Today’s business climate is uncertain. Disruption, exponential growth, and the technology landscape contribute to the need for constant innovation. Company leaders can no longer formulate a business model and rely on the five-year plan. Instead, organizations need change to thrive and grow.
Factor innovation into the equation when figuring out how much value and benefits investments have on an organization. Companies that have an innovation system in place will see significant results.
The Role of Experimentation
Experimentation is crucial to the ROI of innovation. The key to success is adapting to evolving circumstances.
Many companies face the challenge of updating infrastructures and business models. Their systems, culture, and policies need to reflect fast change and an unpredictable future.
Business cases are typically used when discussing funding for ideas. This document asks for financial metrics including return on investment (ROI), payback period, etc. You can’t predict these metrics reliably if they are new, especially when so much uncertainty is involved.
Getting approval for a business case often takes weeks, sometimes even months. All the factors involved can slow down the process of innovation, or create a fear of it altogether.
When innovation is in the early stage, ROI isn’t a metric that is heavily discussed. Instead, conversion rates, click rates and other innovation metrics are used.
Many financial executives rely on ROI and other similar metrics to figure out where to apply capital. This causes a conflict where innovation is concerned and means many great ideas are never realized.
Innovators can resolve this conflict by learning how to relay important metrics and financial information to executives. This helps push ideas through to the experimentation stage so their impact can be realized.
Innovation occurs in different company departments. It can involve teams who regularly meet to discuss their projects or a dedicated innovation team that includes employees from various areas of the organization.
Reaching outside the company to gather ideas from customers, vendors, and other professionals is also recommended to see the ROI of innovation. It allows innovation teams to find even more value in ideas.
Meet with executives and others in upper management to explain those ideas you feel really have potential. Describe their purpose and how they will benefit customers and the company as a whole.
Use metrics such as the rate of return and market size to illustrate your points. Explain how the new innovations will fit into the existing business model and evolve as it does.
Consider Research and Development
Research and development (R&D) is a metric many executives want to see. It’s an important part of corporate innovation that should not be overlooked. Research shows 93% of executives believe organic growth and innovation contribute to revenue increases.
When coming up with new ideas, figure out what it will take to research the new product or service, then completely develop it. Knowing the costs involved can go a long way toward showing the projected ROI of innovation.
The success of new product sales will vary from one industry to another. Show how innovations can play out over the 3-5 year period. This is another great way to measure and ties directly into how proper R&D will pay off.
Want more ways to maximize your innovation efforts? Get the Innovation Starter Kit.