Measurement of Success & Progress

1. Success vs. Progress

Every innovation management system needs a way to define and measure progress and success. We look at two time horizons:

• Long-term success: We define long-term success through objectives. These are usually financial metrics, like revenue and profit, but also market share, competitive position, technology leadership, sustainability goals and employer attractiveness. A good time horizon for objectives is five to ten years, depending on the industry. Short-term progress should always align with these long-term objectives. Objectives and the Picture of the Future are closely linked: objectives shape how we design the picture of the future. The key question in the end is: “What should the world of our customers and our organisation look like once we’ve reached our long-term objectives in X years?”

• Short-term progress: We define short-term progress through KPIs (key performance indicators). These focus on a short time horizon of three to six months. They show whether current tasks drive progress that aligns with the objectives and the Picture of the Future. Classic financial metrics rarely work here, especially in organisations focused on research, development and innovation. KPIs are great tools: they let employees and managers reflect on their tasks, behaviour and results, and adjust where needed. That is why it is so important to define KPIs for short time windows – it keeps the link between behaviour and progress clear.

2. Example Objectives

Here are some examples of how success can be measured:

• Total annual revenue growth

• Share of revenue from products and services not older than two years

• Share of revenue that comes from offerings which solve a sustainability problem ("green revenue")

• Profit margin

• Market share in certain customer segments

• Adoption rate of new technology

• Attractiveness on the labour market

• Reduction of CO2 emissions

• Share of recycled or bio-based input material in production

3. Example KPIs

And here are some examples of what progress looks like in Business Design on a system level:

• Consistent use of the End-to-End Innovation Process

• Adoption of the defined Business Design Roles

• Number of ideas in the idea Portfolio with the right risk appetite

• Ratio of H1, H2 and H3 ideas in the idea Portfolio

• Ratio of projects focused on H1, H2 and H3 ideas

• Number of projects stopped because a hypothesis was falsified

• Number of projects that reach Phase V and go live

• Ratio of projects in Phase IV to projects in Phase II in the End-to-End Innovation Process

• Number of people trained in Business Design

• Time needed to set up an innovation project (“setup”)

• Total effort and time it takes an idea in the Portfolio to reach its first euro of revenue or cost savings

On a project level, success and progress are defined in a Project Charter "Sprint".

Don't measure all of this at once. Pick five to seven KPIs per planning period, no more — a dashboard nobody can hold in their head steers nothing. Each KPI needs three things: a number, a time window and a name.

4. One Objective – X KPIs

An objective and its KPIs only work as a pair, so here is one. Objective for 2035: "A quarter of our revenue comes from services we don't sell today". That objective shapes the Picture of the Future — a world in which our customers buy outcomes from us, not machines. The KPIs for the next six months are small and boring on purpose: three projects in Phase II exploring service models, at least one playground handed over to a sprint in Phase IV and documented willingness to pay from at least ten customers. None of these numbers is revenue. All three tell you whether the 2035 number is still within reach.

5. Reporting

Measuring only pays off if the numbers reach people who can act on them. In practice that happens in the formats described under Governance: the quarterly review, for instance, where each business unit works on its own Portfolio, the innovation review twice a year, where the system itself is on the table, and the half-yearly innovation report to senior management and other reporting formats. Write objectives, KPIs and review rhythm into your System Playbook, so newcomers can look them up instead of asking around. And if you want vision, objectives, KPIs, portfolio and project status in one place, the Innovation Monitor does exactly that job.

6. Q & A

• We're just starting. Which numbers should we track first? Three, and all three come from section 3: how consistently the End-to-End Innovation Process is actually used, how many projects were stopped because a hypothesis was falsified and how long it takes to set a project up. The first tells you whether the system exists outside the playbook, the second whether decisions are made on facts, the third what friction costs you. Add the rest once these three are stable.

• Who owns which number – the team or management? System KPIs belong to whoever runs the system, usually the Innovation Manager together with the body that decides the budget (see Governance). Project success is a different thing and belongs in the Project Charter "Sprint". Don't push a system KPI onto a single team: no team can move the ratio of H2 to H3 ideas in the Portfolio, and holding it responsible for that number teaches it to distrust every other number too.

• Our controlling department wants a business case for every project. What do we say? That they will get one – for projects in Phase IV, where there is a business model to calculate. Earlier than that, a business case is a spreadsheet of invented figures, and everyone in the room knows it. Offer the KPIs of the running phase instead: what was tested, what was falsified, what customers were willing to pay. Those are facts. A business case in Phase II is not.