Technovation ∎ (∎∎∎∎) ∎∎∎–∎∎∎

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Technovation
journal homepage: www.elsevier.com/locate/technovation

Towards a holistic enterprise innovation performance

measurement system
Vikas Dewangan 1, Manish Godse 1
Infosys Limited, Rajiv Gandhi InfoTech Park, Phase I Hinjawadi, Taluka Mulshi, Pune 411057, India

art ic l e i nf o a b s t r a c t

This paper identifies the gaps in previously proposed enterprise innovation performance measurement
Keywords: schemes vis-à-vis today's enterprise needs and proffers a process based innovation performance
Innovation management measurement scheme, which improves upon existing schemes by significantly broadening the
Performance measurement systems measurement scope. A number of industry surveys bear out the discontent of enterprises with existing
Innovation performance measurement innovation performance measurement schemes. In order to address pertinent enterprise needs, a
Performance metrics literature review of innovation performance measurement schemes is presented, followed by a set of
guiding principles for developing a more robust scheme that emphasizes the distinction between the
measurement of invention and exploitation and can be used as a taxonomy for innovation key
performance indicators.
& 2014 Published by Elsevier Ltd.

1. Introduction review their IPM systems to strengthen the outcome of their

innovation efforts. There are several IPM systems that have been
Competitiveness arising from globalization has forced enterprises proposed in the literature (refer Section 3 on literature study), but
to increasingly look towards innovation in order to offer differen- from a practitioner's perspective, none of these seem to be effective
tiated goods and services as well as lower costs for meeting their in addressing the complete needs of an innovative enterprise. In
long term business objectives (Porter, 1998). Therefore, innovation addition, enterprises are facing difficulties in establishing a clear
has become one of the top most priorities for a majority of relationship between innovation and enterprise performance
enterprises today. Moreover, there is a need for enterprises to because of disagreement on how to measure innovation and how
measure the performance of their innovation initiatives to ensure to link innovation with enterprise performance (Cruz-Cázaresa et al.,
effectiveness of their investments. It is easy to measure things that 2013).
are established, stable and well-understood. However, if things are The subject of innovation is considerably diverse and deep
new, evolving and dynamic then what to measure and how to (Lawson and Samson, 2003). Before discussing innovation perfor-
measure them are the challenges (Kirchhoff et al., 2013). Innovation mance measurement, it is essential to understand innovation in
management itself is evolving and presents enterprises with tough the context of the enterprise. Numerous definitions of innovation
challenges in performance measurement. It is not surprising that a have been proposed in the literature. Roberts (1998) definition has
number of industry surveys bear out the discontent of enterprises been preferred, as it is relevant in the context of this discussion:
with their existing Innovation Performance Measurement (IPM) sys-
tems. Less than 41% of enterprises regard their IPM systems as Innovation ¼ Invention þ Exploitation
effective and a large majority of enterprises have felt the need to
improve their IPM systems. These points are borne out by a number In this definition, invention implies conceiving and developing
of industry surveys on innovation including McKinsey innovation the idea into a workable application, whereas exploitation entails
metrics survey (Chan et al., 2008), performance management survey the process of commercialization and reaping the benefits. Nota-
by Business Application Research Center (Bange et al., 2009) and bly, this definition includes the creation of innovations; whereas
Boston Consulting Group (BCG) innovation survey (Andrew et al., most definitions in the literature focus only on adoption of
2010). Evidently, the surveys underline the need for enterprises to innovations (Ravichandran, 1999). For example, one commonly
cited definition of innovation is “the successful exploitation of new
ideas” (Branson, 1998). It may be contended that innovation
E-mail addresses: [email protected] (V. Dewangan),
cannot be effective unless there is an efficient mechanism for
[email protected] (M. Godse). generating and incubating ideas, which are of benefit to the
1
Tel.: þ91 20 22932800; fax: þ 91 20 22932832. organization. In this paper, the term innovation is presumed to

http://dx.doi.org/10.1016/j.technovation.2014.04.002
0166-4972/& 2014 Published by Elsevier Ltd.

