In our recent Master Class on innovation objectives and key results (OKRs), Ludwig Melik and Sara Husk share insights on building the right metrics strategy.
During the call, the pair explore:
- What are the common issues when measuring innovation
- How to structure innovation metrics for strategic outcomes
- How to effectively measure the innovation process and program
- How to reinvent your innovation approach with OKRs
Challenges When Measuring Innovation
Sara Husk: Why is this so hard? … So things like a lack of resources for tracking and measuring… We think about the innovation teams that we work with… What we often hear from those teams is: “We’re small but mighty.” And so, who’s actually going to do the work of measuring innovation?
There’s a very long time frame or time track for some innovations, especially Horizon 3 scientific developments, new drug developments. So you lose the thread over that decade or so that you’re trying to measure that innovation. We also find that the whole point of innovation is to go from that great idea out to something that goes in the marketplace. And there’s a lot of learning. There’s a lot of risk reduction. There’s a lot of iteration that goes along with that. So, it’s going to change over time. Every time things change, the measures can change as well. That makes it a bit more complex — just trying to do some type of standard capital investment type of project…
We also find that often what we wanted to get out of innovation isn’t exactly aligned with the outcomes. And so it’s hard to track it back to something that really matters to the organization.
Key Considerations for an OKR
Ludwig Melik: The point of an OKR isn’t to come up with a statement that you’re 100 percent likely to achieve. As a matter of fact, it is recommended that the likelihood of achievement be more in the 60 to 70 percent range. So that if you are able to hit that number, you should already have a lot to celebrate… If you do by chance hit 100 percent of that objective, certainly you have a lot to be satisfied [with] — or potentially, you need to rethink how simple that OKR was.
[OKR’s aren’t] something that you set in stone, and you forget about for a year or two. The whole point of it is to review it on an ongoing basis — quarterly, [or] in some cases, monthly to make sure you make some adjustments along the way. … You want to also, in that objective, make sure that you are having a quantitative way to define what success really looks like. … It has to be cross-functional, so that it doesn’t just come at the highest level of the organization…[and feels] not actionable to the people who are actually getting the work done every day.
The key results are important because you have to make sure that the key results you state have to be the most important things you really need to do. They have to be measurable actions, based on a set duration, right? So that this way it…becomes very actionable, it’s easy to understand what you need to do, and when you’re going to get it done.
Creating a Metrics and OKR Strategy Take Time
Sara Husk: One of the things that we encourage people to do is just to take a simple innovation maturity test, and you can find that on our website. That really starts some excellent conversations because we can look at things like… “Do we have a good strategy? Do we have the right processes and tools? Do we have metrics?”
What we also know is: This is going to be a journey over time. None of this happens overnight. … So, as your tools and your processes get better, you’re actually impacting the strategic outcomes, and you can even grow your strategy to be stronger as well. … We think that maturity tests and capability testing is really the way to go to look at that. Then what we typically do with our clients is we look at these things and say, “Okay, so we know that together, this is going to be a journey over time. And that’s fine. And so if we have gaps in things like metrics, or perhaps the people in culture, we actually structured different types of activities so that we can strengthen those capabilities.” And then every 12 to 18 months or so you can come back and revisit, “Well, how are we doing with this?”