Other parts of this series:
If you’re a leader who knows that innovation is the way to success, then you have probably come up with the thorny problem of how to measure innovation.
I was talking to a colleague about this the other day, and he reminded me of Goodhart’s law: when the measure becomes the target, it ceases to be a good measure.
Another way of expressing Goodhart’s law is that the activity that we should be performing becomes a “tickbox” exercise. In other words, people perform the actions for no other reason than to perform the actions.
Two random examples come to mind. The Independent Communications Authority of South Africa (Icasa) recently suggested legislation that would require a minimum of 30% local content on all platforms in South Africa. That already holds true for the SABC, but they want to impose this on streaming services as well.
That’s great news for local filmmakers, isn’t it?
Except that a large streaming provider would never be able to reach that target. The really big players have international customer bases, and imposing a 30% South African content quota on them would perhaps mean that 30% of all their content would be South African.
That sounds phenomenal to the SA industry. Except it ain’t never gonna happen. What would happen is the streaming platform would cut their offering accordingly. One player has 20 dramas and 40 South African films on their platform. In the absence of sufficient local content, the new rules would force them to reduce their international content to 40 dramas and 80 films, so that the 20 SA dramas and 40 SA films would make up 30% of their total content. That would meet the proposed regulatory requirements. And kill the business completely in South Africa and abroad.
Another example of Goodhart’s law is the airlines’ approach to refunds. Their approach is, they don’t offer refunds. Unless the reason you’re not flying is that you contracted Covid-19. Then you get your money back. Which creates a perverse incentive to make sure you test positive!
Goodhart’s law applies to innovation projects just as much as anything else. At the same time, we really really want to track and improve innovation efforts. And as Drucker famously said, what gets measured, gets managed.
So if we step back a bit from measurement, can we think of an altogether different approach to innovation? Our research suggests we can.
Different companies have different priorities when it comes to innovation. We discovered nine different innovation dimensions, which sounds like a lot, but it comes in the form of a handy 3×3 grid.
As the diagram shows, companies have one of three maturity levels, depending on the industry and the company itself. They could have an Emerging, a Growth, or a Legacy business. They also have innovation ambitions in one of three areas: Incremental, Breakthrough or Disruptive innovations.
At the very least, even if you can’t exactly measure your innovation effort, you can decide where to direct your innovation resources. That should happen at strategy and alignment sessions, which should ideally be run at least once a quarter, if not monthly.
Or should they? If we make that a target, we may end up with meetings for the sake of meetings.
My colleagues and I haven’t come to any conclusion about how best to measure innovation. Except perhaps for sales themselves. If sales are going up, then it may suggest that innovation efforts are, quite literally, paying off.
How do you measure innovation in your business? I’d love to hear from you.
To read more about innovation governance, our research is available here.