ROI on Innovation

innovation roi

Developing a culture of learning

Defining Innovation

For years “innovation” has been the business-world hot shot. I’ve heard business leaders say “Let’s innovate,” or “we need to stay innovative,” or “only hire the next generation of innovators.”

Great. Fantastic. The boss has spoken. But what does innovation actually mean? I challenge you to develop your own definition. Innovation by itself is meaningless. Many will say it’s about solving existing problems; for some it’s all about planning for future success.

Actionable Events and Results

No matter how you view innovation, one aspect is certain- it revolves around delivering a result and identifying an actionable event. Some actionable events are a result of a clear problem, whereas some are opportunities to add value that does not currently exist. Some examples include: increasing revenue, decreasing costs, developing new product lines, or rethinking how your customers interact with your brand.

For now, let’s focus on correcting an existing problem. Uncovering a problem and identifying an actionable event is critical to pivot and overcome that problem. Everyday top business leaders and blue collar employees, alike, are challenged with ways to make this happen.

Correcting an Existing Problem: Earning back the difference

Many questions tend to surface when addressing existing problems, such as: What caused the Problem? Is it systemic or isolated? Why did it happen now? How do we fix it? How do we ensure this does not happen again? All of these questions, and more, are natural and welcome when learning about a previously unnoticed problem.

Organizations faced with correcting an existing problem typically choose a quantitative approach to earn back the difference, measuring increases in revenue or decreases in cost in the short-term. Traditionally, this has been the go-to metric for return on investment. It has been standard to define success based on quantitative measurements. This concept, however, is changing.

Adding New Value: Learning about the future

Secondarily, an organization may plan to add new value. Planning this step may involve assessing the organization’s current platforms and developing questions around areas of current successes and weaknesses. Where do we excel as an organization? Where do our customers excel? What talent or knowledge makes us unique in the marketplace? What results do we want to achieve? Which team members are required to make it successful?

Organizations focusing on new value typically choose to learn about the future, measuring qualitative success in terms of new customer loyalty, employee satisfaction, requests for new product development, and more. Organizations that adopt a learning culture typically see success in the long-term as they gain market share, develop in-depth customer profiles, and create unique points of differentiation that suppress their competition.

Shifting ROI from earning to learning

Business leaders in today’s marketplace face new challenges around evaluating the benefits of quantitative ROI in the short-term and qualitative added value in the long-term. This is a fundamental concept behind developing new value.

Industry leaders are slowly broadening the focus of measuring ROI in terms of quantitative monetary short-term successes and, instead, evaluating the long-term quality and viability of an idea to add value far beyond short-term earnings. The development of new products, better customer engagement, and overall changes in business processes, can exponential increase organizational growth. This concept applies equally when correcting existing problems and when adding new value.

Building an organizational culture of learning to focus on planning new value results in a more intelligence workforce, more loyal customers, and stronger brand dominance within a marketplace.            

This blog post is part of a series authored by IdeaScale employees. It showcases how they’re thinking about crowdsourcing and innovation as part of their daily routine. Feel free to ask questions or make comments.

This post is by Sean Miller, Sales Development Rep at IdeaScale.

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