There is a reason why firefighters say be fast or be last: They have 60 seconds or less to act before they have a major house fire on their hands.
A home can catch fire entirely in just 4 minutes. In the first 30 seconds, the fire erupts and begins to spread rapidly. In the next 3 minutes, the temperatures can reach 1100 degrees Fahrenheit, at which point a flashover can occur, and everything in the affected room can burst into flames. The oxygen is virtually sucked out and all the windows shatter. In the final minute, the fire can spread beyond the house and cause damage to whatever is in its path.
This is how fast and furious disruption can feel to an ill-prepared company. Change can creep up at any time and in any form. For example, that could be a new provider that suddenly introduces an innovative solution or business model that renders yours instantly obsolete. This damage wreaks havoc not only on your organization but also on your organization’s supply chain. Much like the aftermath of a fire, there is not much to go back to. You are at a point of no return, where it becomes difficult — or even impossible — to resume business because too much time has been lost, and it is too late to act.
“In fire, you can plan everything out to the minute, and a minute before that everything changes.” — Dan Felix
Corporate life expectancy is at an all-time low — down 300 percent since the 1980s. That lifespan is expected to decrease even more in the coming years, as analysts believe there may be more innovation in the next decade than in the last century. The opportunity is of historical proportions. But why is it that an organization’s survival has become such a critical challenge?
Gather Your Clan, Make a Fire Plan
Future-shaping the business while also running it is a lot easier than it sounds. Defining the right innovation objectives and key results (OKRs) and key performance indicators (KPIs) can determine factors that will help in this crusade. But a large majority of executives cannot track, justify, and account for their innovation investments. Simple and effective measures are the holy grail for innovators who constantly struggle to forecast the value generated from their actions. For many, decisions are often constrained and based on metrics related to specific individual initiatives or limited to a line of business.
In developing the KPIs to measure your progress against your OKRs, consider the value, activity, and process. Here are some KPI examples:
- Concept Throughput: Number of concepts within each stage of the process (i.e. ideas, completed canvases, tested prototypes, commercialized innovations).
- Concept Velocity: Speed at which selected ideas are moving through the pipeline.
- Innovation Forecasted Revenue/Cost Savings: Estimated revenue generated from new innovations.
- Other: Actual revenue and cost savings from commercialized innovations.
An Ounce of Prevention is Worth a Pound of Cure
There are regulations and significant consequences that force organizations to deliver concise financial statements and be accountable to their shareholders. These financial records are captured and summarized across the organization. Likewise, it has become evident that customer data can only be reliable if all related metrics are viewed through a global lens that factors in and compiles all the related client data. Yet, innovation — which is the lifeblood of the company — remains an island on its own. For most companies, there are no comprehensive OKRs for the organization as a whole, nor the structure to track the KPIs accordingly. The organization can catch fire, and it will be too little, too late.
“The very worst fire plan is no plan. The next worse is two plans.” — Unknown
Fires That Are Small, Soon Will Be Tall
Current innovation measurement and accounting are a lot like the earliest systems for measurement from 3,000 to 4,000 BC, when the first instances of people using measurement standards emerged. However, there was no universal agreement. Many distinctive units of measurement were being used in different towns and regions. Trade led to the modernization and eventual harmonization of these measures.
You cannot fireproof your organization holistically if you do not inspect possible hazards. Just like the Age of Information established a system of record for financials, and the Age of Customer established a system of record for customers, then perhaps the Age of Innovation, alongside emerging standards such as ISO 56000, will usher in the new global standards of measurement for innovation.
When firefighters are called to action, they quickly move to assess the situation and devise the best strategy to extinguish the fire. Organizations do this by defining innovation OKRs that continuously challenge the company to look for opportunities in the next paradigm shift, and KPIs that constantly monitor their performance to achieve the intended results.
OKRs are, by design, more aspirational. This is a great approach to creating a framework through which the organization lays out its objectives clearly to deliver the right results. Our client Novartis sets a great example of innovation OKRs. In a recent InnoLead Master Class, “Building, Scaling & ‘Unbossing’ Innovation at Novartis’s Genesis Labs,” they presented two underlying objectives and key results for their innovation program.
- Objective 1: Unleash the power of our people. Provide a sandbox where all employees can imagine, explore, and transform their ideas into reality.
- Key Result 1: Implement and launch Planbox’s innovation management platform.
- Key Result 2: Connect and engage multidisciplinary teams across the globe via Planbox.
- Key Result 3: Provide the appropriate tools and resources to more than 23,000 scientists, physicians, and business professionals located in R&D sites in more than 80 countries worldwide.
- Key Result 4: Start the year with a request for application (RFA).
- Objective 2: Accelerate scientific innovation. Accelerate the proofing and de-risking of novel and enabling therapeutic concepts into the Novartis pipeline.
- Key Result 1: Review all admissible proposals from the RFA.
- Key Result 2: Choose the top ideas (about 10) to pitch their proof of concept.
- Key Result 3: Fund the winning projects (about five).
- Key Result 4: Commercialize the winning projects.
When to Measure?
Unlike financial records, one of the trickiest parts of innovation is determining at what point measurement can help inform and shape future actions and behaviors. The common misconception is the lack of value to measure early and measure often — this Innovation Health Checkup can help your team measure at every stage.
Early on, team should look at activity metrics, which show that the right actions will lead to the right results. Later in the cycle, impact metrics are the focus. Those metrics produce an expectation and a forecast intended to help form a basis of the future value for the innovations being considered.
What to Measure?
The next consideration is identifying and tracking data points that are meaningful and actionable. The guiding light here is to determine the KPIs that are high value indicators. Measure these KPIs as often as possible to maintain momentum in doing more of what works and less of what is not as important or urgent to the organization.
“The innovative leader has to be an arsonist and a firefighter.” — Paul Sloane
Build It Up and Burn It Down
Lifelong innovative organizations find the right balance of continuing to improve the old, while looking for entirely new ways to replace it. This is akin to building all the right fire protection measures while starting new sparks that can eventually burn the existing models down. You have to be ready to leave behind what was once valuable and start a new adventure.
The 9-1-1 emergency dispatch is the call you do not want to make. Ensuring the innovation portfolio’s alignment with corporate objectives is paramount to strategy execution that delivers the expected results. Maintaining this alignment requires a close linkage between cross-functional unit OKRs and KPIs. This means everyone in the organization is vested and rowing in the same direction. Performance assessment against future expected outcomes is a constant challenge that links investments to the right returns.
Ludwig Melik is the CEO of Planbox, an agile innovation management platform, and IdeaConnection, an open innovation expert solver network. Prior to Planbox, Melik co-founded Tenrox, a bootstrapped startup that became a leader in project management software. Melik co-authored the book, Optimizing Project and Service-Oriented Organizations, published by Wiley, and has an authoritative blog on LinkedIn in which he regularly explores innovation through a creative lens. You can also watch his unique perspective on the 7 Habits of Highly Innovative Organizations.
View the original article at planbox.com
InnoLead regularly publishes Thought Leadership pieces written by our Strategic Partner firms.