In any debate, without a doubt, we will all agree that innovation is an enabler for long-term sustainability and is one of the top drivers of business growth. There are of course many innovation models and the best one for you will depend on your business model, strategy, products, services and culture. Once the innovation is understood as the process of turning ideas into value, there are many ways to introduce innovation management in the organization. The organization can create new products or services, improve the old ones, or even find new uses for them. Innovation also includes changes that will bring value to the organization, such as introducing new business models or creating new, more efficient processes. However, the definition of "value" isn’t always clear, or it doesn’t match the desires of your executives, managers, and stakeholders.
Whatever innovation model is practiced by your organization, your CEO’s will expect you to quantify the investment needed and the return expected in order to determine whether or not to proceed forward. Return on investment of innovation is a measurement used to evaluate the effectiveness of a company’s investment in innovation activities. While it is not so complicated to measure ROI for the development of new products, there are many innovation activities that are not so easily quantifiable.
The innovation activities that are hard to quantify but important for the organization, belong to the part of the innovation process called idea management, front-end innovation or ideation. The front-end innovation is a critical component of the innovation process since the choices made at the front end will determine which innovations will be progressed forward for further development and commercialization.
Organizations have various names for these activities, such as Idea Challenges, Idea Competitions, Idea Hackathons. They all have a common goal of finding the “right idea” through the defined process with various stages related to idea generation, idea prioritization, idea evaluation, idea selection and idea approval for development.
ROI of ideation activities
Our experience showed that how an organization measures the value of front-end innovation activities in a great way impacts the willingness to continue with the activity and invest again. To understand the true value of your ideation activities, you have to consider the non-financial metrics to provide evidence of their efforts.
Often, organizations focus on the direct financial return on investment of innovation. Yet, with innovation management software you can easily understand the indirect and non-financial ROI that ideation activities can deliver:
- How many times employees have submitted ideas?
- How many times employees participated in multiple Ideation activities?
- What departments have the most active contributors?
- How many ideas were collected in the Idea Challenge?
- How much did the employee participate in the ideas of others?
- What is the average number of comments per idea?
- What is the overall number of votes per idea?
- What is the number of ideas with the highest score?
- What is the number of ideas in the product development pipeline?
- What is the number of ideas that have been implemented?
When it comes to front-end innovation activities, you cannot measure ROI regarding the exact financial outcomes. Especially if the activity is new to the organization culture. Instead, you have to provide evidence that the activity has a great impact on the business in a way that brings value to the organization. These metrics provide your executives with an overview of your innovation team’s engagement, collaboration and activity level.
Companies seeking the measurement of their ideation activities overall value should consider the wide impact of these activities including:
- increased employees’ engagement,
- improved collaboration,
- and stronger innovation culture.
If the goal of your ideation activities is to generate new product development ideas, once the idea hits the market you will be able to measure implementation. In this way, you will be able to track the actual ROI of innovation. Maximizing the ROI of product innovation ideas requires the understanding of all product lifecycle stages, from ideas through development to market launch.
Experts say, to successfully innovate you’ve got to put innovation ROI at the center of your innovation projects. Yet, most companies are not successful in providing the proper system for measuring ROI of front-end innovation activities. Innovation Cloud with its comprehensive and advanced analytics and reports will assist you to keep a close eye on your ROI of innovation, covering both front-end innovation and product development metrics.