Please cite this article as: Dewangan, V., Godse, M., Towards a holistic enterprise innovation performance measurement system.
Technovation (2014), http://dx.doi.org/10.1016/j.technovation.2014.04.002i
2 V. Dewangan, M. Godse / Technovation ∎ (∎∎∎∎) ∎∎∎–∎∎∎

include all kinds of innovations including product, service, process, because the effectiveness and efficiency of these activities not
technology, and business model. only determine a firm’s competitive advantage, but its very
The contribution of this paper towards IPM theory is twofold: survival.

 An extensive review of IPM literature has been provided with Without having an effective performance measurement sys-
mention of key industry surveys. This provides a strong tem, an enterprise may find it hard to effectively manage its
foundation for subsequent research in this area. operations and keep its employees motivated (Globerson, 1985).
 We have derived from our research, a set of guiding principles for Traditionally, performance of a commercial enterprise (in a
developing effective and robust IPM schemes. Researchers can capitalistic context) is measured by: (a) financial performance,
leverage these principles to develop more exhaustive IPM schemes. using accounting measures like return on investment and payback
period and (b) operational efficiency, using measures like produc-
Further, the contribution of this paper towards IPM practice is tivity and cycle times (Kaplan and Norton, 1992). When viewed in
threefold: the current context of creating competitive advantage by adopting
innovation programs, enterprises’ tangible assets are increasingly
 The guiding principles enlisted provide a strong foundation for losing their importance to intangible ones; consequently, these
industry practitioners to develop robust IPM systems. This can commercial performance measures no longer appear to be ade-
help enterprises improve innovation measurement and thereby quate for an IPM scheme (Kaplan and Norton, 2001).
extract more gains from their innovation investments. Enterprises today also need a focus on continuous improve-
 The case study explains how an IPM scheme was derived from ment; often leading to innovation. To quote Kaplan and Norton
the guiding principles. Enterprises can use this IPM scheme (1992):
directly or take help of our framework to derive their own IPM
scheme. The traditional financial performance measures worked well
 Adoption of a uniform set of IPM guiding principles across for the industrial era, but they are out of step with the skills and
enterprises can eventually lead to development of relevant competencies companies are trying to master today.
IPM industry standards as well as open up the possibility of
establishing global innovation performance benchmarks. The late 20th century witnessed the emergence of several
multi-dimensional IPM systems designed to address this need
This paper begins with a discussion on IPM systems in Section 2 (Bourne et al., 2000). These systems provided some means of
followed by the literature review in Section 3. The guiding principles integrating a combination of financial and non-financial measures
required to develop a performance measurement system are dis- to measure the tangible and intangible value created by the
cussed in Section 4 along with the IPM scheme in Section 5. enterprise. Some notable examples are the performance measure-
ment matrix (Keegan et al., 1989), the results and determinants
framework (Fitzgerald et al., 1991) the performance pyramid
2. Performance measurement systems (Lynch and Cross, 1991), balanced scorecard (BSC) (Kaplan and
Norton, 1992), and the performance prism (Neely et al., 2002).
To make innovation sustainable within the enterprise, it is Similar to the evolution of enterprise performance measurement
important to have a well defined IPM system that comprises: systems in the past, IPM systems are also passing through a period
of evolution. To quote Milbergs and Vonortas (2005):
1. The performance measurement scheme that defines and optimally
clusters the key performance indicators (KPI) across appropriate The drive for improved [innovation] indicators stems from the
dimensions (Kerssens-van Drongelen and Cook, 1997). understanding that currently available measurements largely
2. The KPIs and corresponding benchmarks for each dimension reflect the industrial era and less so the knowledge economy
3. The appropriate reporting formats according to enterprise needs unfolding around us: they largely reflect products and artifacts
4. A proper method and supporting infrastructure to enable data rather than ideas and processes.
gathering, analysis, interpretation and dissemination in the
form of reports (Neely, 1998). Moreover, the adoption of reasonably uniform IPM systems by
enterprises will allow for competitive benchmarking among them
In this paper, when we use the term ‘IPM system' we refer to the and thereby development of relevant industry standards.
scope comprising all four points listed above, whereas by the term The objectives for research and new product development men-
‘IPM scheme’, we refer to a formal framework as mentioned in point tioned by Godener and Soderquist (2004) are: (1) communication to
1 above that optimally groups tangible and intangible KPIs so that clarify goals, (2) diagnosis, control and correction, (3) resource
enterprises can derive maximum benefit from the innovation pro- allocation, (4) employee performance evaluation and incentives and
gram. This paper essentially focuses on point 1 i.e. IPM scheme. The (5) continuous process improvement. Similarly, in case of innovation,
points 2 to 4 have been considered out of scope in the context of this the goals of measuring performance are not different; moreover, they
paper. Discussion of KPIs and corresponding benchmarks (point 2) is assume a special significance when justifying resource allocation and
a considerably vast subject and merits a separate discussion. Report- investment decisions by demonstrating the value of innovations
ing formats are generally designed to meet specific needs of using quantifiable data (Gama et al., 2007).
stakeholders at various levels of the enterprise, so point 3 is not Last but not least, organizations should have a well defined
covered here. Point 4 is significantly dependent upon the governance innovation strategy as it provides a strong foundation for devel-
processes and existing infrastructure of the enterprise, hence this oping a robust IPM scheme. To quote Gurhan Gunday et al. (2011):
aspect has been kept out of scope.
The use of performance measurement systems has been witnes- Innovation strategy is an important major driver of firm
sing steady growth. To quote Godener and Soderquist (2004): performance and should be developed and executed as an
integral part of the business strategy. Managers should recog-
The use and interest in performance measurement systems nize and manage innovations in order to boost their opera-
by enterprises has got increased importance over the years tional performance.

