The “parenting role” of developing a good corporate platform for performance assessments, is certainly also relevant and important to corporate innovation. It is however rather strange in times when most corporate activities are measured and carefully evaluated in a short-term and long-term perspective, that corporate innovation often totally lacks a good performance measuring system. Is innovation, then, an exception to the old saying that what gets measured gets done?
This is probably not the case, and since there seems to be a somewhat remarkable total consensus about the strong relationship between a company’s future competitiveness and its innovation capability, the conclusion is that corporate innovation not should be left without a similar well-functioning measuring system. It is more relevant to ask: What does your system for measuring corporate innovation performance look like? Or: Do you need to develop and improve your present system?
In larger corporations in the Process Industries, resource allocation to R&D is nowadays often decentralised and investment in R&D, depending on the nature and scope of innovation activities, is often left to the discretion of business units, divisions, companies or even smaller production units. The advantage of this is that it ensures that innovation activities are in line with individual business strategies and that product development is close to the customers. The disadvantage, which sometimes can be considerable, is that group management, or top management in smaller organisations, totally loses control of all innovation activities, and that possible synergies between business or production units in innovation are lost.
Well designed corporate measuring systems for innovation are the remedy for this disadvantage, and well selected and aggregable performance measures will also give an opportunity for internal or external benchmarking of corporate innovation. A good performance measuring system and good corporate key ratios for innovation will diminish the risks of decentralised R&D and can be looked upon as an important part of a company’s early warning system.
From a historic management perspective, the lack of relevant measuring and control systems for innovation is probably related to an old-fashioned view that this activity is too complex to be measured. But the knowledge base in this area has greatly improved over the past fifteen years, and we now know vastly more about how to measure the performance of R&D. There is a spectrum of alternative financial and non-financial performance measures that can be selected depending on the nature of company R&D and on desirable areas to improve. The question today is not so much whether it is possible to measure R&D, but how to design a proper corporate measuring system for R&D.
As we all know, it is difficult to improve a product from a production process if the properties you want to improve are not measurable. One of the objectives of measurement systems is thus not the measurements themselves, but the desired improvements. The measurements are then only the results that are generated in an improvement process. The measurements themselves unfortunately give us no guidance on how to go about improving a product property, and you have a similar situation for the improvement of R&D.
Since output measures do not help in your improvement efforts you must look for successful behaviour that can produce these desired improvements. You must in other words try to identify “success factors” and “drivers” for good R&D performance – success factors that also are linked to the company’s R&D innovation strategy. There is thus a clear analogue to the Balanced Scorecard approach.Read more about our research on success factors for process development in the issue of International Journal for Process Management and Benchmarking: Success factors for the development of process technology in process industry; Part 1 & Part 2
After success factors for innovation have been developed, it is time to design a measuring system for corporate innovation. The participation of company R&D staff in this process is essential. People in the process industries, being often experts on other kinds of measurements, are not likely to accept measures that are not understandable, relevant and reliable.
When a good measuring system for corporate innovation has been introduced, it is time to consider the overall presentation of corporate innovation and how performance in that area should be presented to the R&D stakeholders. Corporate internal and external stakeholders expect to find out how the company is performing and what direction it is taking through the company annual report. Internal stakeholders for R&D deserve a similar presentation of R&D.
blinab has a long track record in the area of developing success factors and performance measuring systems for innovation in the process industries. We adapt the system to each company’s individual characteristics and the nature of its corporate innovation activities. Development of success factors and measurables is carried out within the R&D organisation “bottom-up” in a stepwise work process that assures organisational acceptance in a long-term improvement perspective. Read more about our view on Success Factors, in the issue of Integrated Manufacturing Systems: Success factors for improvement and innovation of process technology in process industry.
Our experience is that each company must develop a “customised” system of success factors and performance measures for innovation, and that there is no off-the-shelf solution to be found. It is vitally important to measure important and relevant innovation outputs and success factors, but it is equally harmful to measure the wrong ones!
Corporate success factors and performance measures must also in future be better presented and communicated to all corporate internal stakeholders. The responsibility for such reporting rests solely on the R&D director. We find that well structured and presented annual reporting of corporate innovation is the proper instrument. Why not let us help you to develop relevant success factors and a good performance measuring system? We can also assist you to develop your Corporate Internal Annual Report for Innovation™ that will enhance communication with your company stakeholders for R&D, and make an annual presentation of R&D of excellence.
You will find further information under the red buttons below.