The Innovator & Measurement
Innovation called the “foundation of the future.”
Efficiency expert W. Edwards Deming says in his book Out of the Crisis that it was statistical control that opened the way to engineering innovation, and without it the process was in “unstable chaos.” By measuring, engineers were able to discern a direction in which to innovate, because they had identified the process. Deming called innovation “the foundation of the future.“
Measuring innovation is as important as any measurement in Total Quality Management, which focuses on the process. During the process of measuring you can find insights into your innovation process. Texas instruments studied 50 failed innovations and discovered that the failed product lacked a champion in every case, something that could be fixed with the process.
Measuring innovation does not produce innovation, but is an important function in order to have meaningful comparisons. It allows the company to know if what is happening is consistent with the objectives of the organization, and the financial costs and their allocation.
One common misconception about innovation is that it only happens in the Research and Development (R&D) lab and not in other parts of the company, or that it only involves a product or service.
Measure innovation in shipping, public relations, employee benefits, customer relations, service delivery, advertising, hiring, training and skills, materials, operations, company structure, or any area of your business.
Some specific ways to measure innovation:
1. Time between innovations.
2. R&D investment as a percentage of sales/ or profits.
3. Amount of ideas generated per employee.
4. Ratio of ideas to successful ideas.
5. Amount of features on products or services.
6. R&D investment per employee.
Your measurement of investment in R&D tells you how you are doing compared to published information about other successful companies in your industry and whether or not you are being competitive.
For example, it’s easy to find out that Intel made an R&D investment of $4,014 million in 2008 (about 15% of revenues). Intel has increased R&D amounts every year during their over 30-year history, investing 22% of sales in 2014; twice as much as their nearest competitor Qualcomm. In 2015 they invested $12.1 billion.
Or, you can compare to the United States average R&D investment of about two and a half percent of GDP, up to about almost three percent over a decade.
Measurement establishes criterion, and standards by which you can gauge the performance of your company. Deming points out that merely measuring productivity does not tell how to improve it, rather, it is the analysis that tells “whether any given activity is consistent with the aim of the organization.” Measurement in innovation as well as every feature of your company is the raw material of this analysis.
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