Abstract
PurposeFirms frequently struggle with measuring the performance of their radical innovation activities. Due to the uncertainty and ambiguity involved, key performance indicators (KPIs) used for incremental innovation projects are often not useful in this context. The purpose of this paper is to explore suitable KPIs particularly useful for radical innovation projects.Design/methodology/approachThis study first reviews commonly used measures for innovation projects, which is then followed by case-study evidence from three industry-leading international firms. This study includes 13 in-depth interviews with innovation managers and directors in these firms, providing insights on how they measure the progress and performance of radical innovation projects.FindingsKPIs used commonly in incremental innovation showed lackluster results in the case firms and were problematic for radical innovation context. A key finding was that radical innovation project performance should be evaluated based on the process rather than on the expected outcome. Concurrently, based on the literature review and the cases, three sets of KPIs with 13 specific KPIs useful for radical innovation projects are proposed.Originality/valueThe paper addresses a core challenge in using established KPIs in a radical innovation context. The paper gathers and synthesizes a range of measurement points suitable for radical innovation projects and provides specific suggestions for appropriate metrics that innovation managers can use.
Highlights
Jimmi Normann Kristiansen is Assistant Professor at Department of Business and Management, Aalborg University, Aalborg, Denmark
Radical innovation projects are characterized by higher uncertainty and absorption of new knowledge for the firm, as well as exploration of new markets, technologies and/or business models
During the Acceleration phase, radical innovation projects are matured to a point, where they should be measured in line with established metrics for incremental innovation within firms
Summary
The term “key performance indicator” has been widely used in the management literature and refers to identifying key activities of a value-creation process in the firm and generating a way of measuring those activities (Kaplan and Norton, 1996). The popular measures used to gauge success are either firm- or product-related, which often target markets (e.g. market size and time to market) and finances (net present value or similar) and whether the pre-established plan is followed (Blindenbach-Driessen et al, 2010; Henttonen et al, 2016) These measures very rarely target radical innovation projects. Return on investment does not provide a valuation of new competency and spillover effects built through radical innovation projects Analyses will often show that most profit comes collectively from incremental innovation projects, except for periods with radical innovation market breakthroughs Time required to patent is often longer for radical innovation projects. This was further supplemented with documentation from project tools, strategy workshops, seminar work and publicly available information
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