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Do You Measure The Effectiveness Of Your Operational Innovation?

Innovation is only beneficial when transformed into financial, productivity and commercial results.

27May

Innovation is a word that is heavily overused and many large organizations have realized that they have to recruit an innovation specialist, a GM Innovation or even a Chief Innovation Officer. But do these new roles actually deliver the expected innovation that businesses are looking for?

When you read Apple News, Inc., Business Insider. and  other business articles, you’re continuously confronted with articles that highlight the need for organizations to innovate. And although it’s more crucial that organisations innovate in today’s business landscape, many leading organisations have well-defined R&D departments, New Product Development teams, and organizational units that execute innovation for years.

That said, most of these teams are external facing and follow market trends, customer research, industry insights, partner to conduct university research and many more of these initiatives to identify the 'next innovation'  that the consumer would be interested in. However, it’s surprising that many of these businesses don’t introduce innovation at the heart of their own business. Although these businesses promote themselves as being innovative, due to the innovative products, services, ways-of-engaging with their customers, etc., internally, Operational Innovation is minimal.

In the current business landscape, it’s not only important to create 'external' innovation, but it’s imperative to introduce Operational Innovation. Only through effectively introducing Operational Innovation, organizations are able to deliver end-to-end innovation from the core of the organisation to the consumer. But, how do you measure the effectiveness of your Operational Innovation?

Shared Services, Operational Excellence, Business Process Outsourcing Engagement, Transformational programs have been established models, aimed in driving operational effectiveness through the use of Service Level Agreements (SLA- external parties), Operational Level Agreements (OLA - internal parties), Required Service Levels (RSL - optimization targets) and Key Performance Indicators (KPI) across the processes, tasks and activities.

But, even though these models drive operational and cost efficiencies, these models don’t drive innovation. Operational Innovation is focussed on delivering innovation at the core operations, and uses similar metrics, but doesn’t focus on measuring the process, activity or task, but measures the result, or progress towards the result. This means that the Operational Innovation concentrates on the effectiveness of the innovation to achieve an effective result. This means that organisations will have a substantial reduction of KPIs, ratio’s and other metrics, but continue to drive operational effectiveness through innovative solutions.

Many organizations are uncomfortable with this approach as it might lead to 'short-cuts', control challenges, increased risk, etc. This is why Operational Innovation doesn’t focus on SLAs, OLAs or RSLs to support the KPIs, but introduces a solid Governance, Risk and Control framework, which ensures the operational controls (business and technology) that the innovative solutions deliver, continue to meet the enterprise risk management criteria.

Measuring Operational Innovation effectiveness requires the following four first steps, providing guidance in how your organisation is able to measure innovation, while continuing to meet your enterprise risk management criteria:

  1. Translate your organisational goals and targets in measurable goals, through:
    1. Target and “stretch” target metric,
    2. Current metric,
  2. Create a metrics roadmap with expected interim metrics to deliver the “stretch” target metric,
  3. Create an Operational Innovation team to deliver these metrics through:
    1. Metrics validation to ensure full buy-in,
    2. Introduce an innovation roadmap, aligned with a GRC framework and the metrics roadmap,
  4. Align metrics and GRC framework requirements of the Innovation team with performance management process or other performance-based program that the organisation has.

Through introducing these first steps, your organization is also able to introduce an effective, measurable Operational Innovation model, which focuses on delivering end-to-end measurable innovation across your operational departments, delivering true innovation to your consumers.

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