Observe & Measure


Observe and Measure What gets measured gets done, in Robert’s Rules of Innovation OBSERVE AND MEASURE. Observation, measurement and tracking of new product development results are essential to optimal ROI. When creating innovation, it is vital to set metric goals and track these metrics. Observation and measurement – in terms of the performance of the program implementation needs to be built-in as a recurring element. Pick up a copy of Robert’s Rules of Innovation to discover the top five R&D metrics used by the industry and more.

The World’s Most Innovative Companies: Risk, Observation, & Measurement

Every year Fast Company reveals its list of the world’s most innovative companies of the year. With the topic of innovation front and center, Fast Company considers themselves to be a progressive media brand “written for, by, and about the most progressive business leaders”.

For the most part, this year’s top 10 listing comes as no surprise presenting Nike, Amazon, Square, Splunk, Fab, and Uber as the top 6 champions of innovation.

Initially I had thought to only mention the top five, but for turning the taxi and town-car industry upside down, I thought Uber deserved a mention as well. After all, it’s not often that a company challenges innovation in an industry dating back to the early 1700’s.  But then again, who would have thought you could turn the soap industry on its head with foaming soap dispensers? It just goes to show that no industry old or new is without room to improve.

First place on the “Fast list,” Nike Inc. was highlighted for their culture of pushing boundaries resulting in not just one, but two groundbreaking inventions in the past year. The first being the Nike fuel band, a relatively affordable electronic bracelet that measures movement through the day; whether you go out for a run, play a sport, or just walk around the grocery store.  Their second breakout invention was the Flyknit Racer, a feather-light knitted shoe that required Nike to re-invent their entire manufacturing process.

Not many companies, much less a company already successful and thriving, would take such a big risk in the name of innovation. However, Nike knows that in order to sustain innovation, risks must be undertaken. No Risk: No Innovation.  Put another way, No guts, no glory. Nike CEO Mark Parker puts it aptly, “companies fall apart when their model is so successful that it stifles thinking that challenges it.”

Risk requires investment (people, time, capital), and willingness to invest without ROI assurance. For coaching and techniques to encourage initiative and Innovation you can read more the RROI Blog: Here.

Getting back to the list, Amazon took second place in Fast Company’s most innovative list for their innovations in product delivery. As FC puts it, “Amazon introduced same-day shipping in seven major U.S. markets more than three years ago, but the e-commerce giant’s significant 2012 expansion of its next-day and same-day delivery services was a jolt: The entire retail industry seemed to realize its power.”

Third Place went to Square for enabling credit card transactions on mobile devices. Fourth Place was given to Splunk for bringing big data to the masses. Fifth place was for Fab which matured last year from 3-day flash sales to dozens of online boutiques for niche shoppers; and 6th place as you know, went to Uber.

It was a welcome surprise to see Splunk on the list, especially among the top 5 most innovative companies of 2013. “Splunk makes sense of “big data” by monitoring, collecting, and indexing it in real time, creating opportunities for its clients to improve business operations and save money,” says Fast Company’s J.J Mccorvey.

Innovation is meaningless without attaching measurable goals to an initiative. What gets measured gets done, and Splunk is leading the world in helping companies observe and measure data important to them. Observation, measurement, and tracking of new product development (npd) outcomes are essential to optimal ROI. Magazine editors and innovation bloggers frequently forget that leading indicators & past performance numbers are no guarantee for success; so it is especially nice to see Fast Company picking this innovation champion out of the pile.

Are you on the right track to sustainable innovation? The best way to assess how far along you are in creating and sustaining innovation is to first do an Innovation Evaluation or Audit.

Innovationcoach.com  has an online in-depth evaluation that is designed to gauge the strength and weakness of key Innovation Imperatives to create and sustain innovation.  Audit results will show immediately and will be emailed to you, followed by an optional one hour phone consultation.

Start your audit!

 

 

Observe and Measure – Fueling Continuous Improvement

Of the Ten imperatives of Robert’s Rules of Innovation, Observe and Measure is the step that fuels continuous improvement within your organization.  Without tangible metrics, innovation may not be recognized as successful or overlooked when failing.

These metrics allow your company to track your progress and success during each step of the process.  It is critical that your organization’s actions produce ongoing improvement.

Plan. Do. Check. Act.

 

 

New Product Development should be observed and measured at the beginning of the process to establish a baseline for measuring facts.  To optimize the measurement of improvement, there are two indicators (metrics) that are critical to establish:  leading indicators and lagging indicators. Most companies and analysts just look at lagging indicators, it is key to identify and monitor leading indicators.

After a product is launched, it is imperative to continue to observe and measure your product development.  In a survey of 200 companies that design and develop new products, they shared these key performance indicators.

  1. Direct Expenses – Measure the amount of spending expenses incurred for Research and Development
  2. Patents – How many patents were filed, pending awarded or rejected?
  3. Time – Track the amount of time spent for Research and Development.  Also consider the number of people involved and amount of days used.
  4. Sales of New Products – Calculate sales for new products released in the past year, past three years and past five years as a percentage of total sales
  5. Quantity – How many new products have been released?

These metrics can create a basis for comparison and can be used to set target goals for the development of your next new product.  Examine these after each cycle of New Product Development to clarify your expenses and Return on Investment (ROI) for each product.  Spend time looking at each step and the time spent to move forward to the next step.  By looking at opportunities in the New Product Development process to increase ROI, companies are able to improve performance and ultimately, increase shareholder value.

Beyond the Tangibles

In addition to metrics, many companies observe and measure their organization’s success with a number of intangible factors.  Stefan Lindegaard, of 15inno.com reminds us that many business metrics are not black and white and are often subject to fast changes:

“We also need to remind ourselves that innovation has lots of unknowns and intangibles and you cannot afford to lose the needed flexibility in order to meet some specific metric parameters.”

Furthermore, it also takes getting enough data to show trends and patterns. In these times of fast change, there is a good chance that the processes you set out to measure will change significantly over time making it more difficult to actually use this input for measuring purposes.”

Lindegaard’s sentiment is echoed by Apple’s CEO, Tim Cook.  In the fiscal first quarter of 2013, Cook reported record earnings for iPhone and iPad sales.  In addition to the numbers, Cook observes and measures success with additional intangible components:

“You’re going to hear a lot of impressive numbers during this call, but they’re not the only way that we measure success at Apple. The most important thing to us is that our customers love our product, not just buy them, but love them. Everyone here is laser focused on creating an unprecedented customer experience.”

Continuous improvement is possible when you observe and measure the development process before, during and after product launch.  Develop a firm grasp of your product’s leading and lagging indicators.  Examine and track every step of your development process, but first establish the baseline before new product development begins.  Observe and measure to set target goals for future product development, to improve performance and ultimately, increase shareholder value for your organization.

Innovate and Thrive.

 

 

Sustainable Innovation Metrics

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

Innovation from a “Gemba” perspective

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

 

 

Five Key Innovation Questions to Ask

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.”

How to Measure Innovation

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.

Observe & Measure for Continuous Improvement

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” »

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

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’” »