Innovation audit: How to measure the effectiveness of your current innovation capabilities?
Learn how to execute an innovation audit to understand how effective your innovation process functions, as-is and which roadblocks and barriers stop you from achieving your innovation goals.
As discussed in the prior post “6 reasons why you should treat innovation as a survival skill in times of crises”, innovation as a capability is essential to be prepared for these uncertain times and capitalize on the new opportunities to come.
The accelerated need for transformational change caused by digitalization and the speed of emerging new technologies, climate change, COVID-19, new startups entering the marketplace, and other external factors are pushing all established companies beyond their comfort zone to stay relevant.
But before embarking on a new innovation journey and start (unnecessary) long and costly change processes, it is crucial to understand the current status quo in terms of your unique capabilities, strengths, weaknesses, processes, culture, and structure to figure out where you want to go strategically and how you get there.
Prescribing the wrong drugs
In this context, I love the analogy used by Dan Toma. Many consultants act like a medic that hands you a prescription in their doctor’s office even before you could state your symptoms or he could do any further examinations. So in many cases “the wrong drug” is being prescribed without any proper diagnosis. In the innovation context, these could be a corporate acceleration program, innovation workshops, startup partnerships, and investment in startup acceleration programs. This often leads to “innovation theatre” or just failure.
This analogy makes perfectly clear that we need a proper 360º analysis of the effectiveness of your current innovation capabilities before rushing into new strategies or tactics = You need an innovation audit.
What is an innovation audit?
Innovation audit definition: An innovation audit is an objective and in-depth analysis of the effectiveness of your current innovation platform and practice. The purpose is to map out innovation challenges and risks that prevent organizations from achieving their maximum potential with innovation initiatives. This will help avoid wasting time, money, and frustrating company employees.
Properly executed, it shows which parts of how you are managing innovation work well and where adjustments are needed to succeed. A good innovation audit will be one that results in a conclusive gap analysis followed by a clear action plan.
Benefits of an innovation audit
Systematically analyze and overcome innovation barriers with a clear plan of action
It will give you an in-depth, detailed, and objective third-person view of your current innovation capabilities. The identified barriers of innovation can be translated into a clear action plan to overcome them.
A deep understanding of the status helps avoid wasting time & money
The final gap analysis helps avoid simply initiating and executing expensive (and potentially unhelpful) innovation strategies and programs without understanding what works and what does not.
Data trumps opinion. Gathering insights from within the organization sets the ground for evidence-based decision-making. Collecting data helps to design a program tailored to organizational needs. Every company has a unique set of capabilities, processes, routines, knowledge, legacy, and therefore it is essential to personalize the strategy and choose the right tactics to build upon these unique characteristics. It also avoids uninformed top-down mandates.
What you should cover in an innovation audit?
The areas of the audit can be grouped into 2 main buckets:
- Focus (incremental, adjacent, or disruptive innovation)
- Success criteria properly defined / KPIs
- Governance model. Does it foster or hinder innovation?
- Organization and ecosystem. Are roles clear?
- Talent, culture, mindset (Are people empowered to try out new ideas? Do we recognize and reward risk-taking? Can people challenge company policy or the decisions of the boss? etc.)
- From idea to market entry — is the process effective?
- Current project management practice
- Processes used
- Methods used
- Portfolio evaluation (use of models such as: Three Horizon model, Innovation Ambition Matrix or the 4-by-3 Portfolio Mapping Framework.)
- Time to Market analysis
- Cost of failure/learning in the unit of time (basically how many unsuccessful products have been launched in a predefined unit of time)
- % of total revenue coming from new products/services
- How effective is our idea generation program? How many ideas are we generating?
- Percentage of ideas implemented (or adopted by various business units) from the total ideas generated
- What resources in terms of people, time, and money are we allocating to innovation?
Obviously, the criteria can be personalized and extended to other innovation accounting KPIs.
Innovation audit process
Compiling a quantitative survey with a specific focus on five areas — governance, people, leadership, and resources. Respondents are asked to state how much they agree or disagree with a particular statement.
Result: Capture broad insights across as many departments and divisions as possible and find out if there is a missing alignment between how the C-level portrays innovation in their company and how it is done and perceived on a daily basis throughout the business.
Semi-structured qualitative interviews with C-Level and senior management to gather their perception on the innovation capabilities, operations, and results. Furthermore problem exploration interviews with key stakeholders involved in the current innovation capabilities and processes.
Result: Expose barriers to innovation and understand the why behind them.
Once both quantitative and qualitative research data is gathered we can start to synthesize and cluster insights to group some of the barriers to innovation. This should help to diagnose key factors and barriers to your desired innovation outcomes.
Result: Causal mechanisms and emergent themes uncovered that explain why and how innovation is functioning the way it is.
Define the challenges to address in the next steps. Shape and define your innovation mission (Where you want to go) and work on a clear action plan (stating how you’re going to get there). You can use tools such as an innovation mission map and/or innovation blueprints for this exercise. It can also be done in form of an innovation strategy sprint to develop a hands-on action plan for growth alongside key decision-makers in your organization.
Result: An actionable plan to execute to tear down innovation barriers.
Do you want to carry out an innovation audit in your team? Do you want to develop concrete measures to implement projects beyond routine more efficiently? By measuring your ability to innovate, you will lay the foundations for faster implementation of innovative projects.
👉🏼 Get more information about my INNOVATION AUDIT SERVICE to start your innovation journey or build upon current capabilities and processes.
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My name is Fabian Roschig and I am a consultant for innovation strategies and innovation management.
My mission is to drive innovation at all levels, based on the individual strengths of each organization, to enable and accelerate sustainable commercial growth. Together we make this happen by setting clear goals, focusing on the right balance between strategy and execution, and using validated, systematic methods and tools that guarantee continuous, measurable results.
For more than 12 years, I have had the privilege to successfully plan, implement or optimize new strategies, products, and services, innovation programs, structures, agile teams as well as processes for a variety of clients and employers such as The Coca-Cola Company, Condor, kicker, Dr. Oetker or TUI. In doing so, I work closely with executive boards, middle management, cross-functional teams, and external service providers.