The Value of Innovation

Chapter 2Status and Concerns about Innovation Measurement

3M was famous for providing innovators money and then leaving them alone to create new ideas, products, and efficiencies. Just two output measures were really reported: the percentage of revenues from new products and the number of patents. The 3M culture was about the inputs to create fabulous new ideas including their famous 15% slack time (available to work on projects that scientists choose) and spending 5% of their revenue on R&D.

When a new CEO arrived, things changed. James McNerney brought along enough GE-inspired efficiency metrics to clog up the creative veins and arteries of 3M. Too much measurement increased short-term profits and reduced long-term growth.

The next two CEOs, both 3M old timers, reversed the changes. With creative independence restored, the number of new products soared back up to 40% in the next few years. All measurement and no joy makes creativity a chore. [1]

This story shows that the metrics for innovation must be carefully selected, and the process for measuring success must be perceived as a value-adding process. This creates a paradox, because as Peter Drucker comments sagely, “If you can’t measure it, you can’t manage it.” A measurement system must walk the delicate line between measuring the right things, but not using that data in an improper way. It should be used for process improvement, not necessarily performance evaluation of the team.

Innovation: Definition, Models, and Measures ...