels.?

We’ll briefly discuss the tools for managing innovation projects and how our system, InnovationCast, supports portfolio management and measuring the results of past initiatives.?

To learn more, keep reading or schedule a free demo and consultation .?

The Essential Innovation KPIs?

Some advice on this topic suggests tracking over two dozen innovation metrics, but in our experience, this isn’t practical or even necessary.

Instead, we suggest zooming in on what’s important by considering the maturity level of your innovation program. The metrics you track will vary depending on the current conditions of your network, processes, and portfolio.

Engagement Metrics

Innovation departments just establishing themselves — i.e., determining the goals of their innovation strategy , building a network (of employees and outside users), and focusing on idea collection — should measure participation and engagement metrics.?

These could include:?

• The number of employees or total users active in innovation activities (customers, research partners, subject-matter experts, stakeholders).
• Diversity in your network — What backgrounds and experiences do your users have?
• The number of new ideas received (over different time frames).?
• The number of votes or comments on ideas.?
• Diversity in participation — Do most users submit new ideas, comment, or contribute in other ways?
• Collaboration — Time spent reading each other’s ideas and how many times ideas are iterated until their first evaluation.???

How hustling and bustling is your innovation community? Are users involved and sparking discussions, or is participation dwindling??

You need to establish an active community where users share and discuss innovative ideas before you have ideas to work with or impacts to measure.??

Read more: How to Encourage Innovation in the Workplace

Process Metrics?

Then, as you further develop your organization's innovation capability — with a backlog of ideas to review, launched projects under their belts, and projects in progress — you will want to track innovation process metrics to evaluate the efficiency of your workflows and find bottlenecks. These are mostly throughput metrics focused on the progress and flow of ideas through the innovation pipeline.?

In other words, you want to analyze your processes for working with ideas . What happens after ideas are submitted? Here, you should think about:?

• How many ideas are evaluated (vs. how many sit without ever being reviewed)?
• How many assessed ideas are pushed to launch (vs. how many are tabled)??
• Who’s involved in processes? Are you sourcing the most appropriate business units and people??
• Where ideas are stalled in assessment, prioritization, and team and resource allocation — what causes delays, and how can you avoid them?
• What steps in workflows require the most time and resources? Are there opportunities to optimize processes? For example, if R&D spending is hiking up project costs, could you reduce the number of tasks or reviews for certain project types at that step? ??

Read more: How to Manage Your Company’s Innovation Process

Portfolio Management

The next maturity phase comes when you have to review the progress of ongoing implementations and the details of past implementations, and analyze your innovation project portfolio.?

Here, you should measure:??

• The number of active in-progress projects and their progress according to the type of innovation project.?
• The number of successful implementations (across different timeframes).?
• Which areas of the innovation strategy each project supports. Are you focusing too much on one area of the business vs. another? Are there innovation goals you haven’t focused any attention on?
• Resource allocation across various initiatives. Are you evenly distributing resources to hit on different areas of the innovation strategy? What’s the spread across strategy objectives??
• The types of innovation projects across your portfolio. Have you consistently invested in incremental innovations (i.e., improving your existing offerings and processes)? Have you successfully launched riskier ideas? What types of ideas were those???

Note: You should also consider the ideas you passed on and projects that failed so you can gather valuable lessons from those mistakes.?

Read more: Best Innovation Portfolio Management Software

Business Metrics?

In the sections above, we’ve talked mostly about input metrics and throughput metrics — the number of ideas you collect, what you’re doing with ideas, and the overall investment into innovation efforts.?

However, output metrics — what you’re seeing in return for your innovation investments — are arguably just as, if not more, valuable for growing innovation departments (and actually driving organizational change and increasing your bottom line).??

Here, you want to consider business metrics like ROI and the results and impacts of successfully completed projects.?

Now, this will vary depending on the type of innovation project — for example, for new product ideas, you’ll track product sales to determine profits and the overall return on investment.?

However, if you modify product development processes to launch new products sooner, you'll want to track the duration of these tasks and calculate the time savings to measure impact.

You could also track the number of new products launched during specific time frames before and after modifying processes to see if your efforts caused a significant change.?

