Friday, August 8, 2008

Vital Signs: Measuring Innovation - BCG's Innovation 2008 Report

Apple, Google and Toyota are once again named the 3 most innovative global companies by BCG's Innovation 2008 Report.

To make it to the list, the following criteria were used in the questionnaire to about 3,000 global executives:
* The company employs innovative operational processes that give it an advantage
* The company's business models for revenue streams are new and differentiated
* The company has created unique customer experiences that create loyalty
* The company has developed breakthrough products
* The company has developed breakthrough services

The report highlights five common characteristics that distinguish the best innovation leaders:
* The ability to tolerate ambiguity
* The ability to assess and be comfortable with risk
* The ability to balance passion and objectivity
* The ability to change
* The ability to command respect, even from those who are skeptical

Specific to the Vital Signs theme on measurement, in a companion report on innovation measurement, Measuring Innovation: Squandered Opportunities, the following statistics were presented:
* Only 35% of executives are satisfied with their company's current innovation-measurement practices
* Only 43% of companies track innovation as rigorously as they track their core business operations, even three out of four executives believe their company should do so
* Only 22% of companies consistently tie employee incentives to innovation metrics. 36% of companies never tie them together

The most popular metrics for gauging the success of innovation efforts are customer satisfaction (54 percent of companies said they use it) and the percentage of sales from new offerings (47 percent).

What's really surprising is the low level of implementation of innovation measurement practices. The report provides a good starting point with innovation-to-cash metrics, including measures which cover Startup Costs, Speed (time to market), Scale (time to volume), and Support Costs.