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Nurture Your Business With Innovation Management: 5 Keys to Success

Introduction

About Innovolo

Innovolo Ltd is a U.K.-based product development and design consultancy team. We eat, sleep and dream of innovation. As a team of creative problem-solvers, designers and engineers, we love to turn ideas into a reality and help promote innovation by collaborating with exciting businesses.

When a project needs an extra resource or when a business is facing a critical phase of growth, we can help solve the complex problems and simplify the innovation process so that they can create excellent and exciting new products.

One of the biggest barriers to innovation that we witness is a lack of understanding of the machinery of it all. Many thriving businesses have excellent business acumen but lack the insight and awareness to harness innovation as a core driver for success. Sometimes it is because the business lacks the time or resources. Other times, the company simply does not know where to begin. Either way – we love to get involved and turn tricky situations into amazing success stories.

The what, why, and how of innovation might escape even the most seasoned business experts. But that is okay. In this report, we will share some of the most important benefits of why integrating innovation into the culture, processes, and new product development at your company can give you higher returns on your investments, better levels of staff engagement, and more productive activities in your marketplaces.

So read on, get inspired, and pursue an innovation management system that works for your company. We guarantee that you will be glad you did!

THE UNCERTAIN STATUS OF B2B COMPANIES DURING A GLOBAL PANDEMIC

A business-to-business (B2B) company relies on a strong market to stay productive and functional. If the economy is in recession and adjacent buyers and sellers no longer require its products or services, then keeping the doors open can be a challenge.

Then, of course, enter COVID-19, the global pandemic that sent industries around the world into historic economic shutdowns in 2020 and 2021. In the context of a global pandemic, opportunities for B2B offerings have become even more scarce, leading to yet more uncertainty and cautiousness by company owners, CEOs, and product managers.

Does that sound like you?

We want to be among the first to offer our condolences on the months of impeded business, restricted cash flows, and overall heartache that you have endured throughout the COVID-19 pandemic.

Fortunately, however, we also want to provide you with a solution to your problems. It is called an innovation management system. It is applicable to all types of companies, big or small. It applies especially to B2B companies that, prior to the pandemic, were well-established and consistent earners. Companies now more than ever need to rely on innovative solutions to overcome record-breaking challenges in terms of product demand, shifting consumer preferences, and economic lockdowns.

…If you are a B2B company with lots of ideas for new innovations, then read on.

…If you are an established business with an in-house R&D department that is not quite living up to its expectations, then read on.

…Whether you provide capital offerings, raw materials, equipment, or technologies for your business clients, then read on.

A robust innovation management system can boost your long-term ability to operate and thrive in today’s marketplaces, and it is just around the corner…

PANDEMIC PROBLEMS

In studies conducted during the pandemic, up to 66 percent of businesses expressed concern over the substantial disturbances that the COVID-19 pandemic caused.[mfn]https://www.emarketer.com/content/covid-19-impact-on-b2b-industry[/mfn] The worst-hit sectors are in personal services, wholesaling, and manufacturing.

To make matters worse, the effects of the pandemic are far-reaching and hard-hitting for those B2B companies. According to the same study, 59 percent were concerned about sales and revenue and another 56 percent were worried about their cash flow. Finally, 52 percent were concerned about being able to properly execute their business strategy.

The future is uncertain. The indirect effects of the pandemic are yet to be realised. Budgets around the world, for businesses and public finances, are stretched. The increased costs to keep doors open, coupled with reduced sales and revenue means that many businesses are at a breaking point.

Public finances, too, for many governments are set to see all-time highs in deficits due to over-spending on public health and unemployment benefits.[mfn]https://www.economist.com/united-states/2020/06/18/the-state-budget-train-crash[/mfn] There is a real risk that historic budget cuts to public services are inevitable. And that poses a problem for establishing innovation, too, because governments have
historically been contributors to patent-encouragement programs. They have also contributed millions of dollars toward research think tanks or other publicly-funded research programs.

If public accounting does not add up, what hope do private businesses have? In many cases, they may suffer similar fates. Many businesses currently run well below full capacity. Many will need to cut costs accordingly to maintain profit. Small and medium-sized businesses need to make the challenging decisions between investing in more patents and new product developments or moving that cash over to other functions they deem more essential.

