Dodge pitfalls by measuring enterprise innovation maturity
11 MINS READ
Take stock of established innovation maturity assessment frameworks
Measure innovation with a process-centric approach
Build an Innovation Maturity Assessment Framework
Frame the right set of innovation metrics for an organization
Achieve true organizational innovation capability
Innovation is now a hot topic across industries as enterprises struggle to overcome the impact of not only the COVID-19 health crisis but also major geopolitical tensions that bear an impact on economies, consumption patterns, and regulations.
Organizations need to develop and implement innovation strategy in addition to upgrading existing innovation practices, through learning and continuous improvement, and developing new innovative products and go-to market strategies.
While most organizations feel the strategic imperative to innovate, measuring innovation maturity, synergy, and organizational alignment are key challenges for most. The thrill and attraction around innovation and its associated actions often overlook the ability to put a process of rigor around the ‘ability to innovate’ as a key competency for organizational innovation. This is perhaps a key differentiator between the few top innovative organizations across the world and the plentiful others. The ‘ability to assess enterprise innovation maturity’ alongside the ‘ability to innovate’ are complementary as innovation strategies largely determine the magnitude of dividends that emerge out of organizational innovation.
Top innovative companies capitalize on realized innovation as industry leaders, while others search for varied strategic positionings in order to be competitive. Under the prevailing circumstances, there are challenges and threats that go beyond competition. While enterprises struggle to overcome the present health crisis and its impacts on economy, consumption, regulations, and geopolitics, being innovative is a perennial pursuit – an endless marathon.
This paper aims to highlight the key aspects to measure the effectiveness of innovation strategies along with key areas covering innovation metrics.
Taking stock of established innovation maturity assessment frameworks
Multiple globally recognized rankings for top innovative companies provide useful assessments for the level of innovation being achieved by the innovation leaders across industries. Table 1 (see below) lists some of these major global rankings, the key measurement focus, strengths, and major challenges for organizations in the areas of innovation measurement
Measuring innovation with a process-centric approach
All these are established models (in Table 1) with credibility and fair degree of advocacies and provide useful pointers with regards to measuring innovation and improvement. However, for self-assessing the level of innovation within organizations, no one methodology or system is sufficient. While learning from others or following global benchmarks ensures long-term aspirational guidance, what works well for innovation leaders like Apple and Microsoft, may not be industry agnostic or work in all situations, circumstances, or context. An organization’s capability to innovate is rooted in its innovation system which is a coherent set of processes and structures that enable searching for new ideas catering to business problems, synthesizing these ideas to business concepts for product/service designs and launching them in the market to successfully monetize. Each enterprise is expected to have their own technology landscape and competency, varied business models, policies and most importantly, enterprises are likely to pursue differentiated innovation strategies. Hence, the ‘ability to measure innovation’ will be different for each organization and each needs to have a customized approach and focus to carve innovation as a core competency.
This underscores the importance of implementing a Process Driven Innovation Maturity Framework in the context of organizations.
Building an innovation maturity assessment framework
There are multiple innovation maturity and assessment frameworks like CII Enterprise Innovation Maturity Framework, KPMG Benchmarking Innovation Impact, Cisco Innovation Maturity Model, and report by Fast Company. In addition to organizations, even countries and cities – as functioning institutions are formulating frameworks and innovation metrics like the Global Innovation Index by WIPO, India Innovation Index by NITI Ayog, and Dubai Innovation Index by PwC to assess their innovativeness. While it is important for organizations to build their own innovation assessment framework as an integral part of their innovation strategy, they can leverage generic concepts and customize these based on overall objectives and context, to accelerate outcomes.
Figure 2 provides a strategic view of how organizations can create an innovation assessment framework best suited for them.
The complexity of any Innovation Assessment Model depends largely on the scale of the organization, its current innovation maturity level and the technology and business landscape. In creating a framework, it is important to balance the lead enablers and output generators as illustrated in Figure 2.
Key enablers and performance generators
Framing the right set of innovation metrics for an organization requires a sharp focus on some of the key areas (as listed in Table 1). While some of these areas may look straightforward to measure, others are not. Moreover, besides measuring these innovation metrics as end goal, it is also about identifying and assessing the key processes and practices associated with these metrics within the organization and establishing a traceability of As-Is reality. This will help organizations calibrate improvement continually. For example, to track the ROI from innovation accurately, an organization needs to have a robust process in place to identify the percentage of associated revenue or profit that is attributable to innovation. This will vary industry wise. For instance, in the pharmaceutical industry whose core business is innovation driven it will be different from a technology industry where a large part of the revenue comes from the product related services. Measuring innovation ROI provides an opportunity for organizations to build and improve upon the internal processes and practices, while identifying effective ways of capturing their efficiency and effectiveness as an enterprise capability realized through continuous focus, iterative learning cycles and feedback loops.
Table 2: Key Areas to Measure Innovation
Enabling real organizational innovation
For every organization, measuring the ability to innovate is important to achieve true organizational innovation capability. However, initiatives to effectively achieve the “ability to measure innovation” need to improve the “ability to innovate” eventually. For this, organizations irrespective of scale or innovation maturity need to focus on building a contextual Innovation Assessment Framework that delivers a high degree of strategic fitment. Building such functional frameworks requires internal and external organizational context and a sharp focus on processes.