Measurement of innovation

From CEOpedia | Management online

Measurement of innovation is needed to make decisions to implement new solutions, product designs, processes, etc. Measurement can be made with regard to whole sector of economy, particular enterprises in the sector, but also may be related to territorial units (regions or countries). Measurement of innovation is a very important research task, which is, however, difficult due to the diversity of the definition of the concept of innovation and radically different approaches to its interpretation. That results in a large diversity in the selection of indicators of innovation.

Methods of analysis of innovation

When analyzing the measures of innovation in companies we can distinguish between two basic methods. The first is based on the number as well as the nature of innovation that actually exist within the enterprise. This method is rarely used because of the collection of information on the basis of specific statistical data with a source in the technical reports produced by the company. This method results in a great amount of information on individual innovation, and the less with respect to the total number of different innovations.

The second method of measuring innovation is economic method. It involves only those organizations that have introduced innovations. Research tool used in this method is a questionnaire concerning the various dimensions of innovation processes in industry or services and the amount of resources that have been allocated to innovation activities of the company. In addition this method analyzes growth factors causing or blocking innovation, sources of information used for innovation, innovation diffusion and its effects. Using this method innovation is measured in common context of economic variables, e.g. production volume, employment, profits, etc.

Enterprise innovation indicators

We can distinguish the following criteria and indicators for innovation within company:

  • specific effects of innovation: the number of patents, scientific publications, knowledge generated by employees,
  • number of new products - successful product innovations
  • quality of operation - the study of consumer satisfaction
  • strategic success - e.g. an increase in revenue

More specific criteria and indicators of innovation include:

  • number of new products launched over the last three years
  • sales volume
  • profits
  • number of new ideas in the company
  • number of projects in the development stage
  • costs of the product in relation to the current trends in individual sectors
  • production capacity of specific units within company
  • average time needed to process an innovative idea (generate new product)

Community Innovation Survey as a measure of innovation

Community Innovation Survey, abbreviated CIS, are statistics covering the field of science and technology, carried out by the European Union. The tests are carried out every two years, and their main objective is to obtain information on the innovative capacity of organizations, and the types of innovations occurring in selected sectors of economy. The research also apply to issues relating to the development of innovation. Aspects related to the development of innovation include: innovation objectives, sources of information about innovations, budgeting, innovation and expenses associated with them. The necessary data for the delineation of indicators of innovation in industrial companies are collected at national level by means of surveys which are constructed on the basis of a common methodology for all operators and definitions. The resulting indicators are assessing the aspects of innovation in the industry, as well as their means of financing.

Research in the framework of the Community Innovation Survey method is based on so-called "Oslo Manual." Frequently asked questions in the questionnaire survey include:

  • general information on innovative business
  • funds earmarked by the company for innovative activities: R & D, purchase of new technologies, investment in connection with the introduction of innovation, staff training
  • impact of innovation on the company's results
  • value of innovative new product sold
  • sources of information for innovation
  • designated objectives of innovation activity
  • R&D cooperation with other companies, institutions, national or international
  • methods of protection of innovation
  • obstacles in implementation of innovation

Innovation measurement according to the Boston Consulting Group

To assess the innovative activities of the company can also use a balanced composition of meters localized in the following categories: inputs, processes and results. The first category includes, among other things: financial and human resources related to innovation activities, the time devoted by top management, the number of patent applications submitted.

For measures of processes is considered: the speed of the innovation process, horizontal approach to formulate ideas.

Results in the last category include the following measures: the number of new products or services, the share of new products as a percentage of revenues, the share of new customers in company profits expressed as a percentage.

Examples of Measurement of innovation

  • Patent Analysis: Patents are a great way to measure the level of innovation within a sector or region. This is because patents are a public record of new ideas and inventions. An analysis of the number of patents, types of patents and the countries or regions where patents are held can give an indication of the level of innovation in a particular region or sector.
  • R&D Expenditure: Investment in research and development (R&D) is another way to measure innovation. Nations and corporations that invest heavily in R&D are likely to be more innovative than those that do not. Measuring R&D expenditure can be done through surveys and reports.
  • Innovation Surveys: Surveys are a great way to measure innovation. Surveys can be used to ask companies and individuals questions about their opinions on innovation, their research and development activities, and their investments in new ideas, products, and services.
  • Business Model Analysis: Analyzing the business models of companies and organizations can be another way to measure innovation. Examining the strategies and tactics used by companies to disrupt markets and create new value can provide insights into their level of innovation.

Advantages of Measurement of innovation

  • Measurement of innovation allows to objectively evaluate the impact of new solutions, products, processes, etc. on business performance, economic growth and social well-being.
  • It helps to identify competitive advantages of enterprises, sectors, regions and countries as well as to compare effectiveness of different approaches to innovation.
  • Measurement of innovation enables to identify weak and strong points in the innovation process and provides appropriate advice for improvement.
  • It helps to better understand the dynamics of innovation in the sector, region or country and to make more informed decisions about the resources invested in innovation.
  • Measurement of innovation enables to evaluate the efficiency of public policies intended to support the innovation process.

Limitations of Measurement of innovation

One of the main limitations of measuring innovation is the difficulty of accurately assessing the impact of innovation. This is due to the fact that innovation is often intangible, making it difficult to measure its effects in terms of concrete outputs or outcomes. Additionally, innovation can be highly unpredictable and its effects may not be immediately apparent or measurable. As a result, it can be difficult to track the effects of innovation over time.

Furthermore, the definition of innovation can vary among different sectors, countries, and cultures. This makes it challenging to create a universal definition of innovation that works for all contexts. Additionally, the definition of innovation can change over time, making it difficult to create a consistent measure of innovation.

Furthermore, the measurement of innovation can be further complicated by the difficulty of assessing the quality of different innovations. As a result, it can be difficult to accurately compare different innovative solutions.

Finally, it can be difficult to quantify the economic or social value of innovation, making it difficult to measure its overall impact. This can make it challenging to assess the effectiveness of different innovations, or to assess the impact of different innovations on different sectors or economies.

Other approaches related to Measurement of innovation

In addition to the main approach of measuring innovation, there are other important approaches to consider.

  • Quantitative Approach: This approach relies on the use of numerical data to measure the level of innovation, such as the number of patents filed, the number of new products and services launched, the number of collaborations with external partners, and the amount of venture capital invested.
  • Qualitative Approach: This approach focuses on the qualitative aspects of innovation, such as the impact of new products and services on the customer experience, the degree of collaboration between different stakeholders, and the level of creativity and innovation in the organization.
  • Economic Approach: This approach looks at the economic benefits of innovation, such as increased productivity, increased efficiency, and increased market share.
  • Financial Approach: This approach looks at the financial benefits of innovation, such as increased revenue and profits, cost savings, and increased shareholder value.
  • Societal Approach: This approach looks at the social and environmental benefits of innovation, such as improved access to services, improved quality of life, and reduced environmental impact.

In summary, there are several approaches to measure innovation, including quantitative, qualitative, economic, financial, and societal. Each approach has its own advantages and disadvantages and should be used in combination to get a comprehensive picture of the level of innovation in an organization.


Measurement of innovation — recommended articles
Innovative research — Value added statement — Innovative systems — Economic feasibility — Technology scouting — Methods in management — Strategic planning tools — Research and development definition — Strategic management

References

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