The Silver Lining

Innovation is essential during a pandemic. Instead of being the thing that gets cut, innovation should be the element that saves the business. Innovation is what keeps businesses thriving. It allows them to pivot to adjacent opportunities rather than simply closing up their shops.

Rather than cutting funding to R&D departments, you should be ramping up activities. Or, more accurately, you should take a renewed focus on how your innovative activities are being performed. How well are they being managed? What is your patent or new product conversion rates? How many returns do you get for every dollar invested in research and development? Answering those questions is key to innovation management.

WHAT IS INNOVATION MANAGEMENT?

Let us take a critical look at the term innovation. For established companies, there is a nearly limitless number of ways to be innovative. Conveniently, they can all be placed into a few categories:

  1. Product innovations
    1. Launch new goods or update existing ones
    2. Launch new services or update existing ones
  2. Process innovations
    1. Adopt or invent new technologies to help your business internally
    2. Adopt new organisational practices to help your business internally

There is a good chance that these categories need no further explanation. If you sell a product or provide a service to clients, you know that there are plenty of ways to revitalise the efficiency of those existing offerings or even add a whole new offering for customers.

The second category, process innovations, are slightly less tangible, but they exist mostly within your organisation. These are the new software you adopt to boost your ability to keep track of customers, vendors, and clients. Or, they are the innovations in your organisations that allow you to foster collaborative and open environments, giving your team members opportunities to put forward new ideas to the benefit of the company.

How to Manage all that Innovation

Now, how do we manage the implementation of new innovations across the organisation? Whether it belongs in category #1 or #2, that is where the field of innovation management gets its name.

You can approximate how to manage innovation by reflecting on how to manage the people at an organisation. Think of it this way: if you hire a new staff member, and place them in a vacant office or cubicle, but fail to offer them guidance and support, do you think that the new employee will thrive in the workplace? Not likely.

Similarly, to embed innovation into an organisation, you cannot simply force it down among your colleagues or write it down as a priority on your company website and wait for the innovations to roll in. If that is as far as you go, innovation will never truly seep into the workplace and become part of your new normal.

Rather, innovation management is a broad term that describes how businesses can adopt innovative practices. Improving how you manage innovation can help you launch new business models, new products or services, gain market share, and be more competitive. Innovation management is the collection of business processes, tools, decision-making, and other organisational capabilities that allow a company to be innovative.

Innovation management goes by other names, too. You may have seen it called Strategic Innovation or the Innovation Management Lifecycle or even Innovation Best Practices. Whatever you like to call it, the precise point about steering innovation in the right direction for your organisation is that you need to manage it. It needs to be nurtured, guided, and emphasised in your daily routines.

To that end, there are lots of ways to manage innovation:

  • Prototype new products or services;
  • Brainstorm new organisational processes;
  • Adopt new software to monitor and manage innovation projects;
  • Outsource the innovation management to experts;
  • Implement a product lifecycle management system; or,
  • Manage a portfolio of innovation projects.

These methods really only scratch the surface.

It should be noted that innovation management is, in a way, a component of change management. It is a new way of doing things within an organisation. It should be considered with the same level of care and precision to implement as other major shifts in the company. In many cases, the entire workforce must be committed to innovation and the executive teams must be ready to challenge norms.

Who does innovation management?

In one way or another, many of the top companies in the world have robust innovation management plans.

Consider Google, whose very brand conjures up feelings of innovation and cutting-edge technologies. They systematised innovation early in their corporate history. Over fifteen years ago, the company shattered conventional norms by providing its employees with the freedom to contribute 20 percent of their time to work on organisational innovations.[mfn]https://www.businessinsider.in/The-truth-about-Googles-famous- 20-time-policy/articleshow/46962732.cms[/mfn] This management philosophy is, in fact, a perfect example of innovation management. The leaders of the company bought into the power of innovation and employees throughout the organisation utilised the philosophy to improve processes and launch new prototypes at unprecedented levels.

Another company that leverages innovation management in a powerful way is Procter & Gamble. They manage a few dozen brands and are experts at nurturing a huge portfolio of new product innovations.[mfn]https://hbr.org/2006/02/the-why-what-and-how-of-management-innovation[/mfn] This complex arrangement of new products would not be possible without a rigorous innovation management scheme driving their powerful portfolios.

