From this writer’s point of view their innovation activity gets caught up in plenty of unintended consequences, to put it mildly, in wasted debate, discussion & bad decisions through wrong measurement criteria.
Challenging the old paradigms in how we measure
Firstly, we are still locked in the old paradigm of thinking this is an industrial economy where we set about measuring inputs to innovation (R&D expenditure, capital investment) and then focused on the intermediate step of throughput and then outputs (publications, production units, patent filing, end products).
We also perceive innovation far too much still as an activity within just one company – viewed as linear, with considerations for services more of an afterthought (like ‘bolt-ons’). Production systems still remain far too often the driving force of performance judgement.
Today, the world of innovation is completely different. We need a far more open set of resources (many outside our own company) to enable innovation. The process has clearly been recognized as non-linear and the chase for more ‘real time’ metrics is reflecting the shift to a knowledge-based network economy to accommodate growing uncertainties, the multiple choices and varying outcomes that innovation offers. We need to move our measuring to ultimate successful outcomes
Recognizing the need to change our measurement culture
This shift means we have to push a whole lot more on challenging established measurements and metrics – question if they are still valuable or just ‘simply’ established and have never been questioned in a way to overhaul the whole process. Everywhere we look within innovation systems; there are significant legacies in place.
We need to do a better job at measuring knowledge flows – it is the increasing emphasis and use of technology that is allowing us to challenge the old measurement paradigms. We still love to count machinery use, transactions, production of widgets, with an engrained efficiency mind set. Sadly it is not as effective, nor relevant, to the world today, actually most of these are just statistics that don’t drive us forward, they constantly make us look back. It is not ‘forward accounting’ for the knowledge that is building, to underlie new creation and valuing the way this is developed and diffused in the future.
This also brings to the surface the need to understand our intellectual capital. If you understand that, you have a better chance to be more innovative, inventive and creative as you are moving far more towards a learning environment focusing on the value of all the intangibles that generate knowledge or leverage through relationships, human engagement or dynamic structures that shape and respond.
Valuing our network relationships more
The value of networks is still not accounted for as well as they should be within our measurements. We collect the number of connections yet we fail to capture the knowledge generated by these interactions, they stay resident often just with the receiver, not captured within the organizations brain to understand and put to better, more effective use, applying the multiplier effect. Technology is rapidly changing this, and this collective knowledge and networking is certainly being leveraged more, but is it really being measured as a vital metric that provides value?
Today we are working through the impacts of the Industrial Internet (IoT)
This promises to be transformative, it will change the basis of competition and through this the basis of how we measure ourselves. Not only will the industries have their boundaries withdrawn, there will be a new wave of disruptive companies challenging the incumbent, since they don’t suffer the legacies of the past. Technology is driving the change:
- The world will improve its operational efficiency in dramatically different ways (time, asset-utilization) though more predictive maintenance and increasingly remote management.
- We will become far more comfortable with connected ecosystems, forming around software platforms that will break down and blur traditional industry and working boundaries.
- We will see increased collaboration between humans and machines, and even machines to machines, which will shift productivity into a new realm – which we need to understand, so as to capitalise on the potential this offers.
- Lastly we are rapidly moving to the outcomes economy, fuelled by software-driven services, innovation built into hardware, and the increasing visibility into products, processes, location, customers and partners.
It is in this last shift, of outcomes, we need to build our measurements and metrics around.
We move constantly towards the era of outcome-based services
Businesses will be forced to shift from measuring the inputs and outputs of products, to outcome-based results, where a business competes on their ability to deliver measurable results to customers.
This delivering on outcomes will radically shift how we measure and reward our progress. It will call for significant levels of increased collaborations across a growing, ever-changing, ecosystem of business partners, bringing together those involved to combine products and services to meet customers’ needs
Platforms and ecosystems will become a far more common place to facilitate and capture the data, translate the pockets of knowledge so these are shared, aggregated and exchanged across these growing ecosystems, where we are all increasing working to create and capture value for ourselves and contribute to others within the platform ecosystem. Our participation in platforms are helping us to facilitate transactions, interactions and mobilization and increasing extending out to learning platforms, each of us looking to achieve a successful and ultimate new outcome that improves on the existing.
These shifts in the ways we form collaborations are giving us broader connected knowledge that is creating different insights and eventually new business models. To achieve this we are becoming increasingly reliant on the partnership network or relationship we form within different (chosen) ecosystems, to learn, distribute and monetize these in new products and services that fit our needs, all occurring at unprecedented scale and speed to capitalize on opportunities and create a new competitive lock in or contribution to our needs. These are providing increasingly the new products and services that specifically meet customer needs based on the learning outcomes and exchanges.
Moving from outdated measuring criteria
How we embrace the changes occurring daily means we must challenge much of the way we presently measure and manage innovation. Innovation can’t stay hidden behind closed doors, safe within a selected group or siloed off and we simply can’t keep working with outdated measuring systems that focus on inputs, throughput and outputs.
We need to shift to the greatest judgement criteria, our measures and metrics all need to become outcome-based solutions as the only really measuring point. It is in successful outcomes we come closer to solving the real needs, tackle the problems and opportunities you find in innovation as others measure success seen and judged on the outcome.
The ultimate outcome from innovation is to understand the real customers need and then deliver on it. To get to this we do need to keep checking that we did understand, constantly reiterated additional value in our learning on this constant updated basis, translating what we learn and building with increasing speed and scale towards the lasting solution.
We need to all get paid or rewarded far more on the value of the result from successful ultimate outcomes, judged by focusing only on the successful result of delivering to that real customer need.
image credit: keepcalm-o-matic.co.uk
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Paul Hobcraft runs Agility Innovation, an advisory business that stimulates sound innovation practice, researches topics that relate to innovation for the future, as well as aligning innovation to organizations core capabilities. Find him @paul4innovating