Innovation ROI: The Tough Questions

Some things are easier to measure than others.

For example, an objective such as lower cost of goods sold, or improved revenue is relatively easy to measure. Strategic objectives on the other hand have been historically more difficult to quantity. How do you measure Innovation as a strategic objective? What is the ROI of innovation?

Coming up with a comprehensive answer is challenging, not only because the value of innovation is hard to pin down, but also because you need to know about the business’s specific situation to give an accurate answer. If the old adage is true, what gets measured – gets done, then the ability to answer this question is vital to the success of your innovation program.

Consider these questions as you shape your answer.

How Are You/Your Board/Clients Measuring Innovation ROI Right Now?

ROI measures the efficiency of an investment. To calculate ROI, the return or net profit derived from the investment is divided by the total resources that were invested, with the result expressed as a percentage.

According to Steve Blue, the traditional use of the term ROI refers to the result of something you’ve already done. However, by then he argues, it is already too late. “It’s time to rethink ROI and focus on the front end—revenue, operations and innovation—rather than the end result.”

While not everything can be measured, tracked, and quantified, the most important step is to define the intended results for your own organization’s innovation-based strategic objective.

Examples include:

  • Increased number of new ideas
  • Improved quality of ideas
  • Number of Ideas in the pipeline
  • More efficient implementation of quality ideas
  • Number of patents filed
  • Improved resultant success achieved from the implementation of new ideas

Are you holding your team accountable?

Every year Fast Company compiles a list of what they consider to be the world’s most innovative companies. For many of these companies, innovation is characterized by a strong level of accountability and teamwork across departments, business units, and disciplines. Profits are important, but they are not the end all be all. Financial metrics such as ROI give innovation management fiscal discipline and help them to justify the value of strategic initiatives and programs. However, sustainable innovation occurs when innovation is organized and driven through a culture that promotes a strong sense of shared mission.

Innovation might pay for itself – but it starts with accountability. Members of a corporate team need to feel responsible for their work – to meet deadlines and to deliver what was agreed upon. Holding others accountable begins with clear communication of what is expected.

When you successfully establish Accountability, it leads to great benefits for you such as being able to trust in your team, freeing up time for you to concentrate on strategy, and getting to lead a team that is confident, motivated and ready to take on the next “big thing”.

How do you handle accountability in your workplace? What is your definition of accountability, and is that definition shared by everyone in your organization?


You can learn more about creating and sustaining innovation by reading “Robert’s Rules of Innovation: A 10-Step Program for Corporate Survival”.