In the following pages, you’ll get unique advice about why you should focus on improving innovation management in your organisation. We will look at five important benefits of innovation management. We will also give you some tips and tricks about how to implement innovation management in practical ways.

The 5 Benefits of an Innovation Management System

  1. It Optimises Budget and Talent

Innovation management is a very good tool to help get the most out of scarce resources. Whether it is because of a recession, a global pandemic, or because you are a growing enterprise, resources are not always widely available. Moreover, most companies do not have extra resources lying around to throw away by wasting them on unsuccessful projects.

One of the first things that innovation management seeks to identify is a specific output. Rather than running around aimlessly claiming to be innovative but really just mucking up processes that already work adequately, innovation management gives your objectives a tangible target.

  • Do you want to launch a certain new product within the next two years?
  • Do you want to revitalise the way you maintain customer and vendor records internally so that you can generate new leads and follow-up on existing ones?

No matter what problem you are trying to solve, good innovation management ensures that your whole team and all your necessary resources are optimised and functioning to their fullest potential.

By accurately defining your practices, you get more accurate outputs, too. Innovation management, then, is akin to the fancy scope you put on your rifle during target practice.

If you only try to line up your target by squinting and starting down the barrel, you will miss much of the time. However, by focusing your efforts through the use of a tool (a scope in this case), you can dramatically improve your accuracy and consistency in hitting your mark. In the case of your business innovations, “hitting the mark” means launching new products or revitalising that internal record-keeping process, or any other innovative activity.

Optimising your budget for the most impact

What is your budget made of? It consists of much more than just the balance in your bank account. Your budget takes all sorts of resources into account: time, money, effort, human-hours, capital resources, and more.

Ideally, the amount of resources you use will be optimised. Optimisation occurs when you can produce your desired goal satisfactorily by using the least amount of resources that are required.

Did you know?

An innovation management system can drastically optimise three different types of impacts that your business can benefit from:

1. Business Impact

Business impact is the degree to which innovation and other improvements can alter the characteristics of your business. These business effects are widespread,
but here are a few examples:

  • More cash flow;
  • Better return on investment for innovation products;
  • More connectivity to your customers;
  • Better partnerships with innovators like startups, think tanks, and entrepreneurs; and,
  • A systemised way of creating new ideas.

Such impacts make it easier for you to stay competitive, nurture opportunities and ultimately deliver more (or better) goods and services to your customers.

2. Technology Impact

Your technological impact is the degree to which technology and other forms of automation can increase your business potential.

By adopting new technologies, your business can become more competitive. As an example, encryption software may help bolster your online e-commerce sales. Or, automated purchasing systems might make selling your products to new vendors easier than ever.

There are four major ways that technological impact can make a difference for your business:[mfn]https://www.bbc.co.uk/bitesize/guides/zhs4gwx/revision/4[/mfn]

For starters, the cost is a huge impact. Technology can reduce the cost of producing your goods or reduce the risk of wasting resources. Productivity also plays a huge role in how competitive your profit margins can be compared to other companies. New technologies can improve how efficiently you run your business.
Quality can be improved through technology, too. For example, using a new and cutting-edge ingredient in your production process might mean a more durable
and reliable product for you to sell. Lastly, the increased impact can be achieved through new flexibilities. Automation can improve the way you are agile and flexible to meet customer needs. These characteristics can be revitalised through technological innovations.

3. Market Impact

Market impact is an agglomeration of many factors, all of which give your business a heightened profile or presence in the market.

As an example, for a B2B company selling intermediate chemical goods to commercial retailers, your market impact is how much presence (scale, quantity, customer base, vendor relations) your business possesses compared to others in the same industry or region.

Innovations, in all sorts of ways, can benefit your market impact because they make your offerings more advanced, more beneficial, and ultimately more desirable for purchasers, which can boost your market impact.

Define your vision, then scout

One of the most powerful tools in innovation management is to use scouting to your advantage. The process of scouting is a way to explore new technologies or market trends to make your business more competitive.

The most successful companies have a “radar system” in place to monitor industry developments and capitalise on new trends.

For example, if a news story identifies a new B2B trend that helps to lower the costs of acquiring new vendors, what actions will you take once you acquire that information? More importantly, what actions will you take when you consider the direction of your company strategy?

