Before you launch your innovation campaign, you want to set up key performance indicators or KPIs for short. Key performance indicators help you keep track of your overall strategy and your individual innovation programs. They alert you when it’s time to intervene and take action to get things back on track. Without KPIs, you’re flying blind, so to speak, and you run the risk of falling short of your overall goal.
To be most effective, each KPI should be quantifiable and measurable. You can have as many as you want, but don’t measure a KPI just because you have the data. If you’re not going to use it, don’t bother. It’s a waste of time.
Measure something only if you plan to take action from it. That’s why we set thresholds around each one. Each KPI should have a target of what you expect to happen plus a high and low number around that target. For those thresholds, you and your planning team should agree in advance what action you’ll take if those thresholds are exceeded.
Here’s an example. Assume you create a KPI about the number of new products created each year. You set your target at 50, and also specify a high and low threshold of 60 and 40 respectively. If your actual products per year is more than 60, you might consider taking action such as reducing R&D spending. On the low end, if you’re below 40, you could consider increasing innovation projects.
Each KPI should be linked to the key parts of your innovation plan including your goal, key targets, technologies, risk, and launch tactics. For the goal, you might have KPIs around the timing of revenues, the type of customers you’re converting, and whether you’re taking customers from the right competitor.
For technologies and risk, you want to measure changes in technology and your company's ability to adopt it. You may also want to measure how well the technology has lived up to expectations across industry sectors. You need to carefully monitor whether you’re achieving the technology positioning that you had hoped for.
For launch tactics, you could create a KPI for each of the 4Ps if needed. For example, you might have measures around communications objectives, sales force effectiveness, distributor activity, store promotions, search engine ratios, social media activity, pricing and discounting rates, product performance, waiting times, and service complaints.
Good innovators not only reach their financial goals, but they also know whether those goals were achieved the way they expected them to be achieved. They also take immediate action when they detect something is going in the wrong direction.
KPI’s help you and your innovation team stay aligned and do what’s needed to succeed.