How do you measure commercial innovation outcomes?
Innovation is about improving the way you solve problems and create new value to outperform competition. It should deliver strategic competitive advantage.
Generally:
- If it’s in the commercial world, the focus on delivering better benefit for customers faster than competitors, and shaping and positioning in the environment so you can succeed.
- If it’s in a purely adversarial environment where survival is at stake (eg: sport, war, space), it’s about giving your people tools that they apply to outperform and overwhelm the opposition, faster than competitors can comprehend and effectively respond, and be fittest in the environment.
Accelerated value creation is the key – however you measure “value”.
You should be able to measure the benefits each innovation activity is delivering. Kill what doesn’t work. Double down and expand what does.
Focusing on the commercial world, the measures should be simple. For example:
- customer retention
- customer acquisition growth
- growth of new revenue streams
- increased recency, frequency and monetary value of spend
- increased margin
- referrals by customers
And the end commercial result should always be productivity – more outputs for the inputs.
That means improvements in the following:
- what you stop doing (and save)
- how many more customers you serve with same inputs
- cash return on capital employed
- stock turn
- improved conversion rates and probability of winning (P-Win)
- ARPU
- and heaps of other financial ones, but especially:
- EBIT!