Innovation management is powerful, but only if your priorities, strategy, and vision are clear. If acting on a hot tip leads you to a trend that does not suit your business vision or your regular customer base, then would that effort be worth it? Probably not. But to properly manage your leads, you have to set up your vision and goals first then explore new trends or technologies that will yield the most impact. Being able to scout is both an effective management tool but it is also crucial if you want to optimise your resources and staff efficiently.

A recent study by the Harvard Business Review asked 140 top businesses about their scouting techniques.[mfn]https://hbr.org/2019/01/how-big-companies-should-scout-new-technologies[/mfn] While the majority had embedded scouting practices within departments like marketing and R&D, many businesses nonetheless struggled with prioritising their scouting efforts.

In the study, the top five challenges to scouting were:

  1. Connectivity to the business;
  2. Identifying what areas to scout;
  3. Having the time to do it;
  4. Sufficient staffing; and,
  5. Sufficient funding.

Notice how the bottom three are budget constraints? Even the top companies (with millions of dollars of revenue between them) have a tough time validating the impact that scouting can have on their innovation potential.

Conversely, the top two irritants are more about the machinery of the business and how to properly integrate and embed the scouting activities into tangible results.

The reason we point out this valuable study is that it illuminates the importance of an innovation management system. As a whole, a robust system in place to manage innovation can optimise budget constraints (thereby reducing problems 3-5).

Additionally, innovation frameworks can help clearly define the mission and goals of your business, which impacts how you integrate results and identify new innovation opportunities in the first place (problems 1-2).

2. Stronger Innovations, Stronger Portfolio

Does your company have a patent portfolio?

What about a product portfolio?

If you answered “yes” to either question, then an innovation management system can help you maximise your portfolio and open new doors for your innovations.

What is a patent portfolio?

A patent portfolio is a number of patents owned by a single entity, most commonly a company. If a company comes up with a brand new idea that has never been seen before in the market, they are quick to apply for a patent so that they get exclusive rights to own and sell that specific type of innovation.

In the patent world, the quicker you file for a unique patent, the better since there is a significant first-mover advantage. That can give companies a huge edge over their competition if they can hold the rights to a product idea long before others can “copy” their idea. That first-mover advantage, particularly for trendy or disruptive new products, can yield massive market shares for companies once a product is launched.

In addition, it is not always necessary for the patent holder to be the producer of the intended innovation. Many companies also license their patent portfolios to other producers – for hefty fees, of course. In recent years, IBM, the market-leading technology company, has earned over US$1 billion in annual revenues from licensing its desirable patent portfolio.[mfn]https://www.ibm.com/annualreport/[/mfn]

It really does pay to be innovative!

What is a product portfolio?

In a similar way to a collection of patents, a product portfolio is the “dinner menu” of products or services that a company offers.

As an example, a B2B company might include numerous offerings in its product portfolio. A distributor of office furniture may sell its inventory to retailers but it also might offer maintenance, repair, and operations (MRO) services to keep its assets in working order or to respond to quality control issues in the supply chain. The sale and service of its own office furniture are two distinct offerings in its product portfolio.

What does a portfolio tell you about the strength of your company? Well, from an investor’s perspective, a diverse number of products or services in the portfolio is a positive diversifying factor for financial analysis. That is because different types of products face differing market dynamics. If a company features diversified products across a few different industries, then that mix of sales may have a stabilising effect if one industry hits a downturn while another gets heated up.

As far as financial analysis goes, product portfolios can tell a lot about a company’s performance and reliability. It is important to distinguish between product offerings in a portfolio because one item may drive financial performance more than another. For instance, Apple Inc. is famous for its iPhone device which is a core contributor to its financial success. Specifically, the smartphone drove 62 percent of the company’s total sales as of 2018.[mfn]https://www.investopedia.com/terms/p/product-portfolio.asp[/mfn] That makes the device more important, from an investor’s standpoint, than Apple’s other products like computers or software.

Did you know?

Innovolo Ltd is a leader in systematised creativity. We’re an award-winning innovation leader that has the technical expertise to develop and grow a patent or product portfolio for your business.

