7-2 Short Paper- Metrics for Innovation

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Stokem 1 7-2 Short Paper: Metrics for Innovation 7-2 Short Paper: Metrics for Innovation Metrics Evaluation After reviewing the table showing the different metrics for the companies INAGG, Inc. and AMMB, Inc., it is evident that each of the organizations’ differ from one another in terms of creativity and innovation. There are seven metrics throughout the table which include: number of active products, research and development (R&D) budget, R&D headcount, % of sales from products introduced in the past four years, number of new products launched in the past four years, employee time dedicated to experimenting with new products, and number of patents in the last four years. Many metrics impact a variety of factors in an organization, and in terms of active products, I believe that this metric is an indicator of incremental innovation. This is due to the fact that INAGG has 12 active products, which is double the amount of AMMB, as well as double the number of new products launched in the past four years, being seven. Additionally, AMMB has 23 patents within the past four years, while INAGG only has seven. This is critical to mention for the purpose that AMMB has been planning for long term product development, launching only three products recently. INAGG, on the other hand, has focused more on launching products rather than pursue more long-term products. Transitioning to R&D headcount, I believe that this metric is an indicator of innovation. INAGG has an R&D headcount of 52, meanwhile AMMB has an R&D headcount of 33. One of the key factors with this metric being an indicator of innovation is due to AMMB having a higher R&D budget than INAGG, with AMMB’s budget at $14 million and INAGG’s budget at $10 million. In addition, with AMMB having more than triple the number of patents, there is a clear understanding that labor efficiency is not an indicator in regards to R&D headcount.

Stokem 2 7-2 Short Paper: Metrics for Innovation If any of the metrics from the table increased over time, there is an opportunity for one of the organizations to have the competitive advantage of a higher total employee count or total revenue. Out of the seven metrics that are currently being measured, four of them are led by AMMB, which could potentially shift if any of the metrics increased. Company Evaluation Organizations thrive off of their ability to create and maintain a supportive culture and overall environment. After evaluating each company individually, I believe that AMMB is an organization most likely to have a culture that supports innovation and creativity. Although INAGG has a greater R&D headcount and active products, AMMB has a higher R&D budget along with a higher percent of sales from products introduced in the past four years. Additionally, AMMB tracks employee time dedicated to experimenting with new products, meanwhile INAGG does not track this metric at all. By adding this metric to an organization, the team will have an ample amount of time to distinguish whether or not the product will have a long-term effect on the company. A scenario in which having multiple patents would not be an indicator of an innovation culture would be having multiple patents and overloading the R&D team with non-useful innovative products. This will results in a loss of time and resources being wasted on products that won’t make it through the stage-gate process. Ability and Limitations of Metrics and BI There are a variety of metrics that assist in measuring the ability of an organization to innovate or support employee creativity. These metrics come with the many abilities and limitations for an organization as a whole. A few limitations from the metrics described above that are the best indicators of innovation culture included the number of active products and the percent of sales from products introduced in the past four years. A limitation for active products

Stokem 3 7-2 Short Paper: Metrics for Innovation includes the lack of specifications in terms of what the products are, therefore, distinctiveness between products is uncertain and unclear. Additionally, a limitation for percent of sales from products introduced in the past four years includes the simple fact that we don’t know how much percent of the new products produced what percent. This is important because there could be one specific product that is increasing the sales of newly introduced products heavily, ultimately resulting in time and resources “wasted” on new innovation. By utilizing a combination of metrics, there are some limitation that may be avoided. For example, by coming two different metrics like the percent of new sales and the number of patents. This information will give an organization the ability to asset whether or not the amount of newly innovated products correlates with the demands of the market. Lastly, in regards to business intelligence, this may be used in order to determine whether or not the current metrics being utilized are beneficial in measuring organizational success. If the metric is not providing information that will better the company, than an adjustment in metrics will be needed to be able to measure success for the organization.

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