Or, let’s say you’re a SaaS brand that has shifted business models: You previously offered freemium software but now offer paid packages. You can see how that affects sales and gather customer feedback to determine if pricing changes impact revenue or customer experiences. If shifting to a fully paid product doesn’t create waves, it could indicate you have wiggle room for future pricing changes.??

During this analysis, consider which area of the innovation strategy each project relates to and how the results support your goals. Did projects achieve the intended results? Where do these results put you now, and what could be on your horizon??

Best Practices for Measuring Innovation?

Above, we discussed focusing on your innovation program’s maturity level to find the right starting point for measuring innovation. In this section, we’ll review our other best practices to guide your evaluation processes.?

#1. Don’t get caught up in vanity metrics — impacts & actual ROI are the key performance indicators (KPIs) for driving change?

At the beginning, engagement metrics like the number of participants and new ideas collected are important — they show your progress in building a strong innovation program and network.?

But you can’t focus on these forever. Reporting to upper management that you collected ~500 ideas or that ideas garner an average of 100 votes or comments is only exciting for so long, as ideas alone don’t drive real change in an organization.?

If you don’t do anything with ideas or have an efficient innovation process, you sit on a goldmine of untouched opportunities.?

#2. Business metrics should inform your innovation strategy & vice versa?

As we mentioned earlier, the business metrics you track will depend on the type of innovation you’re measuring — whether it’s a new product release, process change, shifting business model, etc.?

The results of projects and returns on innovation investments can guide your strategy.?

Consider evaluating:

• Which ideas were pitched and ditched in the past.
• Which implementations achieved the intended goals, and which ones failed to hit the mark.
• Short and long-term impacts of successful initiatives.??

You can use these insights to continually improve your strategies. You can shift idea collection and brainstorming towards specific initiatives, invest further in impactful innovations, and plan more projects similar to ones you’ve successfully launched in the past.?

The relationship between a company’s strategy and its innovation management is a two-way street. In simple terms, the goals of your innovation strategy influence which projects to pursue and determine the metrics to measure.

You can also use these insights to guide riskier decision-making and take action toward more disruptive innovations; perhaps you’re considering offering an entirely new type of product or testing a new market.??

How do results support strategy goals, and what’s the overall ROI? Where does this put you going forward??

#3. Track long-term impacts & ROI?

Another pitfall we see is that innovation departments only monitor the results of new innovations for a couple of months after launch. They’ll gather 90 days of data and determine if the efforts were a success or a failure.??

While you might be able to detect duds immediately — for example, if nobody purchases the new product you release — measuring success isn’t always so straightforward. The longevity of success also matters.?

Let’s continue with a product example to illustrate this point.?

Consider Nespresso, a household coffee company with various espresso machines, beans, blends, and flavors. It constantly releases new coffee pods to complement its machines.?

Let’s say Nespresso releases a new line of coffee pod flavors, and loyal customers rush to grab them. Nespresso sees booming sales over the first few months. (At this point, they might consider this new flavor a favorite and produce more, maybe even adding it to their core product line.)??

But after six to nine months, they see sales for this product taper off. Perhaps customers bought it for the initial excitement of trying a new flavor but didn’t like it, so they never repurchased it.?

This data tells Nespresso that this new flavor wasn’t as big a hit with customers as they first thought, so they can stop investing resources in producing or promoting it.?

Or, beyond coffee pods, and even more long-term — let’s say Nespresso releases a new machine to replace their top-tier Verturo machine. They market this as their newest, most innovative machine, providing a better experience than what customers already have with Verturo.??

For the first year they earn new customers, see existing customers upgrade, and sales do well — but after that first year, customers start experiencing technical issues with the machine. Feedback and product ratings plummet, and customers submit warranty tickets to fix or replace their machines.?

This innovation, which initially brought revenue, is now costing the business — both customer happiness (potential loyalty) and actual expenses related to honoring warranties.?

At this point, Nespresso can investigate the machine's issues to determine how to remediate them and avoid similar mistakes in the future.?

Did they use a different manufacturer for certain parts than they usually do? Is there a bug with the machine’s software??

They could modify their product so future builds aren’t prone to the same issues, or if problems and feedback are so negative, they could retire the product and release a whole new model.?