Filing a patent is not a simple process. There is an art to filing broad and high-quality patents that give your business the protection it needs. Ideally, you want to safeguard your entire product portfolio, which, for some sectors, might mean filing for patents for a broad range of improvements and innovations. Each step of a product iteration may be possible to protect through patents. It is important to stay on top of an ever-evolving landscape of patent filings (and competitor developments), which is a key factor to the success of your portfolio.

Innovolo wants to help you revolutionise the way you expand your products, develop new innovations, and ultimately file for patents to protect your R&D legacy. We want to:

  • Help develop documentation and prepare your teams to create new innovations;
  • Help you pinpoint what exactly can (and should) be filed as a patent;
  • Help with the tough negotiations with external parties that may arise in the new product development or patenting process; and,
  • Help you every step of the way in the innovation journey of your business.

Ultimately, Innovolo wants to help you get the protection your need for as little hassle as possible. That way, you can focus on running your business while we focus on protecting your intellectual property!

The benefits of a strong product or patent portfolio

An innovation management system allows you to streamline your intellectual property processes. In today’s highly technological and highly competitive business world, every company is innovating. Having a strong product or patent portfolio gives you a serious edge over other companies that do not spend the same level of attention to crafting a perfect portfolio.

Here are a few reasons why it is advantageous to have a strong portfolio, driven by a robust innovation management system:

1. A strong portfolio gives you better coverage

A perfect patent portfolio means you can protect your important innovations and the entirety of your product line. Part of strengthening your portfolio is making sure you have the optimal level of protection in your patent filings.

The highest level of protection means you will be safeguarded if a competitor tries to develop a substitute product during the lifetime of your patent.

A wide-ranging patent that covers future iterations of your product is also good because it gives you increased scope. It is like casting a wide net, meaning if you change the product slightly in its lifetime, you will still be able to monetise it properly since it will still fall within the scope of the original patent.

2. A strong portfolio helps with negotiations

A strong portfolio is like a marketing tool for your business. It can allow you to attract more customers. It can drive the decision-making of your executive team by giving them valuable insight into what components are yielding the biggest financial gains for your enterprise.

A strong product or patent portfolio helps you position yourself as a market leader in your region or industry.

Think about your own portfolio like a brochure: is it better to have one or two offerings that vaguely define what your business model is? Or is it better to have a well-defined catalogue of competitive offerings that demonstrates to investors, customers, and new vendors that you take your outputs seriously? We’ll take option #2 every time, and you should too.

Great portfolios demonstrate to others that your business has real and tangible value. Often, the portfolio will outlast any one patent filing, meaning the strength of the entire portfolio can be taken into account when it is time to attract investors.

3. A strong portfolio gives you a better return on investment

Even if your business does not currently have a patent portfolio, it might be a good time to consider it.

You may even have developed a product or service in the past that could be subject to the protection of a patent without even knowing it. Putting a patent on it would protect you from competitors but it would also open doors for monetisation opportunities. Depending on the scenario, your products might be eligible for licensing agreements with other vendors, meaning you can open up new revenue streams through licensing opportunities. Doing so gives you much more return for your initial R&D investments than if you were to use the new product exclusively for yourself.

3. Boost Your Intangible Assets

Innovation management is a key driver for your organisation’s intangible assets.

What is an intangible asset?

When we think of innovation, we often think of a physical new product that we can touch and feel. While that is true in many cases, there are also intangible aspects of innovation that contribute to the value and growth of your business.

Particularly in the knowledge industry, intangible assets are those that contribute value while being based on irregular, highly specialised, or non-repetitive activities.

An intangible asset is a resource that “has no physical presence and has long-term value for a business”.[mfn]https://www.freshbooks.com/hub/accounting/what-is-an-intangible-asset[/mfn] Examples of intangible assets include:

  • The reputation of your business;
  • The in-house expertise of your business;
  • The copyrights, trademarks, or patents that your business owns; and,
  • The brand recognition that belongs to your business.

Intangible assets constitute what is known as the goodwill value of your business. In other words, it is the level of business maturity that makes your business recognisable and attractive to customers, investors, and vendors.

Ask yourself this: if you were to sell your business tomorrow, how would you value it?

You can add up all your inventory and your assets and capital and wind up with a tangible estimate. But what about your intangible assets, like your in-house knowledge and expertise, your reputation, and your business brand? Each of these elements must also contribute to the overall valuation of your business.

