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b'This week, we look at an old show that has recently come up. It is a show I did in February of 2012 about innovation metrics. We\'ll discuss the core set of innovation metrics that every organization should use.
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\\nBad Metrics
\\nBefore we get started, I want to address one thing: bad metrics. They are very prevalent and extremely popular in areas such as Wall Street and publicly traded companies. These metrics get defined by analysts who have never run any innovation efforts or businesses.
\\nThe most popular bad metric that Wall Street has is the percentage of revenue spent on\\xa0RND. They try to rank organizations based on this metric. I have run tests and trials, collected data from public companies coached and mentored CEOs, and CIOs worldwide from various industries. This is a bogus metric that is not predictive of future success. If this metric was true, if I spent 50% of my RND revenue, I should be two times better than somebody who only spends 20% of their RND revenue. False. It varies by industry and company. I spent a lot of time trying to convince the board of directors at HP that this is a bogus metric and not useable.
\\nWhen it comes to good metrics, I look at it from input, output, outcome, and impact. I spend the most time on input and impact. When it comes to innovation, the impact your innovation is making, and the input you are investing in is key.
\\nInnovation Input Metrics
\\nLet\'s look at what innovation input metrics you should consider having as part of your success measurement. The first one is the number of new ideas in the\\xa0funnel. It would help if you kept the funnel full of ideas. This metric is about keeping your organization focused and continuously developing new ideas. At my current organization, we sit down twice a year and look at everything in the funnel. You want to find ideas that are reasonable for your organization.
\\nThe next metric is the acceptance/idea kill rate. Acceptance is the number of ideas that make it to the funding phase. You want that acceptance rate to be anywhere from 10-30%. The idea kill rate is when you decide to kill an idea rather than move it forward. At HP, we had a four-phase funnel to managing ideas and turning them into products. At each phase, there was about a 55% kill rate. We would start with ten, go to five, go to two or three, and finish with one. You need to look at your current acceptance and kill rate and set a target, possibly putting it into your\\xa0Objectives and Key Results (OKRs).
\\nThe third metric is a balanced investment. This metric is how you will use your innovation spend to influence your organization. This metric has products and services across the bottom, and vertical is your customers and markets you serve. 70% of the innovation spend should be in the core. The 20% should be in new products to existing customers and existing products to new customers. And lastly, 10% in new customers, new markets, new technologies, etc.
\\nInnovation Impact Metrics
\\nThe first one is the 3M metric, which is the percentage of revenue from new products. 3M has an innovation metric they have tracked for decades. The metric is what percentage of their revenue that comes from products produced within the last three years. The revenue percentage forces them to come up with new ideas constantly.
\\nThe second metric is the quality of your patents, which differs from the number of patents. When I first went to HP, Carly Fiorina was the CEO. She pushed us hard to ramp up the number of\\xa0patents. Organizations get ranked based on how many awarded patents.'