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Measuring Innovation 2007

A BCG Senior Management Survey
August 01, 2007 by Jim Andrew, Harold L. Sirkin, Knut Haanæs, and David C. Michael
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In conjunction with its latest annual global survey on innovation—the results of which are described in our companion report, Innovation 2007—The Boston Consulting Group invited senior executives to complete a separate survey on innovation metrics and measurement practices. This report highlights that survey’s results.

Companies spend billions of dollars a year on innovation. Yet a critical part of the equation is often missing: proper measurement. Few companies measure their innovation efforts as carefully as they measure other aspects of their business; some companies barely attempt to measure innovation at all. The potential cost of this shortcoming is sizable.

Our survey asked 377 executives a range of questions about their innovation-measurement practices. Among the survey’s key findings:

  • Most companies recognize the importance of measurement, but few believe they are doing it as well as they should. Only 37 percent of survey respondents said they were satisfied with their company’s measurement practices.

  • The majority of companies use a small number of metrics to measure their innovation activities. Sixty percent of survey respondents said that their company uses a total of five or fewer.

  • The most widely tracked components of innovation are profitability (82 percent of respondents said their company tracks it), time to market (62 percent), and idea generation and selection (61 percent).

  • The single most widely used innovation metric is total funds invested in growth projects, which 71 percent of respondents said that their company employs.

  • Few companies consistently tie employee incentives to their innovation metrics. Only 28 percent of respondents said that their company links the two consistently; 24 percent said their company doesn’t link them at all.