That is why, in the accounting world, tangible assets like inventory, equipment, or capital are considered to be the current valuation of a business. The long-term worth of a business, however, takes into account the intangible assets, too.

Where does innovation management come in?

Innovation management is the system in place at your organisation to boost innovative activities. That boost comes in the form of a robust system of metrics, talent, habit-formation, culture, enthusiastic senior leaders, and more. Innovation management, at its most advanced stages, means that innovation and knowledge creation are at the very core of everything your enterprise does.

By properly implementing a strong management system for your innovation efforts, you can unlock untold potential in the growth and value of your business. It allows you to actively engage in innovation and growth-inducing R&D rather than leaving those items to the bottom of your to-do list.

The very act of engaging in innovation does, in fact, leave you more knowledgable and more mature in how you run your business. Being able to systematise those activities with the help of a management system can only steer your activities with more precision and with better success.

The end result? A more mature and more attractive company filled with many intangible assets in addition to your current valuation.

A Tale of Two Companies: A Story about Intangible Assets

Consider two companies. Both are vying for some financial support from an investor. During tough economic times, the financial support could mean the difference between staying open during the recession or closing down the business permanently.

Company A is a reputable and established brand in a region of the country and has a sizable vendor list to distribute their wholesale products and services. They have a conservative board and leadership team that prefers to vote for the status quo rather than to take many risks.

Company B has similar characteristics but is a smaller organisation with less experience. However, while Company B does not have as many years in the
industry, they have a demonstrated track record of some truly innovative outputs. Leveraging an innovation management system that allows them to recruit top
talent, their out-of-the-box thinking allows them to partner with exciting new startup companies and adopt innovative new software and service models. That
excitement has allowed them to grow their offerings to a similar size of market share as Company A but in half the number of years.

The investor must consider several options when deciding where to invest. If the investor considers only the tangible assets like the inventory and the existing client base of both companies, then Company A would be the winner.

However, the investor is savvy and therefore calculates some of the intangible assets of both businesses into the equation. That is where Company B begins to emerge as the winner. Company B has more innovative in-house talent in place across its departments. It is also recognised in the industry for its fast-paced growth and calculated risk-taking abilities. Clearly, there is “something going on” with Company B that sets it apart.

Moreover, upon interviewing executives and leaders at both companies, it becomes clear that Company B’s robust system for managing innovation is a sizable advantage. Not only does creative thinking come more naturally, but an advanced system of monitoring and tracking its innovation projects means that the intangible assets are, in fact, possible to evaluate and measure.

Once all is considered, the investor ultimately sides with Company B and gladly invests in a life-saving level of financial equity that keeps the business growing and thriving in a competitive market space.

4. Better Evaluation with Metrics

If you read the “Tale of Two Companies” story, you noticed a significant advantage that the young fledgling innovator had over its competitor:

A system to evaluate and monitor innovation.

At times, a system of measurement and evaluation can be the difference-maker when investors take a hard look at your business or when you negotiate with new vendors or distributors.

How do you measure the value of intangible assets or any other type of value you generate through innovations?

The answer is with metrics. There are two different parameters to consider when evaluating the success of your R&D department or any innovation activity.

1. The value that you add to the company.

This can include all sorts of value, such as the new features you add to products or the level of continuous improvement and development activities you partake in. You can also add value by solving problems for customers and engaging staff in whole new ways.

2. The value you generate through your creative efforts.

Your creative and innovative efforts generate value through the creation of intellectual property and the contribution to your intangible assets.

How to use metrics to track progress

Implementing a system for metrics is itself a type of innovation. It is a transformational change for your business that will help you stay better organised, make better decisions, and survive economic downturns.

An innovation management system gives you a matrix of science-based metrics so you can measure and evaluate each of these values using hard evidence.

A common set of KPIs belongs in the financial category. These often include common metrics like gross profit margin, net profit, customer acquisition ratio, and return on investment (ROI).[mfn]https://quickbooks.intuit.com/r/financial-management/5-financial- kpis-gauge-business-health/[/mfn]

Not every metric will work for your business. You have to pick and choose and filter the most fitting ones to inform your decision-making and evaluation purposes. A common solution, when determining what metrics to use, is to combine several into what is known as a balanced scorecard. You can place different levels of importance, or weight, on the metrics that are most (or least) important to the perceived success of your business.

