NPD Resources
Metrics for Innovation Success
Strategy is one of the two most important drivers for NPD success. However, because the type of NPD projects which are undertaken are also an expression of the organization’s strategic typology, innovation metrics will vary from firm-to-firm. Typical linkages between
Innovation Strategy and preferred metrics of successful innovation are discussed here. A Defender organization which pursues stable product lines and penetration of existing markets will focus on somewhat different metrics than a typical
Prospector firm, for example.
Because the Defender firm is working to protect its market domain through high quality, superior service, or lower prices, one of the most important metrics is whether the new product fits the business strategy. Our idealized Defender company, Queen Royal Plastics, for example, will measure whether the single core technology can deliver a new product with minimum capital investment and without disruption to the existing product line.
In contrast to the Defender firm, the Prospector firm values being “first” to market, so its primary measure of success involves whether the products of today will lead to future opportunities. In fact, the Prospector firm will introduce nearly six times as many New-to-the-World products as will a Defender firm (30% of portfolio vs. 5%). Measures for a Prospector firm will be consistent with changing product lines and early market entry. Innovation, also a high priority, may be tracked through metrics such as number of new patents issued over a period (quarter or year), as well as benchmarking patent portfolios with nearest competitors to ensure the Prospector firm is “winning” with the most new technologies.
An example of a Prospector firm is described in the case study of Cat's Audio Equipment.
Again balancing the hybrid nature of maintaining stability in operations but innovating as a Fast Follower, the Analyzer firm balances metrics, as expected, between those of the Defender and the Prospector. A case study of an idealized Analyzer organization is presented for New US for Women.
However, the Analyzer firm will tend to focus more closely on projects that have a lower degree of newness in the marketplace as compared to a Prospector firm. An important metric to the Analyzer firm is the rate of success for new products in the marketplace. These measures will include fit with business strategy as well as the development program Return on Investment (ROI). An NPD project that is considered “too expensive” will not likely be followed with another similar NPD project until the Analyzer firm can discern the full details of the “failure” by one of many rigorous analyses.
With no specific new product development strategy, the Reactor firm, such as mighty grEAT food company will look to subjective measures of project success. If any metrics are tracked, the development program ROI may be reported. The disadvantage is, of course, that the ROI is not necessarily representative of success in the marketplace if the research and development investment was not focused for efficiency in the first instance.
Download the full white paper here. Read more about Innovation Strategy Typologies.
Learn more about ensuring alignment between your firm's Innovation Strategy and Vision.
