Innovation Insights: Activity Metrics vs Impact Metrics

// Michael Watkins // Aug 24, 2022

At the start of any organization’s efforts to innovate more effectively and sustainably, processes need to be put in place that ensure new ideas don’t get ignored or forgotten about before they can be implemented.

With these frameworks like Challenge Driven Innovation® from Wazoku up and running, it’s important for the business to review how they’re used. The data that comes from these reviews can highlight how successful or unsuccessful the program is. As well as this, analytics can be crucial in helping stakeholders to identify and refine any unforeseen hurdles that arise from this new way of working.

To begin with, companies should be looking at ‘Activity Metrics’ to determine the health of the innovation program. These data points tend to be non-financial and bring aims and goals to the early stages of an innovation initiative.

 

Think of Activity Metrics as the foundations needed before constructing the building that the organization wants. Activity Metrics include:

 

-         Employee Participation

-         Number of Ideas Generated

-         Concept Kill Rate

-         Number of Ideas Approved

-         Number of Ideas Implemented

 

While Activity Metrics provide good starting points for organizations early in their innovation journey, eventually key stakeholders will want to see the tangible benefit that an innovation program brings. Focusing on activity or engagement for too long restricts the effectiveness and optimization of the innovation program itself.

 

As a program’s capability becomes more mature, businesses should turn to ‘Impact Metrics’ as a better way to review performance. These data points are often more financial than Activity Metrics. To build on the earlier point, Impact Metrics are the building that eventually rises out of the foundations. Impact Metrics include:

 

-         Revenue Generated from Solutions/Products

-         Cost Reduction

-         Profit Margin

-         Internal Rate of Return

-         Innovation Revenue as a percentage of Total Revenue

 

To get the most out of any metrics, it’s important to be looking at the right ones at the right time. There’s no point in looking at the profit margin of innovations before any have made it through a new process. Similarly, a year or two into an innovation program is not the best time to measure and determine success through participation instead of revenue.

In this blog, we have set out the different types of metrics that companies should use to review innovation programs. We’ve highlighted the different areas of focus needed at different stages in the programs life, and offered some tips on when to move from Activity Metrics to Impact Metrics. Following this guidance should help any organization getting started and to eventually move from one-off innovation events to a scaled, always-on innovation capability.

Topics: Innovation, Wazoku

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