The uncertainty associated with innovation needs to be managed.
Yet in order to be able to manage something, it first needs to be measured and understood. Unfortunately, traditional financial accounting metrics have not evolved to address the needs of innovation management, and it’s unlikely that accounting standards will change in the near future. Therefore, organizations often revert to using lagging financial indicators such as profit and loss (P&L) and return on investment (ROI) to measure the progress in innovation.
While these might be useful indicators for the core business where the degree of uncertainty is small, for innovation they feel like trying to steer a car on a highway, looking in the rear-view mirror. This is due to the fact that the results occur far too late in the idea’s life-cycle to inform its actual development. Thus, according to Eric Ries, an innovation accounting system becomes a mechanism of evaluating progress when all the metrics typically used for mature businesses are effectively zero.
At our recent Innov8rs Connect Unconference 2021, Esther Gons and Dan Toma, co-authors of the new book Innovation Accounting, shared how you can measure the progress an innovation team is making and contaminate all the investments in innovation to your executives.
Check the full session recording below.
As recorded during Innov8rs Unconference 2021. For access to 500+ other videos and resources, become a member of Innov8rs Community - apply to join here.