"It’s really not that difficult to decipher your innovation culture by looking at leadership behavior, organizational structure, business processes, metrics and incentives, rewards and recognition, and the stories and symbols that reinforce (or inhibit) innovation. By understanding the things that shape norms, values, and behavior, it becomes possible to influence them—and to create a culture of innovation."
In business, we often aim for disruptive innovation, transformative breakthroughs that decimate competitors and drive uncharted growth. We underrate sustaining innovation that fosters perseverance, improves business, adds value, and is a requisite for disruptive innovation. In The Invisible Advantage: How to Create a Culture of Innovation, Soren Kaplan explains how to cultivate a corporate culture of innovation.
A company culture of innovation is the only way to sustain a competitive advantage. The norms, values, and behaviors in business either stifle or support change. Innovation enables a company to reinvent itself and prevents it from becoming obsolete. There is no precise formula, each organization is different, and processes must fit each unique situation. In businesses that promote creativity and learning at all levels, innovation doesn’t feel like a risk and people are comfortable experimenting with new ideas and progressive changes.
Kaplan provides a complete framework and tools to create a culture of innovation. For this summary, I’ll focus on metrics, how what we measure influences our company culture and can stimulate or constrain innovation.
The Big Idea
Measure What’s Meaningful
"Management guru Peter Drucker once said, ‘What’s measured improves.’ In other words, you get what you measure. For many companies, coming up with ideas often isn’t the problem. The challenge is turning ideas into something real that delivers an impact. This is where metrics can make the difference between no ideas, lots of ideas that go nowhere, and real innovation."
Metrics give us direction. Leaders set goals and measure progress, often this focuses on easily measured metrics like speed, efficiency, accuracy, or profits. Innovative behaviors are difficult to quantify, and most companies don’t have innovation metrics. What we decide to measure determines what we get. If we don’t measure innovation, we won’t get it. We should begin by considering the needs of the customer and our organizational goals. Is our metrics measuring ways we can better reach these goals in the future? Do we quantify how many new ideas we have tried and the results? Is innovation measured in all our operations or only in some areas? Pervasive pioneering behaviors help us recognize when processes are flawed or have stopped working and discover better ways to serve the customers’ needs and meet the company’s goals.
To create an innovative culture we need to promote and measure inventive behaviors in leadership, employees, and customers. Establishing these metrics is a process unique to each company, there are no standards. Where do we begin? Read on to the GEM’s.
Articulate the Endgame: Define the Outputs
"Most companies understandably zero in on top line revenue and overall profitability when it comes to gauging success. Many also focus on their net promoter scores. These high-altitude metrics are indeed important, but they have limited value for measuring—and driving—innovation. Why? They’re numbers. They don’t take into account what people want. Most important, they don’t inspire action toward specific goals."
Measuring profitability and the support of our customers is important, but it doesn’t tell us what specific behaviors will lead to more profits and more satisfied clients in the future. Our metrics need to define the end goal and encourage innovative practices. We need to measure how well we are adapting, responding to changing customer needs, and keeping our practices aligned with our objectives.
Innovation metrics that define the end goal may include the number of clients who trade up to next generation products or services, the business generated in new customer segments, or revenue from new markets. Metrics like these define goals, identify opportunities and promote innovation. Specific criteria vary between organizations, but they should set the end goal and help determine the innovative behaviors leading to positive changes.
Fuel the Innovation Engine: Define the Inputs
"Measuring innovation also involves setting specific goals that will help fuel the process—the things you do internally to help you hit your targets. When you give people targets, they take on responsibility for hitting them. And in the process, they produce experiences and success stories that then reinforce more experiences. The goal is to jump-start this kind of positive feedback loop."
Once we have defined the end goal, we need to give people specific goals to reach our larger goals. Every employee should be aware of the importance they play in achieving the company’s goals and how they share responsibility for innovation. Communicate trust and acceptance of new ideas. Policy and business practices should align with words that encourage trust, learning, creativity, and innovation. Even when given words of encouragement, people will not share and develop innovative ideas in a distrusting, discouraging environment that impedes learning and creativity.
On a leadership level, we should set goals that support innovation by focusing on the future instead of on daily operations. Are we measuring how many new ideas we incorporate from external sources or considering only internal ideas? Are we measuring how many large innovative projects we support or focusing on small changes to existing products and services? Are employees trained in the innovation process? Do we sponsor workforce innovation experiments, and give innovation awards? Measuring these types of goals shifts our mindset from maintaining the status quo to stimulating innovation and leads to an innovation culture.
What we measure is what we get, it helps defines our organization and what type of culture we have. To develop appropriate innovation metrics we need to be receptive, persistent, and patient. It is an ongoing process of thoughtful consideration. Defining this nebulous metric is not easy, but it’s what matters most. Measuring innovative behaviors encourages an adaptive company culture and aligns goals with the evolving needs of our clients. Measuring innovation helps define the actions that make us capable of sustaining a competitive advantage.