The Elusive Innovation ROI

Let’s face it. The majority of tech companies have become obsessed with innovation and determined to use it whenever possible in marketing campaigns.

That’s because demonstrated leadership in the area of innovation signals to competitors and customers alike that your company possesses the right stuff.
The trouble is that measuring innovation is not easy. Which doesn’t mean people aren’t trying.

McKinsey Quarterly recently reported results of a global survey that it says reveals the companies getting the highest returns from innovation.
Among the interesting findings are: only 16 percent of the survey respondents say their companies don’t use metrics to assess innovation; and 45 percent don’t track the relationship between spending on innovation and shareholder value.

Another interesting finding from the survey is that companies place greater importance on metrics for outputs than for inputs. For those companies that do, the three most important metrics are externally focused: revenue growth, customer satisfaction and percentage of sales from new products or services.
That means there’s little interest in assessing the entire process of innovation. For anyone who has been a student of innovation management, that should raise a red flag, since it spells trouble for companies not minding the process. (See Toward a Discipline of Innovation.)

For those companies where innovation is viewed as the most important strategic priority, the top three metrics used to track innovation are: customer satisfaction, number of ideas in the pipeline and R&D spending as a percentage of sales.

In a separate study, published in late October, the journal Marketing Science cited evidence that leading the list of the world’s most innovative countries are Japan and the Nordic region, with the United States coming in sixth.

The researchers evaluated 31 countries based on the time it takes for new products to take off. Researchers analyzed 16 different product categories over a time span of 50 years.

Looking past this economic downturn, it seems logical that the companies keeping on track with a strong innovation culture and mindful of its strategic importance are most likely to have the capacity and wherewithal to come out ahead. –Lee Bruno

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