Innovation-specific metrics

Implementing a system to measure performance indicators is a positive step for the financial well-being of your organisation. However, there are other niche metrics that will help you monitor the progress of your innovation projects, too.

The most common way to measure innovation activities is with simple metrics such as:

  • The number of new products;
  • The number of ongoing innovation projects; or,
  • The number of patents in your portfolio.

These can be very valuable to measuring the level of innovation occurring at your business. However, they fall short of measuring any tangible output or outcome of those innovation activities. After all, just because you launched a new product and got a “checkmark” on your annual checklist, do you know if (and how much) that new product contributed to your sales?

In reality, the metrics that many enterprises utilise when measuring innovation are lagging indicators. They tell you what has happened in the past or what is currently happening.

With a little more care and precision, you can transform those lagging indicators into leading indicators that tell you a more precise story about how your activities lead to tangible results or empower you to meet strategic goals. When you are setting up your system of metrics to track the outputs of your innovation, there are two simple metrics that can make a world of difference.[mfn]https://www.mckinsey.com/business-functions/strategy-and-corporate- finance/our-insights/how-to-take-the-measure-of-innovation[/mfn]

1. Sales From New Products

Sales from new products = Gross sales in new products (current period) / R&D spending (previous period)

This tells you how many new product sales you get from each dollar invested in research and development. It goes one step further than tracking solely the number of new products launched, and instead shows you the impact of those launches on your gross sales.

2. Gross Margin from R&D

Gross margin from R&D = Gross margin / Gross sales in new products

This tells you the productivity of your new products. It gives you a glimpse into how much gross margin you generate from launching new and innovative solutions.

These two metrics are important because they give you insight into how your business is able to convert research and development into meaningful results, over a period of time. In other words, they tell you how efficient your innovation efforts are.

…A word of caution: metrics should be present to both inspire managers and to evaluate progress made toward innovation. However, it is possible to over-compensate with metrics, which can lead to exactly the opposite result. Overdoing it with metrics can stifle creativity, add stress and limit the amount of innovation output that your managers can produce.

It is always best to use a healthy balance of metrics, combined with a light touch of freedom to let your leaders, managers, and technicians exercise their own best judgments for how to get the innovation job done.

You Don't Need to Hire a Data Scientist or a Statistician to use Metrics. ...but you might need a little help

The team at Innovolo are experts at leading established businesses to new heights through the implementation of effective innovation strategies.

A dedicated innovation expert is a way to accelerate your in-house innovation activities. It can help your business thrive by integrating tangible and predictable metrics of success to your corporate strategy.

Innovolo can transform your business from being a follower to being an innovator through the use of some of the following strategies for KPIs and metrics:

  • Pick the right metrics (more accurately than randomly pointing at one from a list).
  • Interpret metrics the right way (rather than misreading the data to steer you in the wrong direction).
  • Utilise your metrics to inform decision-making (rather than letting the metrics control you).
  • Set up your metrics in consideration of your industry, region, and market size (rather than copy-and-pasting a metric from a resource you found).
  • Excel in your metrics usage to capture output (rather than rely solely on simple metrics).
  • Understand the time component of metrics and look at data from an appropriate number of months or years (rather than assuming that last quarter’s data is enough).
  • Strike the right balance between monitoring metrics and exercising judgment (rather than stifling the creativity of your departments or over-doing it with KPIs).

Want to hear more? An Innovolo expert can discuss the full suite of metric options available for your performance dashboards and your balanced scorecards.

5. Nurture Your Conversion Rates

What is a conversion rate?

In section 4, as we looked at the importance of metrics, we established that a conversion rate is a critical type of data to evaluate your innovation projects. A successful conversion occurs when a new or untested concept is transformed into a viable product that you can prototype, market, and sell to customers.

Or, if the innovation is an internal improvement, a conversion rate can be assessed when the new process becomes widely adopted at the organisation.

An integral determinant of achieving successful conversion rates is to simply weed out non-feasible ideas in your ideation process. By implementing innovation management practices, you add rigor to the process of creating and choosing new ideas. You also harness new abilities to evaluate new ideas so that only the best and most promising proposals are carried forward through the development process.

Ideation in practice

Innovation management is a way to stabilise and strengthen how your organisation performs innovative activities. A huge part of that technique is the very basic (yet deceptively complicated) act of generating new ideas.

