McKinsey Global Survey Results: Assessing Innovation Metrics Essay

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McKinsey Global Survey Results

McKinsey Global Survey Results:

Assessing innovation metrics

Assessing innovation metrics
A recent McKinsey Global Survey shows that companies are satisfied, overall, with their use of metrics to assess innovation portfolios—though many findings suggest that they shouldn’t be. The companies that get the highest returns from innovation do use metrics well; these organizations tend to assess innovation more comprehensively than the others. Even in the current economic turmoil, innovation remains a high strategic priority for most companies, and many see it as a strong contributor to growth. Yet many also struggle to measure the performance of their innovation portfolios. In a recent McKinsey Global Survey,1 we asked senior executives which types of innovations their companies pursue, which ones they measure and with what metrics, what goals they have in using metrics, and how satisfied they are with the metrics they choose. Companies reporting the highest contribution to growth from their innovation projects tend to be more interested in pursuing and measuring their innovations as a portfolio and therefore use metrics across the whole innovation process. In the end, they are more satisfied than others with the ability of such metrics to help their organizations do everything from aligning individual performance incentives to improving innovation performance to communicating with investors.
1 Conducted in October 2008, the survey had 1,075 respondents, all C-level or other senior executives, representing a full range

of regions and industries.

Jean-François Martin

Oct 2008 McKinsey Quarterly survey on innovation metrics

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McKinsey Global Survey Results

Assessing innovation metrics

Sixteen percent of the respondents say that their companies don’t use any metrics to assess innovations. Among those that do, most are satisfied overall, though the findings suggest they aren’t effectively using these metrics as well as they could. Most notably, companies are much likelier to rely on metrics for outputs than for inputs, so they aren’t assessing the whole process of innovation. Forty-five percent don’t track the relationship between spending on innovation and shareholder value. Further, although many companies are satisfied with their use of innovation metrics in general, far fewer are satisfied with specific uses, such as aligning individual performance incentives.
What gets measured and why

Innovation is a high strategic priority for most companies (Exhibit 1). However, this survey shows slightly fewer senior executives either selecting it as the top priority or placing it among the top three than those who responded to a similar question last year:2 65 percent now, compared with 70 percent in 2007. This drop may reflect the fact that the latest survey was in the field after the credit crunch and stock market turmoil had begun to reorder many companies’ priorities.
2 In September 2007, a McKinsey Global Survey asked, “Over the next three to five years, how important will innovation as

a major driver of growth be on your leadership team’s agenda?” See “How companies approach innovation: A McKinsey Global Survey,” mckinseyquarterly.com, October 2007.

Survey 2008 Innovation metrics Exhibit 1 of 7 Glance: Exhibit 1 Exhibit title: A strategic priority

A strategic priority

% of respondents,1 n = 1,075

Asia-Pacific Europe North America Developing markets

How important is innovation in products, services, processes, or business models on your organization’s strategic agenda?
Total The top priority 14 9 Among the top 3 priorities 51 24 25 By region 12 16 29

43

54 49 52

Among the top 10 priorities

30 4

33 35

Not a priority

5 3

6 5

Respondents who answered “don’t know” are not shown.

Oct 2008 McKinsey Quarterly survey on innovation metrics

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McKinsey Global Survey Results

Assessing innovation metrics

The kinds of…