How do you value a startup? Many business owners cannot believe it is solely dependent on future earning capacity instead choosing to believe the value of their business is dependent on the amount of capital they have put in, and the years of hard work they spent on it. I still remember this explanation recounted to me by Jason Fitzsimmons (data modelling lecturer extraordinaire) as he explained how he broke the bad news:
“I realise you have put two years of hard work in, and all of your life savings…but for all I know you could have spent all that time and money digging a large hole in the ground and filling it with pencils”
So how effective is your company’s innovation program? Have you been digging a hole and filling it with pencils, or have you been getting those golden nugget ideas that make it all worthwhile?
In his blog on Innovation Management, Doug Collins wrote about measuring the value of an innovation practice. In it, he provides a framework for measuring the value of an innovation practice based on three simple criteria:
- Strategic Alignment: are the ideas helping the organisation achieve its goals?
- Relative Advantage: how much better are things after the ideas have been implemented?
- Engagement: is the community engaged, and will the program maintain momentum?
This sounds great, after all…why are we trying to think creatively in the first place? is it worth the effort? and are we still going to doing this a few years from now? All good questions. From my experience in a professional service firm, I would also look at the links between the way innovation is practiced and the way revenue is generated. Here are two different approaches from a professional services firm, guess which one still has engagement in two years time:
- An exciting range of lunchtime innovation sessions are launched, with cool brown bags full of lunch goodies and plenty of high energy ideation. The best ideas are put forwards for selection with prizes going to the crowd favourites. Successful ideas are then pitched to clients in an attempt to monetise them.
- Innovation practices are embedded into existing client projects, with staff trained in creative thinking techniques and provided with on site facilitators to help generate innovative ideas at key points during each project. Evaluation and funding is decided within the project team, with close collaboration and support from the client.
Measuring the individual return on investment of ideas produced from an innovation practice gives you a pretty good idea of whether or not your program is any good. Checking to see whether or not these ideas are aligned to strategic goals is also a really useful way of telling whether your efforts are being focused effectively. And engagement can be measured through a number of leading indicators (i.e. backwards facing). But is this enough?
- What is an innovative culture for, and why would you want it? Innovation is a skill-set and a process which you can develop and use to create and implement cool ideas. You’ll know the ideas were really cool when no-one else has thought of them, and they blind side your competition to create real competitive advantage. An effective innovative culture will continue to unearth opportunities, keeping your company agile and ahead of the game
- How can you spot which people are innovative? They’re the ones with innovative characteristics like curiosity, flexibility and fluency. They will be willing to experiment and make mistakes, and they will have the drive to keep trying until they get it right. Innovative people will keep being innovative because it gives them joy, and they really want to keep innovating.