Using Actionable Innovation Metrics

Ash Maurya writes about actionable metrics. They are very different to regular metrics, which Ash refers to as vanity metrics. Here’s an example:

Imagine you are running a consulting practice which wishes to differentiate itself from two types of competitor (i) contractors, and (ii) tier one consultancies. You want to grow the business but don’t have the cash-flow to recruit new staff. You decide to start leveraging contractors, but only until you have enough cash-flow to start bringing in more full-time recruits. How do you control and monitor this growth? 

I would suggest using a simple rule to ensure you keep to a basic ratio, say 1.5 contractors to every 1 staff member. Too many contractors and you become a high cost, low value body shop. Too few and you are toast (out of cash). What about the monitoring? Here is where we can see the difference between vanity metrics and actionable metrics:

  • Vanity Metric: revenue. As it gets higher or lower, you get to plot numbers on a chart. Ooooooooh
  • Actionable Metric: staff/contractor ration. If the ratio gets out of whack, change your recruiting.

Note: another key point about actionable metrics is in cohort analysis, but I’ll get back to that another time. In this post, I want to focus on the “what are you going to do with your newfound knowledge” part.

What about Actionable Innovation Metrics?

There are a lot of different ways to measure innovation, the least useful of which is money. If you start with the premis that measurement is supposed to drive action then the whole point of innovation metrics would be to help drive innovation. What kind of behaviours would we want to see? Here are some of my favourites:

  • Willingness to fail (and learn from it): are you innovating, or making incremental improvements to something you know works already?
  • Ability to solve the right problem: do actual customers have a genuine problem that they need solved?
  • Collaboration and diversity: diverse teams seem to innovate better, so why not encourage it?
  • Creating value: can you actually execute your ideas and create some value?
  • Boot strapping: are your teams developing the minimum set of features to validate their innovations (think Minimum Viable Product), or gold plating everything?
  • Speed: are you moving through short sharp iterations or protracted navel gazing exercises?

Notice that I am not measuring return on investment (a short-term view if ever I saw one), number of patents (so what if you don’t hit your targets?), or number of ideas that get funded by the board. Instead, I am focusing on the kind of behaviour I want to see with clear action choices as the results come in. Teams aren’t diverse enough, step in and make a change….Ideas not getting executed, step in and fix the problem…teams taking too long to develop their ideas, step in and shake things up…

So next time you report on your innovation program, ask your self “so what?” or even better “so what am I going to do about it now?”

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