METHODS & TOOLS FOR MEASUREMENT OF

CORPORATE INNOVATION

A literature review study by Soroosh Mohammad Ebrahim

Measuring Innovation

Oslo Manual - 2005: (Guidelines for collecting and interpreting innovation data)

Organisation for Economic Co-operation and Development

WHY measure innovation?

•Innovation – key to the growth of output and productivity.

•The relationship between innovation and economic development is widely acknowledged.

•Innovation policy should be evidence-based.•Innovation data – to better understand innovation and its relation to economic growth; to provide indicators for benchmarking national performance.

WHAT is innovation

Aninnovation

is the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new

organisational method in business practices, workplace organisation or external relations.

The innovation measurement framework

Types of innovations

• Product innovation: introduction of a good or service that is new or significantly improved with respect to its characteristics or intended uses. This includes significant improvements in technical specifications, components and materials, incorporated software, user friendliness or other functional characteristics.

• Process innovation: implementation of a new or significantly improved production or delivery method. This includes significant changes in techniques, equipment and/or software.

• Marketing innovation: implementation of a new marketing method involving significant changes in product design or packaging, product placement, product promotion or pricing.

• Organisational innovation: implementation of a new organisational method in the firm’s business practices, workplace organisation or external relations.

Degree of novelty

• Diffusion• New to the firm• New to the market• New to the world• Disruptive innovations

Innovation activities

Innovation activitiesare all scientific, technological, organisational, financial and

commercial steps which actually, or are intended to, lead to the implementation of innovations. Some innovation activities are themselves innovative, others are not novel activities but are necessary for the implementation of innovations. Innovation activities also include R&D that is not directly related to the

development of a specific innovation.

Innovation activities for product and process innovations

• Intramural (in-house) R&D: This comprises all R&D conducted by the enterprise, including basic research.

• Acquisition of R&D (extramural R&D): R&D purchased from public or private research organisations or from other enterprises (including other enterprises within the group).

• Acquisition of other external knowledge: Acquisition of rights to use patents and non-patented inventions, trademarks, know-how and other types of knowledge from other enterprises and institutions such as universities and government research institutions, other than R&D.

• Acquisition of machinery, equipment and other capital goods: Acquisitions of advanced machinery, equipment, computer hardware or software, and land and buildings (including major improvements, modifications and repairs), that are required to implement product or process innovations.

• Other preparations for product and process innovations: Other activities related to the development and implementation of product and process innovations, such as design, planning and testing for new products (goods and services), production processes, and delivery methods that are not already included in R&D.

• Market preparations for product innovations: Activities aimed at the market introduction of new or significantly improved goods or services.

• Training: Training (including external training) linked to the development of product or process innovations and their implementation.

Innovation activities for marketing and organisational innovations• Preparations for marketing innovations: Activities related to

the development and implementation of new marketing methods. Includes acquisitions of other external knowledge and other capital goods that are specifically related to marketing innovations.

• Preparations for organisational innovations: Activities undertaken for the planning and implementation of new organisation methods. Includes acquisitions of other external knowledge and other capital goods that are specifically related to organisational innovations.

How does it works? Rose et al.(2009)

Performance measurement systemsTo make innovation sustainable within the enterprise, it is important to have a well defined IPM system that comprises: 1. The performance measurement scheme that defines and optimally clusters the key performance indicators(KPI)across appropriate dimensions(Kerssens-vanDrongelenandCook,1997). 2. The KPIs and corresponding benchmarks for each dimension 3. The appropriate reporting formats according to enterprise needs 4. A proper method and supporting infrastructure to enable data gathering, analysis, interpretation and dissemination in the form of reports(Neely,1998).

Saunila & Ukko (2012)

Saunila & Ukko (2012)

Saunila & Ukko (2012)

Dewangan & Godse (2014)

Conversion Ratios for each step in the Innovationprocess / value stream• Ideas : Ideation campaigns• Ideas that reach concept design :

Ideas• Implemented designs : Concept

designs• Ideas that sell : Implemented ideas• Ideas that make a profit : Ideas that

sell• Sales leads : Target customer base• Sales : Sales leads

Holistic ratios for the rate of renewal of theorganisation• Sales from new products &

services : sales from existing products & services

• Profit from new products & services : profit from existing products & services

• Customers on the new products customers on the old products

• Rate of transfer of capital investment to new capabilities

Financial & market measures• Revenue from new products or

services• Profit from new products or

services• New customers from new

products or services• New segments and sector

entry from new products and services

Balancing the desire to innovate with risk management• Verified knowledge :

Unverified assumptions• Effort spent on

implementations : Effort spent on concept development

Innovation Competency / Effectiveness / Discipline/ Repeatability• Use of formal creativity tools &

techniques• Use of formal idea

management tools & techniques

• Use of formal problem solving tools & techniques

Growth and sustainability measures• Revenue from new products & services;

Profit from new products & services• How much have your customers increased

their success (quality/sales/revenue/…) or reduced their cost due to use of your products and services

• Rate of return on Innovation Investment (how sustainable is your Innovation)

• Market share growth from new products & services

• Brand awareness and Stickiness (those who stay on new product : those who leave)

• Patents created per year; Market share protected by patents

• Revenue protected by patents; Revenue generated from lisencing patents

There is a way to do it better, Find it!

Thomas Edison

Thank You!