How do you measure your innovation capabilities?

“How can we drive innovation?” This is a relevant question for most Project Management Offices (PMOs). It is also an important element of the IT value chain. “Can IT drive innovation from strategy to portfolio?” This requires innovation that is formulated against all business, technical and functional requirements to to truly support the needs of business customers.  IT organizations need to have their “eyes wide open” to trends in information technology and services to understand where to focus this innovation. But often, it mostly it involves having a PMO that delivers on innovation opportunities and ensures that the benefits meet business needs.

How should innovation be considered?

Innovation as a goal should aim to measure the achievement of competitive advantage as well as improved operational effectiveness and efficiency. Global consulting firm Booz Company annually comes out with a list of 1000 global innovators. Booz calls out an enterprise’s system of capabilities: talent, knowledge, team structures, and tools and processes  to distinguish what matters when it comes to innovation. To be innovative, you need to extend differentiation to your capabilities system. According to Booz, in this way the enterprise can “consistently and significantly outperform rivals, and IT can clearly and concretely measure the business impact of its innovation spend.” Put simply, innovation should create or extend what Booz calls the enterprise “right to win”.

How do you measure your innovation capabilities?

To improve the ability to innovate, COBIT 5 suggests IT organizations measure themselves against three process improvement goals. Let’s explore each along with their recommended metrics. 

1.Enterprise value is created through quantification and staging of the most appropriate advances and in technology, IT methods and solutions. Clearly, this improvement goal argues for the quantification of the Return On Investment (ROI) of projects and programs. It is also important to consider the comparison of the returns for potential projects against an internal rate of return (IRR) or “hurdle rate.”  It also argues effectively for appropriate staging of projects with a program. Clearly, relating projects to programs requires the right staging of activities to be established. One metric is used to measure success here: the increase in market share or competitiveness due to innovations and the enterprise stakeholder perceptions and feedback about IT innovation. If innovations become focused on the enterprise capabilities system, then market share and competitiveness are easier to judge and customer feedback will be positive.

2.Enterprise objectives are met with improved quality benefits and reduce cost as a result of identification and implementation of innovative solutions. This simply says that IT organizations need to get more predictable. The benefits of this are reduced delivery times and reduced development costs over time. Two metrics are recommended here: the percent of implemented initiatives that realize their envisioned benefits and the percent of implemented initiatives with clear linkage to enterprise objectives. The first goes right after benefit delivery while the second argues for better linkage to enterprise benefit statements.

3. Innovation is promoted and enabled and forms part of the enterprise culture. This talks about people and enabling them to be innovative. Think about Amazon IT seizing the opportunity to build the first cloud business as example of what this process goal is about. Two metrics are recommended to measure success: the inclusion of innovation or the emerging technology-related objectives in performance goals for relevant staff and stakeholder feedback and surveys. The first involves incenting staff to be innovative and effectively look for opportunities to be so. The second says that you measure perception about IT innovation. Between these two you measure the people side of the equation.

So where should I start?

My suggestion is you start where the most immediate value can be driven. But if it were up to just me, I would start by quantifying the innovation opportunities and show customers are directly involved in balancing process with the business. What do you think? I would love to hear back from you.

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Twitter: @MylesSuer

Article source: HP PPM Blog

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