An article in Industrial Market Trends alerted me to the Goldense Group 2008 Product Development Metrics Survey of the top 10 R&D metrics used by industry:
- R&D spending as a percentage of sales (77 percent);
- Total patents filed/pending/awarded/rejected (61 percent);
- Total R&D headcount (59 percent)
- Current-year percentage sales due to new products released in the past six years (56 percent);
- Number of new products released (53 percent);
- Number of products/projects in active development (47 percent);
- Percentage resources/investment dedicated to new product development (41 percent);
- Number of products in defined/planning/estimation stages (35 percent);
- Average project return on investment or average projects payback (31 percent); and
- Percentage increase/decrease in R&D headcount (31 percent).
I’m not surprised, but nonetheless a little disappointed, that the vast majority of these are activity metrics as opposed to outcome metrics. The two exceptions are ‘current-year percentage sales due to new products released in the past six years’ and ‘average project return on investment or average projects payback’. As such, they are potential candidates to elevate from operational metrics on a dashboard to strategic KPIs on a scorecard.
Both of these metrics are lagging, rather than leading, indicators of innovation which means that they do a good job of tracking innovation after it happens but may not give us much insight into future innovation. If you were in charge of creating a leading KPI for innovation, what would you choose?
In “Managing Creativity and Innovation” (Harvard Business essentials, pg 124) the innovation process should:
1. Generate a sufficient number of good ideas
2. Be free of bottlenecks that impede development and fristrate innovators
3. Is free of politics
4. Encourages calcuated risk taking
5. Is nonarbitrary
6. Creates cheap failures
7. Channels resources to most worthy projects
8. Involves people who understand the company’s capabilities.
Metrics that hit on each of these in some way would be helpful-but then again, many of these metrics are lagging as opposed to leading metrics. How does one measure culture? There is the rub…