Archive for the ‘OBSERVE AND MEASURE’ Category

Sustainable Innovation Metrics

Tuesday, February 26th, 2013
Observe and Measure

Observe and Measure

 

Of the 10 imperatives of Robert’s Rules of Innovation, Observe and Measure is one of the most vital.

Innovation is ultimately about Return on Investment. A system of metrics will objectively show your progress and success each step of the way. It’s essential to follow a course of action that produces ongoing improvement, and sustainable and repeatable innovation. Innovation is meaningless without attaching measurable goals to an initiative.

 

In order to have optimal measurements there are two types of indicators (metrics) you need to be aware of:

  1. Leading indicators: These types of indicators signal future events. They show you where you are heading. Leading indicators often change prior to large economic or business adjustments and, as such, can be used to predict future trends. Examples of leading indicators can be patents filed, ideas created, and development time spent.
  1. Lagging indicators: These indicators show you your rearview mirror observations. The importance of a lagging indicator is its ability to confirm that a pattern is occurring or about to occur. Examples of lagging indicators include patents granted, expenses, revenue, and inventory turnover.

The most successful innovative companies observe and measure both indicators for successful development and execution of their quarterly and annual plans. Be sure to measure the time spent in each gate, and the time spent to get to the next gate. See if you can make any innovation improvements as far as efficiency along the way. By observing both key metrics, you gain a holistic and well-rounded view of your company’s performance.

Douglas Wick, President of Positioning Systems, recommends, for every one lagging indicator, you should have two leading indicators.  “Leading indicators let you know what to expect.  They help with forecasting and predicting where your business is going and protect you against falling off the cliff.”

Based on a survey of 200 companies by Goldense Group, the following are the top five R&D metrics used by industry:

  • R&D spending as a percentage of sales
  • Total patents filed/pending/awarded/rejected
  • Total R&D head count
  • Current year percentage of sales attributable to new products released in the past year/three years/five years
  • Number of new products released

By following a set of metrics, you’ll be able to evaluate the performance of your New Product Development process and your end result. Be sure to continue to observe and measure these metrics even after the product is launched.

Addition tips:

  • What’s Measured, Gets Done:  Observation, measurement and tracking of new product development results are essential to optimal ROI.
  • What to look for: Successful Key Performance indicators (KPIs) follow the SMART criteria (s.m.a.r.t). They are…
    1. Specific ‐ pertaining to the goal of the organization
    2. Measurable ‐ for the organization to assess its progress
    3. Achievable ‐ realistic in terms of the business environment
    4. Relevant ‐ directly linking the business and metrics
    5. Time-Bound ‐ placing goal achievement in a certain time frame.

 

For more Tips, see “Robert’s Rules of Innovation” A 10-Step Program for Corporate Survival.

Robert F. Brands is President and Founder of Brands & Company, LLC. Robert speaks to companies around the globe, sharing such topics as “Innovate to Thrive” and “Results Driven Innovation”. He has led worldwide teams responsible for marketing and sales, operations, and R&D and is a regular contributor to real- and virtual-world media and social networking platforms. Brands’ hands-on experience in bringing innovation to market spans decades, and includes the creation and improvement of product development processes and company culture.

For more information, visit www.linkedin.com/in/robertfbrands or www.innovationcoach.com/about/biography

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Innovation from a “Gemba” perspective

Friday, February 22nd, 2013

When was the last time you approached your business as a customer?

Have you ever placed an order for your own product, and followed its path from start to finish? It may be time to start. It may be time for a Gemba Walk.

Competitive business strategy requires effective planning, development and growth. It demands innovation in all aspects of performance and interaction.

The ability to monitor, study, and track core elements; both human and material, can help to minimizing errors and increase profitability. Theories, studies, and methods implemented for achieving innovation vary, but the core essence of all teachings is same; understanding the situation and thus improving the structure.

Read More at Innovation Coach: http://www.innovationcoach.com/2013/02/innovation-gemba-perspective

 

 

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Five Key Innovation Questions to Ask

Tuesday, April 3rd, 2012

innovation2There are plenty of reasons to innovate. Especially now more than ever before, sustained Innovation is the means to developing marketplace showstoppers that lead to profitable growth. Innovation is not a luxury that can be placed on the back burner, even for today’s successful companies. So before beginning your next innovation effort, here are some key questions to consider for mapping out an effective innovation plan.

1. What type of innovation does your organization need?

The key to implementing innovation is first defining the type your organization needs. The hardest kind of innovation to manage is Breakthrough – which creates an entirely new way to deliver value. Few and far between, these game changers hold the greatest potential for business success. Most innovations are incremental, which can mean a tweak on an existing product, process, or service. Examining how your innovation effort fits into the current organization’s needs is critical at this go/no go checkpoint. (There is nothing wrong with focusing and starting with Incremental Innovation or Line Extensions, get some early wins, get the organization engaged and excited and create a structured repeatable process.)

2. Does your innovation satisfy customer needs?

Customer demand affects the successful outcome of your innovation. Beyond asking your customers what features they would like to see, ask them what their biggest concerns are and that will help shed light on the products and functionalities they require for a more successful innovation.

