“Innovation is ultimately not an act of intellect but of will.” Joseph Schumpeter
How do we measure innovation? Unfortunately there is no one framework which is used universally to measure innovation. Innovation according to Wikipedia means “a new way of doing something. It may refer to incremental, radical, and revolutionary changes in thinking, products, processes, or organizations. A distinction is typically made between Invention, an idea made manifest, and innovation, ideas applied successfully.” The stress is on the actual application of the idea. Without taking action we could talk about theoretical models and concept all we want, but without tangible output, innovation does not take place.
I believe Google is an innovative enterprise. Successful products such as gmail, chrome and orkut were all created in the 15% innovation time that all employees are given. They are all motivated to put their ideas into action, and then see the response it receives. Much of the time these initial attempts will be inferior to products which may be in the market. In this case Hotmail, FireFox and Friendster were all established players in the industries they were targeting. Nonetheless, they put their products out there and continued to improve on them. There were several products which did not achieve any critical mass and they were discontinued. The important thing is that a shot was taken. As an entrepreneur we have to take calculated risks and continue pushing our products/services out of their comfort zone.
Some useful sub metrics I use to measure an organization’s innovative index are:
1. Incremental Changes: How a business continues to improve its product/service is an important component of innovation. Once again, if you take Gmail for example, they continue to add new features which may have been requested by users or deemed necessary to enhance the user experience. Recently they integrated the ability to use video within the service, canned messages to enable faster replies and new themes to make the interface look unique. Set benchmarks for your products/services and then track what those changes do in terms of traffic, sales and profitability.
2. New Products/Services: I am a big fan of creating complementary assets around core business units which are performing well. Not only does this provide further advantages to continue using the core product but it opens up the ability to leverage on the successful product/service to launch others. Also one can measure how many new products/enhancements are in the pipeline and when they are expected to be released.
Depending on the type of organization that you are part of, one will need to come up with relevant sub metrics to calculate the innovative index. While I was searching for models I came across a great article written by the author of Freakonomics Stephen J Dubner called “How can we measure innovation?“. The article includes answers from many well known authors and industry leaders. I strongly recommend reading the entire article. It provides a point of view from individuals with very different backgrounds and can help you find the right metrics for your business model.