Benchmarking the Future

How do you measure something that never existed before? How do you evaluate projects and efforts designed to create a new tomorrow? The challenges in creating and measuring something new in business, institutions or government are many. More so when the mission is to create something disruptive or revolutionary.

This article outlines some of the practical tools I've employed over the last 15 years to help me define, measure and apply innovation in a variety of settings and industry sectors.

Why innovate?

This should not be the search for a single answer. On the contrary, it is of greater benefit to generate multiple answers. Answers to this question explain and link the innovative effort to the strategy. It defines what the desired results should be from innovative actions. It answers: why us? Why this?

What to innovate?

Given the range of options, this question narrows the focus (or broadens it), so to address and gain optionality for a wide range of possible futures. What do we act on? What projects do we need to have in our portfolio to deliver the change we wish to produce?

How to innovate?

This provides the answer to the processes and organisational design and frameworks designed to maximise innovation adoption. This is all about policies, portfolios, pipelines and funnels. This question answers the nuts and bolts of the process. Who is responsible for the projects? What do they do? In my experience, it is mandatory to bolt on a PMO to innovation projects to ensure knowledge transfer.

Innovation can be applied anywhere in an enterprise and in different contexts. In these settings, we have used four elements to benchmark the future:

1. An Innovation Framework

"The triple-A system: adaptive, agile, and accelerated"
R.G. Cooper

The first thing about frameworks is that they help. A framework gives you boundaries, guardrails and direction. At its simplest, the innovation framework helps you work out: Time, Money / Effort, Benefits, Kill Metrics.

Time: How long will you dedicate to this? How long before you will harvest benefits? How long before you will stop?

Benefits: Who / what will benefit from the project? These include intangibles such as learning, skills and networks that are developed through the innovation project.

Kill Metrics: What are the triggers that will effectively kill the project? Kill Metrics are few in number, which makes them straightforward to remember, communicate, and use. Kill Metrics are tailored to your organisation's unique culture and aspirations and prevent WOMBATS (Waste Of Money Brains And Time).

2. Essential data and metrics

• Quantitative Benefits
• Financial returns
• Reduced costs

These should be straight forward. Unambiguous and therefore, easily communicated. What benefits / value did the project deliver? Was the experiment successful? Did the innovation bring about disruption? Did it generate a breakthrough?

3. Quantitative & Qualitative Outputs

Chunking and segmentation of the various metrics give context and greater meaning to the data collected. When measuring innovation efforts, we find it valuable to do this across three stages of project maturity:

• Leading Measures
• In-flight Measures
• Lagging Measures

Leading Innovation Measures:

• The number of projects and robustness of growth and innovation platforms and clusters of ideas or opportunities selected and developed
• Strength of strategic and leadership commitment to growth through innovation as expressed in strategic initiatives, targets and leadership metrics

In-Flight Innovation Measures:

• Project completion rates
• The risk-adjusted net present value of the innovation pipeline and the return on investment in that pipeline
• Innovation capacity and capability building (including partnerships and networks) relative to targets and competition

Lagging Innovation Measures:

• Amount of earnings or revenue growth achieved through innovation relative possible o targets and industry competitors and overall competitive position
• The success of individual innovation projects (from concept to customer) and global platform or new business development programs

4. Knowledge Transfer

There are many methods to translate benefits and the learnings and the learnings from an innovation project / program or portfolio of work into an organisation. Knowledge management is often the least developed skills within all organisations.

If the organisation is small enough innovation may result in a total business pivot. In those instances where organisations are large enough and the innovation delivers or fosters new revenue channels or cost reductions, particular models are better than others.

In summary, innovation projects are at best experiments – and experiments have an unknown outcome. These projects will generate a variety of insights that will shape the projects themselves but also affect business decisions and provide insights into technological feasibility, human resources, product market fit and customer insights.