THE DIGITAL ERA DEMANDS INNOVATION. Every business today — indeed, every organization — must continually adapt to keep up with changing customer expectations, new digital competitors and business models made possible by emerging technologies. For an established business, this means digital innovation within your core business — via improvements to your customer experience, as well as back-of-house improvements that address operations, risk and productivity. And it also means digital innovation beyond your core — testing new offerings in pursuit of new customers and new revenue models.
Yet it is not enough to blindly commit resources to innovation and the pursuit of new ideas. Leaders must ensure that every innovation adds meaningful financial value to the firm, along with value to the customer. It is therefore essential to measure innovations at every stage to determine that they are on track to create real value.
The Challenge: Measuring Innovation
Measuring innovation is a perennial challenge. New ventures cannot be managed by the same KPIs that you use in your core business. What’s more, the metrics needed to grow any new venture will rapidly change.
Because of your long experience with your core business, its day-to-day operations can be managed with traditional planning. But the inherent uncertainty of any new digital innovation requires that you manage it through a process of experimentation. This process should draw on seven principles shared by agile, design thinking, lean start-up and product management:
1. Start from2. Don’t write a business plan. Instead, write business hypotheses.3. Focus on learning and testing those hypotheses.4. Build new things quickly, cheaply and iteratively.5. Get feedback at each step — directly from the customer.6. Be ready to pivot or shut down quickly if the data do not validate your hypotheses.7. Be ready to scale up if the data indicate that you are on the right track.