3. Who are your innovation champions?

The innovator-in-chief needs to truly champion this culture and drive it throughout the organization to make it happen. In order to defeat the devil’s advocates and become an agent for change, the leader must democratize the innovation process and select a group of people from different business groups, different backgrounds, and different skill sets joined together for a common purpose. He or she must engage, walk the talk and not just delegate the spiritual leadership. The companies with inspirational innovation leaders stand out with their results i.e Apple, Kohler, etc.

4. How will you measure success?

Innovation is ultimately about Return on Investment. It’s critical to use leading and lagging Key Performance Indicators, and observe and measure time spent on each segment of the new product development (NPD) process to see how it’s progressing. Leading Metrics used in the industry can include ideas generated, ideation sessions held, number of patents filed, and for lagging new products released, and percentage of sales due to new products.

5. How will success be rewarded?

With successful innovation comes profitable growth and a win-win situation for shareholders, employees, and customers alike. Incentives are needed for all participants on your NPD staff, and often times the key motivator is less financial than it is about recognition for a job well done. Motivation does not have to be about money – but it is necessary, so reward your people. They are your best innovation resource.

By focusing effort in the right places, companies can avoid oversight and increase their chance of innovation success. For more tips, see “Robert’s Rules of Innovation.”

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How to Measure Innovation

Tuesday, May 3rd, 2011

No matter if it’s a test score, sports game result or a sales figure, what we measure is what goes down in history. After all, “what’s measured is treasured.” It’s human nature to look back at past results as a basis for comparison and for improvement in the future. For this reason, it is absolutely essential to carefully observe and measure performance in the New Product Development process. In each of the different stages of the process, keep track of how much time is being spent so you know if you are ahead or behind schedule compared to past NPD cycles.

What gets measured is what gets done. Therefore, it’s necessary to set leading and lagging indicators for how the NPD process is going. Leading indicators such as the number of new ideas in the database, number of projects in the hopper, patents applied to, and amount of time and resources spent are all important information that give you insight on the NPD progress. Lagging indicators could include number of new products introduced, patents granted, new product sales in the first three years after launch, and how close your team is getting to the goal of introducing “at least one new product per year.”

By the way the traditional measurement of % of R&D spend is no guarantee for success!

Things will not always go as planned so now is the opportunity to make corrective actions. By measuring performance, you will be able to address your team on what’s working and what’s not for continuous improvement.

Success in product development is seen as one of the top indicators of the future performance of a company. To sustain Innovation, companies need to continuously improve their new product development capabilities. Quantitative and qualitative measurements of new product development will lend insights into a company’s strengths and weaknesses.

Measuring performance doesn’t stop after your product is launched. Now it’s time to measure the fruits of your labor. Some very important and telling information can be collected during the first three years after the launch of a product. In a survey of 200 companies that design and develop new products, they shared these key performance indicators.

1. Measure Research & Development spending as a percentage of your total sales.

2. Look at your total number of patents filed, pending, awarded and rejected.

3. Track your total R&D head count, hours or days spend.

4. Measure the current year percentage of sales due to new products released in the past year, past three years, and past five years.

5. Count the number of new products released.

These metrics should be examined after every New Product Development cycle so you are clear on your spendings and ROI for each product. Look at your ratio of new product sales compared to total sales. Now you have a basis for comparison and can set a target goal for the next new product. This management by objectives style uses ongoing monitoring and is an effective method for keeping the NPD team focused on achieving goals. By looking at opportunities in the New Product Development process to increase ROI, companies are able to improve performance and ultimately, increase shareholder value.

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Observe & Measure for Continuous Improvement

Sunday, October 10th, 2010

Of the ten imperatives of Robert’s Rules of Innovation, this step is all about continuous improvement. It is necessary to Observe and Measure throughout the Innovation process, or else, how would you recognize successful Innovation? A system of metrics will objectively show your progress and success each step of the way. Plan. Do. Check. Act. It’s essential to follow a course of actions that produce ongoing improvement.

So first, gather initial observations and measurements at the beginning of the NPD process. It’s necessary to establish a baseline or starting point and measurable facts versus subjective assessments.

Secondly, to have an optimal measurements, one should establish leading and lagging indicators – leading to show where you are heading, and lagging to show you rearview mirror observations.

Examples of leading indicators can be patents filed, ideas created and in the hopper, as well as development time spent. Lagging indicators include patents granted, new products introduced and percentage of new product sales compared to total sales. Continue reading “Observe & Measure for Continuous Improvement” »

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Observe & Measure: When Validating Innovation, ‘What’s Measured Is Treasured’

Monday, January 25th, 2010

Innovation may be vital to creating competitive advantage.

But how costly is ineffective innovation? That is, if a company sets out on a new product or service development initiative – and that effort fails along the way for whatever reason – what has been lost? Investments in time, effort, capital – even reputation? Continue reading “Observe & Measure: When Validating Innovation, ‘What’s Measured Is Treasured’” »

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