Article #10: Useful Metrics and Industry Examples
Now that you have found and chosen the opportunities that best support your company’s innovation objectives, how do you monitor and measure success? As in any metrics program, your desired outcomes should guide what is measured along the way. While team and partner processes are important to measure, companies today are most concerned with impact on the bottom line.
For example, AstraZeneca has refocused its metrics to emphasize commercialization, i.e. how many drugs win approval to be sold. In the past, research progress was measured by the number of compounds entering development.
Similarly, Kimberly-Clark Health Care measures how many projects are actually done versus how many were evaluated. In terms of process metrics they also track the following:
- Concept Development Support
# (or %) of features identified by our team that are presented to the customer
# (or %) of features identified by our team that are selected for commercialization
- New Area Exploration
# of go/no go decisions enabled by our team
# of projects we place into our project bullpen for prioritization
- Existing Project Support
# of technical problems solved
# of external ideas utilized to resolve issues
Other measurements used by different companies include:
- Time to decision: How long does it take to vet specific leads—go/no go—phase by phase?
- Time to results: How long before an approved, funded project is launched in the market?
- Payback: When will a company see the first returns on its investment?
- Value and impact on the business: What does a project contribute to the company portfolio, brand, IP base or future business?
- Percent of revenues/percent of profits, short of original estimate
- Value of externally-sourced product revenue as a percentage of total sales
Some companies set specific financial goals: Avery Dennison looks at the number of new projects identified and launched with potential annual revenues of $50-100 million. Unilever’s minimum is $100 million. Fewer bigger deals are the ultimate objective.
Next week we look at how rewards and incentives are tied to Open Innovation goals and metrics.
Metrics discussed at Tech Scouting workshops in 2008 and 2009 – click here
This article published in conjunction with MRT’s workshop series:
Technology Scouting to Accelerate Innovation – Implementing an External Sourcing Program – check our website for the latest dates and locations of this popular seminar.
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Article #9: Negotiating for Success: Recommended Actions
“Pigs get fat and hogs get slaughtered.” Brad Trucksis, Associate Director of Global Business Development at Procter & Gamble made this point very clearly at the Tech Scouting Summit last week.
Win-win is the only acceptable option for a negotiation’s outcome. A win-lose outcome, in favor of your company, will ultimately translate into lose-lose, since the partner will lack incentive to perform optimally. Make sure your partner is as happy as you are with the terms.
Another point made by speakers – and particularly by Lauren Foster of MIT’s Technology Licensing Office — a good agreement rarely gets looked at once it is made. The strongest alliances are built on trust.
That said, how do you best ensure a win-win with your partners? Continue reading
We all know that history repeats itself over and over again, despite any of the warnings we’re given in school to not forget past lessons. The latest example is headphones. When I was a kid in the 70s, a lot of headphones were big and bulky. Then when the iPod precursor, the Sony Walkman, exploded the portable music industry, small footprint earphones dominated, followed by the even smaller footprinted earbuds made famous in iPod ads.
As it turns out, we are now full circle and the hot way to listen to your digital beats is once again through the big sized phones known as “cans.” All hip celebrities and pro athletes are now seen isolating themselves while in public from fans and papparazzi with these massive head mounted speakers. I’m sure these things appear on the xmas wish lists of many a teen that you know.
One of today’s giant headphone makers, Fanny Wang, is now offering their hearing impairment devices in custom color configurations. When it comes to mass customization, custom coloring is the dominant method offered by most who allow a customization option. This is the customization path of least resistance and most favorable economics, so as the digital world continues to enable this service, one could predict more and more mainstream products to start offering custom color.
This is probably not a good thing. Professional product designers are typically trained in selecting good taste in color selection and balancing, with the more advanced also trained in color psychology and chromatics so that the end result is pleasing to the eye, and maybe also soothing or calming. If left entirely to the consumer, violent clashes of light waves could start proliferating in a visual explosion of Cosby sweater madness.
We live in an era where the Internet and social media is heavily pushing the democratization of everything, giving everyone input and influence into anything. While overall this is a positive step and will likely mature into something better than the chaos we face today, the current primordial soup of mass customization will probably make you want to avert your eyes for a while. Innovation like this is similar to government–that while we gravitate towards the ideals of democracy, we know the truth is that benevolent dictatorship can produce higher quality.
Article #8: Rapid Decision-Making – Scoring for Value
In making decisions about opportunities, speed of review is essential. Not only is it essential for staying on top of inputs, it maximizes external interest and keeps your team’s focus on the best prospects.
- At Corning, ideas that pass pre-screening are given preliminary assessment through internal white papers that reach their conclusion in four to six weeks; in-depth analysis by market-and-technology teams concludes within six to eight months.
- Avery Dennison devotes fewer than five days to initial screening. Second stage evaluation can take up to 100 days.
- In the venture capital industry, initial analysis often occurs in ten minutes.
- Kraft reaches ‘go-no go’ decisions within 30 days, at each screening phase with end-on-end cycles of three to four months in its supplier process.
Here are some ways to speed up decision-making: Continue reading
Article #7: Portfolio and Business Fit
Opportunities and technologies should be viewed through the lens of your organization’s growth strategy and should fit with your product portfolio/roadmap. The question of “fit” applies to both immediate and longer-range needs. The decision to partner (versus make or buy) and the level of resource investment are also informed by the fit.
Clorox’s “Go deep” process, discussed in the previous article, assesses capabilities and technology for the purpose not only of identifying the right partners, but also to understand the fit with Clorox’s technology platforms and business strategy.
They use an alignment scorecard with three components: Continue reading
Marketing is like the judicial system, a necessary evil of civilization. Proponents of marketing would consider it an essential method for successful capitalism and the distribution of goods and services. Opponents would call it an exercise in boldface deception and greed. Like almost all things in the universe, the truth lies somewhere in the middle.
To muddy up the mix further comes new research published in a new book by Professor Diana Derval, “The Right Sensory Mix,” which claims that an individual’s product preferences are determined prenatally by hormones and something she has named the “Hormonal Quotient® (HQ)”. Derval’s research has resulted in a methodology to help companies make decisions in R&D and product development to make goods and services more appealing to customers. Gee, how convenient!
In a recent article published on MMDnewswire, “Product preferences are determined in the womb,” Derval explains how hormonal profiling can accurately predict product preferences on numerous sensory levels: taste, touch, smell, sight/color, etc. They also can provide geographic specific profiling, for example, she notes that the majority of Chinese citizens are nearsighted, which means the color blue tends to elicit a relaxation response, whereas more farsighted populations such as Australia would relax better around the color red. I am not sure what to do about the fact that red is the most culturally significant color to the Chinese and whether or not the hormones driving a blue preference can be overridden by such additional factors.
While I am sure there is probably sufficient clinical data to back up these claims, it seems wise to remain cautiously skeptical. While there is great appeal in having binary decision systems for product design choices, they can also be taken too far and too literal. There have been many attempts in history to harness the power of the subliminal human mind to drive sales, such as those trying to tap into the “reptilian” brain of humans and hiding words and images in advertisements.
While I am certain that Dr. Derval’s methods can be successfully employed in certain instances, I suspect that it is far from a universal solution to improve sales. As much as hormones may drive our behavior, I believe there are other “human element” factors influencing our choices that can derail this new science. Relying on subliminal hormonal markers is too simple to apply to the total complexity of human behavior and consumer choice. Just my opinion.