Financial Innovations::Online Financial Information About Service Company

A great tool that managers can use to set organizational goals and measure its progress is through the innovation scorecard. It details the firm’s financial and operational objectives, with which the purpose is to allow the firm to get higher return on innovation such as cash generated from innovation investments. These investments may include Research and Development (R&D) expense, development of new business methods and hiring of new people. Cash generated from these investments may also include profit contribution of new processes or products.

When setting objectives for return on innovation, organizations should come across a given set of measures, among which include profit and revenue for every employee that is relative to competitors; profit from new processes and products divided by innovation investment and internal rate of return from innovation investments.

Moreover, organizations should establish goals for the said measures and associate compensation of managers in order to achieve these goals. Superiors should also carefully identify authorized individuals who should be held responsible for the attainment of these goals. In addition, they should set goals that can generate innovation return through the use of the innovation scorecard.

There are four measures that make up the innovation scorecard. One is entrepreneurial leadership. This can be measured by doing an independent survey among employees, in which the results can be used to determine how well a firm is able to attract and maximize entrepreneur productivity. Entrepreneurial leadership may cover topics such as rate of employees that can improve the firm’s competitive status without interference; rate of employees with rewarding career opportunities and remuneration and rate of employees whose bonuses and other extra perks are linked to improvements in terms of customer satisfaction scores.

Another is open technology. This can be gauged by interviewing a firm’s product developers and/or technologists. Results of this measure can help identify a firm’s vulnerability to new technologies that might be a threat to its competitive status. Interviews may include topics such as rate of current revenues based on products introduced in the past two years; rate of current revenues from products outside the scope of your firm’s R & D and the number of persons delegated to monitor the latest technologies.

The third measure, which is boundary-less product development, can be gauged by interviewing a cross segment of product development teams. These interviews can help superiors set time to market streamlines and enhance the probability of launching successful product innovations. Topics covered under this measure are the number of new products created with cross-functional groups; reduction in new products’ time-to-market over the past three years as well as the number of groups getting quick feedback from specific customer with regard to prototypes on new products.

The last measure in the innovation scorecard is disciplined resource allocation, which can be measured by interviewing participants in the field of resource allocation for new products. This measure can help determine flaws in making investment decisions and suitable practices that can boost return on innovation. Interviews may cover topics such as rate of new product launches alongside thorough post-mortem analysis; number of discussions for sharing the best and worst practices throughout the firm and the rate of resource allocation on new products derived from stage-gate methods and portfolio grid.

To maximize the use of the innovation scorecard, firms should compare industry results and incorporate the scorecard into their compensation and performance measurement systems.

Aother – Sam Miller