So you feel innovation is important to your organisation but you are struggling to find the equation to satisfy investment. If this is you, read on. We have condensed the methodology for you.

The high level formula is: IC+IA=IR

Step 1: Establish Innovation Capability

Whether innovation activity happens is not is the easy part, the underlying factor of success or failure is whether the organisation has the capability to innovate. This is therefore the first aspect to assess.

The six foundation capabilities are:

1. Opportunity Scanning – tracking trends and gathering competitive intelligence
2. Strategy – formulating future business plans
3. Management – integrating and coordinating activities and subsystems
4. Production – accomplishing the core tasks of the organisation
5. Marketing – maintaining and growing the reputation of organisations and the value of their programmes
6. Administration – measuring, maintaining and recording key resources such as finance, personnel and IT systems.

The six matching innovation capabilities are:

1. Opportunity creation – exploiting external discontinuities and networks
2. Strategy for innovation – ensuring alignment, focus and an appropriate portfolio of innovations
3. Leadership of innovation – inspiring and integrating
4. Core innovation processes – creating, capturing, assessing and applying innovative ideas
5. Culture – marketing the importance of innovation internally
6. Measuring and maintaining innovation – applying the administration systems to innovation.

If these are all in place, it is time to focus on activity.

Step 2: Enable Innovation Activity

Innovation activity has been defined by NESTA as ‘applying ideas and knowledge to create value’. They cite three key characteristics for something to be classed as innovation.

Innovation is:

1. New or first, at least to that organisation,
2. Genuinely different,
3. More valuable than the nearest existing alternative.

Others have defined types of innovation as:

1. New to the market
2. New to the sector
3. New to the organisation

Bottom line is there needs to be a way to classify innovation and capture the activities associated with it so they can be measured and leveraged.

At this stage the establishment of an “Innovation pipeline” is required to capture the source of innovation (staff, management, suppliers, etc.), the type of innovation, and the potential impact of the innovation (cost, headcount, speed/time, risk).

The focus of step 2 should be to establish a baseline of innovation activity from which you can build.

Step 3: Measure Innovation Results

This is the critical output and should be aligned with value statements that are defined by the customer and measured by finance. For example “Reduce defect from 3% to 1% by year end.”

This value statement is the reason to innovate, the innovation pipeline is the metric for activity, the business impact is the result of the innovation activity (i.e. cost, headcount, speed/time, risk).

As you measure the results of your baseline activity, however limited that may be, you build the data points from which to build your case to scale up the activity.

So there you have it, assess your capability, capture your activity, and measure your results.

And remember, if you are short on resource or methodology, we can always help