To structure your ideation, it is often helpful to establish a working group or committee. Doing so adds responsibility and accountability for the ideation process. It assigns ownership of the process to a handful of individuals which can be a powerful motivator.

First, try setting up a screening group or ideation committee. This group of motivated and enthusiastic big-thinkers can screen new ideas and look for concepts that have the highest potential business value. These subject matter experts should be connected to your core business and must understand many elements of your operations. The more diverse the group is, the better since the varying perspectives will only strengthen the idea evaluation.

Once an idea gets the “O.K.” from the ideation committee, you know that the concept is ready to take forward for further evaluation at a leadership level.

Another common option with screening groups is to outsource that expertise to third-party innovation platforms. Doing so can give you an increased ability to properly screen and nurture ideas and increase your conversion rates.

Add rigor with cyclical ideation

We recommend a cyclical approach to your innovation management and ideation:

1. Pre-ideation: in this stage, you will get all the foundations in place at your organisation to be able to foster and support the ideation cycles. You will set up the “infrastructure” of ideation, which includes coordinating meetings, motivating and recruiting staff and stakeholders and getting the approval of senior leaders. It also involves getting all technical documentation gathered so your existing products, services, and problems are defined as much as possible.

2. Ideation: in this stage you will generate ideas and solve problems through a host of collaborative techniques like brainstorming, prototyping, sketching, challenging your assumptions (and more). Ideation sessions can be guided by an external team of innovation experts, which can greatly help to facilitate the process and increase results.

3. Protection of ideas: in this stage, you will apply for patents for your most promising ideas. If you are not filing for a patent, it is at this stage that you will document and safeguard your ideas for internal use. Often, companies get caught up in the furor of ideation and fail to properly “write it down”. Then, projects get lost as enthusiasm and support wanes over time.

This cycle, above, is simple but gives you a clear method for adhering to your innovation strategy. It nurtures the ideation process from start to finish so that your ideas can gain momentum and turn into tangible assets.

Innovolo Loves to Screen New Ideas

Our team of innovation experts at Innovolo is passionate about innovation. We are also knowledgeable about facilitating and coordinating ideation sessions that maximise impact.

Why not let Innovolo be your trusted screening group or ideation committee? Or, a dedicated innovation expert can be integrated into your internal organisation so that ideas are fostered and evaluated with the highest level of innovation expertise.

Innovolo offers many options to facilitate your ideation process.

Why not try a virtual ideation workshop? It is an intuitive online interface that enables collaboration and brainstorming with top creatives and innovation experts, with no hassle!

Innovolo can also engage with your teams to create custom innovation boards so that your ideas are captured and documented in real-time. Then, when you have the bandwidth to reflect on the new ideas, they can be evaluated and progressed along the innovation pipeline – on your time.

Or, our team of experts can be a permanent and dedicated resource for your company to help you better capture and mold ideas. Innovolo offers an Innovation-as-a-Service package where a dedicated resource is always available to assist you with ideation or implementing rigor to your innovation management. It is like a performance booster for your ideation and innovation.

Conclusion and Takeaways

Innovation management is a method to nurture, encourage and evaluate innovation at all levels of your organisation.

Once properly implemented with care and consideration, it can be a self-sustaining system. You would sense the impacts of an innovation management structure if you were to see it. It occurs at an organisation where:

  • Every team member knows their role;
  • Innovation efforts are focused throughout every department of the organisation;
  • Collaboration happens naturally and frequently; and,
  • Good ideas are captured and converted into great new innovations, whether that be via structural changes at the company or new offerings for customers.

Innovation management is a tool to help you:

  1. Optimise your budget and talent;
  2. Develop stronger innovations through diligent portfolio management;
  3. Increase the value of your intangible assets;
  4. Inform decision-making and evaluate performance with metrics; and,
  5. Nurture conversion rates to increase productivity and innovation success.

Want to work with Innovolo?

A dedicated team of innovation experts is just a call away. As an award-winning consultancy firm, we have lots of expertise to partner with your organisation and help you unlock your true potential through innovation management.

We offer an exciting virtual platform, mixed with exclusive and customised innovation services that alleviate the fragmentation and misunderstanding that exists when it comes to implementing proper innovation management.

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