Written by Asia Sultan (topic: innovation performance)
Traditionally, companies have used KPIs to determine how well they meet their operational and strategic goals, as said KPIs have conventionally been seen as important in defining how a company progresses towards it business and marketing goals. But, in a world where start-ups are disrupting industry giants – as is the case with Airbnb in the hospitability industry – increasingly organisations are looking towards innovation to keep up and grow their market share. This has resulted in companies spending a lot of money on ‘innovation hubs’, with expensive gadgets and brightly colored furniture, all in the name of being more ‘innovative’. The problem with this however is that innovation is treated as an end goal and not a means to an end.
Innovation performance as an indicator of success
I’d like to explore the idea of innovation as a KPI as companies struggle to fill the ‘innovation gap’ required for them to sustain and grow their businesses. In a world where traditional KPI’s don’t seem to achieve desired outcomes, due to the complex and dynamic nature of the customers and their needs, innovation can no longer be a ‘nice to have’ but must rather be treated as a key performance indicator.
So, what is innovation anyway?
Innovation has become such a buzzword in global business today but what it means exactly can be vague. Let’s take a stab at describing innovation then:
- Words: creative, original, never done before
- Reactions: “Why didn’t anyone think of this before?” – think Uber
- Description: Challenging usual notions of how things have been done, and bringing ideas from one industry to another, or from one geographic region to another
- Strategic criteria such as,
- Creating meaningful points of difference for products and services vs. current alternatives,
- Fulfilling unmet consumer needs, by offering new ways to accomplish goals, or make lives or jobs easier, better, happier, more exciting, satisfying, or more productive,
- Enabling companies to compete in incremental new markets or category segments, and
- Delighting, engaging, and capturing the imaginations of consumers to increase loyalty.
Why is it hard to practice innovation?
Well for one, failing sucks. Also, innovation takes time and big companies don’t have the patience. And, frankly, companies want to disrupt the market but because of how uncertain the process of innovation is, they fear the unknown.
The question is then, how do we measure innovation? I was chatting about the idea of Innovations KPIs with a colleague, who strongly believes that traditional KPIs are no longer relevant. She suggested that KPI’s be replaced with what she coined Key Behavioral Indicators (or KBIs).
Wait, what? Behavior?
Behavior because innovation has a lot to do with just that – it talks to process, methodology, mindset and ultimately a culture that encourages and produces new outcomes. So instead of metrics such as ‘new customers acquired’, companies looking to work more innovatively should rather look at whether their teams are behaving in a way that is innovative, as well as if they’ve built an environment conducive to this behaviour.
Here’s a closer look at behavioral indicators:
How well do your workers understand your customers underlying pains? What informs the type product your company sells and the means which it is made available in the market? Is it the old-school CEO’s meet in a boardroom and decide what their customers need and ship out the product? Or do you get to know your customers and problems better before developing and selling your product?
Even companies who get information about their customer before they develop products/services would do it through market surveys, usually in the form of questionnaires. These aren’t very helpful if you are trying to really empathize with your customer.
Innovative tools like design thinking offer more effective ways to understand the customer through methods like observing and engaging. Reminding us that innovation isn’t as complicated as perceived, it’s the simple things that we take for granted can have great impact in our companies.
Creative Thinking Practices
Innovative teams should embrace creative thinking practices. These practices include emergent thinking when brainstorming ideas, prototyping, testing, and refining their product according to the learnings based on the outcomes of said testing. This doesn’t mean that the team should rely on the customer to come up with a solution, but rather that if the team spends enough time understanding the user, in order capture the right insights, this will lead them to the right solution.
It’s also important to believe in ‘fail fast and early’ principle. Companies shouldn’t punish their employees when their ideas or products fail, instead they should adopt low fidelity prototyping to test with users as a product or service is being developed to de-risk the project and validate the concept with the potential customers early on.
It’s not enough for an innovation team to be diverse and cross-disciplinary, they must be collaborating to meet goals too. The value of different perspectives that come with collaboration cannot be underestimated. This is not easy in a corporate environment where there are many departments that don’t necessarily have a channel to collaborate, but we should remember that we won’t get unexpected solutions with an expected team. Innovation comes with getting different mindsets and perspectives because the people we are solving for are complex and very dynamic. And, collaboration doesn’t have to be exclusive to the team, it can also take place with customers to co-create products and services that match their needs.
Of course, none of the above will work if the environment does not support innovative practices. Companies should ensure that as they work to change the culture, that they also create supportive internal structures.
I don’t think business KPIs are going anywhere. We do however need to learn to work with them, use them intelligently, and iterate on them as we refine our business practice. KBIs could be a good mix of an improvement on the traditional KPIs and innovative practices necessary to survive in today’s business world. It’s hard to measure ‘creativity’ or ‘behaviour’, and consequently it’s hard to forecast whether an innovation will succeed or not. What companies can do is ensure they create the right environment for innovation, so that the right ideas find their way into the market.
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