In my article, Measure The effectiveness Of Operational Innovation, I provided insight in the steps that successful organizations take to measure the 'individual' operational innovation efforts. By measuring the individual ideas through to innovation solution and deployment, you’re able to assess the effectiveness of operational innovation on the organization’s vision, targets and goals.
At my company, we have been using the model below, to diagnose and assess, to create the right foundation, to develop a minimal viable solution through an agile innovation iterative development approach, and to deliver the operational innovation solutions through a well-defined deployment model.
During various sessions with innovation experts and operational executives, we have come to the conclusion that the challenge is not in how to execute the operational innovation process effectively, but how the innovation process ensures that the individual operational innovation solutions deliver the immediate, short, medium and long-term results.
In 2013, Scott Anthony, and other innovation experts, highlighted the need for companies to measure their innovation process effectively. And many organizations have started to adopt effective transformational and operational innovation models through which 'x' number of ideas will translate into 'y' number of innovations, delivering 'z' investment value.
To ensure overall effectiveness of the innovation process, there have been many articles describing the return on operational innovation Investment, also noted as ROII, to measure the effectiveness of the innovations through:
- Innovation success rate: successful innovations divided by total ideas explored (ideas that have met their original targets)
- Innovation magnitude: operational contribution (financial) divided by successful innovations
- Investment efficiency: ideas explored divided by total operational investment
And, although I believe it’s important to measure the effectiveness of the operational innovation process, we can’t forget that any innovation environment should accept 'failure'. As the ROII is mainly focussed on the positive outcomes of innovation, there should also be a realisation that innovation will not be 'successful' all the time.
Even though many organizations have introduced and have started to measure the effectiveness of the innovation process, it’s important to include additional metrics on the individual operational innovation solutions-level, to ensure that the innovation adds financial, people, technology or other value to the organizational goals.
If the metrics are solely measuring the effectiveness of the operational innovation process, your organization might wake-up after a couple of months, with a very efficient and effective operational innovation process that churns out operational innovation solutions that haven’t added any organizational value to the vision, goals and targets.
Do your operational innovation solutions deliver business value and the desired results?
Most organizations have made an absolute science of the operational innovation process. By introducing different methodologies, steps, engagement models, etc. these businesses have ensured that ideas transition effectively into innovative solutions. However, it’s important to ensure that innovation delivers your organizational goals and targets, otherwise there are far better ways to spend the organization’s dollars on.
Effective operational innovation combines measuring the operational innovation process and how the solutions deliver business value and get the desired results. In today’s business landscape, I’m still surprised to see either process or result metrics, without combined metrics. I have only come across a few companies that have successfully been able to combine these metrics, and have been able to successfully introduce operational innovation at the heart of their business.
Only by combining process and result metrics, organizations are able to validate how effectively they are delivering operational innovation. Once organizations are able to introduce these combined metrics, simple questions, like 'what does ‘success’ mean?' or 'can the innovation show direct impact to your bottom-line?' or 'has this innovation had the expected impact to the organisational goals and targets?' can be answered.
Given how critical operational innovation is for a company’s long-term innovative success (and sometimes survival), perhaps it is time to mandate that publicly traded companies regularly report on their innovation effectiveness, providing key measures of their innovation performance.