However, none of this learning would have happened if Nespresso hadn’t monitored long-term innovation performance.

Case Study: DHL?

DHL is a leading logistics company offering international shipping, courier services, and transportation. They employ over 500K professionals globally (in over 220+ countries!).?

When DHL started working with us, their goal was to create an employee innovation program that involved their various business units.?

They were also particularly interested in involving their IT Services group in innovation processes so their IT experts could contribute to idea sharing and provide insights on supporting innovation strategy goals with new technologies (AI, robotics, automation, APIs, etc.).?

Given their industry and services, their IT teams’ insights were invaluable in improving all business areas, so it was critical to be able to include them in innovation efforts.?

Working with our team, DHL launched an innovation platform (internally branded IdeaHub) where over 5k+ employees could collaborate on innovation initiatives.?

They could pitch ideas about specific areas of interest, discuss, refine, and assess ideas to hone in on the most promising opportunities and see their best ideas through to launch.??

After debuting their program, they measured innovation processes and efficiency by tracking:

• Idea to implementation times — DHL’s innovation department only took four weeks to launch its first idea.?
• The number of new ideas submitted and how that number increases as their network grows and efforts evolve — DHL saw a 67% increase in idea submissions after bringing everyone on board.?
• The percentage of successfully implemented ideas — DHL has launched 14% of submitted ideas in the last two years.?
• Which areas of the innovation strategy each project impacts — DHL’s projects support Facilities, Internal Tools and Technologies, and Living Responsibly.?
• Primary regions of impact (aka which global regions or target markets are impacted by changes) — DHL has implemented ideas from the USA, Germany, Prague, Chennai, and Costa Rica.?

Read more: How to Create a Collaborative Innovation Process and Network

How InnovationCast Supports the Measurement of Innovation??

InnovationCast is a comprehensive, configurable innovation management software to support each step of the innovation workflow, track innovation projects and outcomes, and report on the impacts of initiatives.?

We’ve designed our platform with features that support best practices based on our experience, including:

• Targeted idea collection tools, like ‘Challenges’ and ‘Categories,’ so you can receive high-quality ideas relevant to your innovation strategy.?
• Customizable idea evaluation workflows so you can assess different types of ideas (i.e., weigh their potential impacts, gauge the risk level, and determine if you have the resources to implement ideas).?
• Project management dashboards to plan implementation tasks for validated ideas.?
• Portfolio management to keep a record of all past and ongoing implementations. You can see what you’ve tried in the past, identify new growth opportunities, and analyze project workflows to determine areas for improvement.?
• Reporting dashboards to easily track innovation metrics and impacts of initiatives.?

We’ll set up InnovationCast with your processes and requirements in mind. For example, we’ll design evaluation workflows for the types of projects you manage and show you how to adjust or add new workflows as you fine-tune processes.???

We can also create custom reporting dashboards — or integrate with Power BI tools — to help you monitor the innovation metrics relevant to your maturity level and strategy goals.?

Another client of ours, Novo Nordisk (an international pharmaceutical company), requested a specialized dashboard in their platform to monitor:

• The number of active projects.
• The number of active projects per development stage (to easily see each project’s progress).
• The number of projects per area of innovation strategy.?
• The number of projects per therapy area.?
• The number of projects per pharma value chain.?
• The number of projects per affiliate/business area.?

You can easily see engagement and participation metrics, too. We offer reports showing total users, when users were last active, and the number of new ideas, votes on ideas, feedback, and shared resources (Signals).?

Getting Started?

We offer a free demo and consultation so you can learn more about InnovationCast and how it supports innovation efforts. Then, we can guide onboarding and training for a smooth, simple adoption.?

We also promote organization-wide adoption with automated training emails. You add employees or any outside user you want to invite to InnovationCast.?

We’ll send them a series of onboarding emails so they can create an account and learn how to navigate the platform’s features. This way, you don’t have to manage training yourself, and you can add virtually anyone to the platform, regardless of where they’re located.?

Our platform can also send reminders to participate in innovation efforts, promote continuous engagement, and give tips on getting involved or submitting more thoughtful ideas and feedback.??

If you have extra questions about this topic and want to learn more about how InnovationCast helps you manage projects and measure innovation, schedule a free consultation and demo with our team .?