Introduction
Innovation and creativity are essential concepts that help organizations succeed and get a competitive edge in the market. Many companies want to introduce these values into their corporate cultures, but this process can be complicated. The problem is associated with the fact that it is challenging to measure creativity and innovation. Thus, a hypothetical scenario of two companies is analyzed to determine a correlation between business metrics and innovation culture.
Evaluating Innovation and Creativity Metrics
Table 1 – Comparison of Business Metrics of Two Companies.
The Number of Active Products
The number of active products can be an indicator of innovation, but it is impossible to make such a suggestion while looking at it in isolation. Simultaneously, this data cannot distinguish between incremental and discontinuous innovation because one should consider the product nature, involved technologies, and market impact to decide on it. If this number increases over time, the evident and guaranteed conclusion is that the company has increased its productivity.
Research & Development Budget and Headcount
Research and development (R&D) headcount is more likely an indicator of innovation than labor efficiency. This metric reveals how many employees develop and introduce new technologies and solutions. A higher R&D headcount leads to an increased R&D budget. It may denote that the organization allocates more human resources to innovation and creativity, but the effectiveness of a larger team is doubtful. Thus, the selected criteria are informative, but their isolated consideration does not allow for assessing an organization’s creativity.
If many non-R&D members dedicate much time to experimenting with new products, such a company has an organizational culture promoting innovation. This number denotes that the business encourages all its workers to bring new and innovative solutions, which is productive for the company. Guinan et al. (2019) explain that such a practice is typical in teams fostering creativity.
The Number of Patents
The availability of patents can characterize innovation, but the more is not obligatory, the better. A higher number of patents is not a good indicator of innovation if quality is ignored and if these new ideas fail to be successfully commercialized. Thus, it is possible to stipulate that AMMB, Inc. has a better culture promoting innovation and creativity. In addition to employee time dedicated to experimenting, the conclusion is supported by a larger R&D budget and a more significant percentage of sales from a lower number of new products.
Limitations and Business Intelligence in Measuring Innovation
One should additionally comment on the limitations of metrics and the use of business intelligence (BI). The best indicators of innovation culture include workers’ time devoted to experimenting, the number of new products, and their share in total sales. They have a shared limitation because the focus on a single statistical figure cannot reveal the entire picture.
Furthermore, each variable conveys essential details, which means that it is not reasonable to group them. This combination could lead to the loss of significant meaning. That is why it is sensible to rely on BI solutions to overcome this limitation and increase the metrics’ abilities. In particular, historical analysis of the variables, comparative analysis with other companies in the industry, and employee feedback can help receive more comprehensive and trustworthy information regarding innovation in the company.
Conclusion
In conclusion, it has been discussed that creativity and innovation are significant concepts. Since it can be challenging to measure them, organizations can rely on a myriad of metrics to cope with the task. Among multiple options, businesses should draw more attention to the time that their employees dedicate to experimenting, the number of new products, and their percentage of overall sales.
The number of active and new products, the R&D budget and headcount, and the number of patents cannot directly determine the presence of innovation culture in the organization. Even the suitable variables above have certain limitations to their predictive abilities. That is why BI solutions and practices should be implemented to overcome the impact of these limitations and measure innovation and creativity.
Reference
Guinan, P. J., Parise, S., & Langowitz, N. (2019). Creating an innovative digital project team: Levers to enable digital transformation. Business Horizons, 62(6), 717-727. Web.