Goal of every business is to create value for all of its stakeholders; owners, customers, employees, environment, the government… you name it. In order to achieve these often opposite and diverse goals, first you must have a clear insight into them and clear understanding of all of your stakeholders. That way you will be able to create a strategy which will avoid conflicts between these different groups and, at the same time, create value for everyone. A real win-win situation. You must have this in mind throughout your whole innovation process and make sure that it is in sync with your value goals.
What KPIs do you value the most in your innovation process?
In order to achieve these diverse goals you must keep track of your KPIs. Each one represents a certain segment of your business from a different perspective. It is up to you to decide which you want to keep track of and which are the most important in your innovation process and business as a whole. Having all this valuable data will make it easier for you to make a decision about your next innovation venture.
Market Value Added – market value of your shares minus the assets invested in their purchase
This could be one of your KPI if you are a corporation, but still it is not the most dependable one. It is quite sensitive to market changes and can be used for the whole business, but not its parts/segments.
Cash flow and Gain – Cash flow is an indicator of value rather than performance. It is unquestionably an important indicator of how your business is doing. Unfortunately, it doesn’t always show the correct position your business might be in. Certain invoices can easily be delayed in order to manipulate and bulk the reports to present a better picture. Gain is a bit better indicator of performance since it represents Cash Flow adjusted by Amortization. But same as Cash Flow, basing your business decisions on Gain as an indicator can lead you to wrong actions because neither represent the right position your business is in. With such incomplete information you can easily decide to ignore great opportunities.
Economic Value Added (EVA) – Net Operating Profit Less Adjusted taxes (NOPLAT) minus the Finance Charge
EVA is a more superior indicator because it shows both the value and the performance of your business. It is a dependable indicator of your regular activities and consistent with indicators of performance of your new projects such as Net Present Value (NPV) and Internal Rate of Return (IRR). It is also a value indicator of your whole business (worth, value). You can get NPV by discounting EVA of any project. Using the same principles, the immanent worth/value of your business could be calculated as adding employed capital to discounted EVA. EVA is a great KPI to use when making key decisions about investment projects.
There are plenty of KPIs you can use to track how your business is doing. It is important to have a clear idea of what you want to track and be able to understand the data you collect. Using different KPIs will give you a 360 degree view of every aspect of your business and will help you make decisions about new innovation projects as well as give you a clear insight about how your current innovation processes are evolving. The end result – create value for all of your stakeholders. And what are innovations than new valuable solutions which fuel progress.
It can be hard to keep track of all of your KPIs, and too much data could be hard to collect and analyse. Thanks to Innovation Cloud’s ability to connect to your existing ERP, you will have a much more detailed insight into all of your KPIs. Innovation Cloud provides you with an easy solution to observe, collect, formulate and track your KPIs within the system. All this enables you to have a clear insight into your KPIs at any given moment and track their progress as well as take corrective measures, if needed. This way you will be able to make educated decisions about your innovation portfolio and your innovation process, and fine-tune your strategy. Innovation Cloud is more than an innovation platform, it’s a multi solution for your whole business.