If you’ve been reading our blog, then you know that there are two ways of measuring innovation program success: innovation inputs and innovation outputs. One of our customers is so good at measuring their innovation outputs, that they know the value of every incoming idea (whether it’s implemented or not). This is something that you see in almost every practice that includes a funnel. Marketing, for example, looks at both the cost to acquire each lead as well as the value of each lead coming in. The cost for each lead is essentially the total number of leads divided by the total dollar amount spent to attract those leads. The value of each lead, of course, is the total amount of revenue generated by new deals divided by the total number of leads it took to generate that revenue.
But how do they calculate this when it comes to innovation? It’s basically the same idea. You take the total amount of money saved and revenue generated and divide it by the total number of ideas in your community. That shows the total value of your innovation portfolio and really helps to generate an appreciation of every idea in your funnel whether it gets to a final implementation stage. It turns out that every idea has some relative value.
When Harvard Business Review wrote their article about how to manage your innovation portfolio, they talked about ideas across three horizons. Those ideas that impact and improve your core offering, the ideas related to adjacent offerings and markets, and totally transformational ideas in new territories. The golden ratio that HBR found most commonly was a 70% investment in core, 20% in adjacent, and a 10% investment in transformational ideas. Of course, they found the return on those ideas to be totally inverse with only a 10% return on core ideas and a 70% return on successful transformational ideas. However, if you are looking at the total value generated from all ideas, you can see the value of an idea no matter where it falls in your portfolio.
How are you measuring each idea in your ecosystem?