Please cite this article as: Dewangan, V., Godse, M., Towards a holistic enterprise innovation performance measurement system.
Technovation (2014), http://dx.doi.org/10.1016/j.technovation.2014.04.002i
 V. Dewangan, M. Godse / Technovation ∎ (∎∎∎∎) ∎∎∎–∎∎∎ 3

To understand IPM systems and schemes, we have studied measurement of R&D and new product development has been
academic and practitioners’ literature. The observations are men- included in addition to innovation. The challenges in these areas
tioned in the following Section 3. are quite similar; moreover, taken together, these domains represent
a superset of measurement categories corresponding to various
activities that makeup innovation.
3. Literature study There is a notable consensus in the literature on the need for
adopting a multi-dimensional approach for the effective perfor-
While conducting the literature study, we observed that there mance measurement of innovation; however, there exists a
are two approaches authors have adopted while discussing IPM in significant divergence of opinion on what exactly these dimen-
the enterprise. sions should be.
Brown and Svenson (1988) in their work on R&D productivity
1. The first approach discusses the relative merits and demerits of measurement have favoured a process based approach, measured
performance indicators (for example, patent counts, R&D inputs across the categories of inputs, processing system, outputs, receiving
and new products launched). system and outcomes. In their opinion, the reason that perfor-
2. The second approach focuses on optimally clustering innova- mance measurement systems fail is that typically because of an
tion performance metrics and may discuss related indicators excessive focus on measuring internal processes and behaviour,
as well. the outputs measured are of doubtful value and the measurement
system is often quite complex.
Table 1 presents a synopsis of the literature in the latter category; Cooper and Kleinschmidt (1995) in their discussion on success
as the focus of this paper is essentially on the study of performance factors for new product development posit a simple model
measurement schemes (explained earlier in Section 2), rather than encompassing the twin performance dimensions of program
identifying suitable indicators. Literature encompassing performance impact and program profitability; with the former having indicators

Table 1
Innovation performance measurement literature (of metrics clustering schemes).

No. References Organizing scheme used for performance indicator clustering Methodology used for deriving the organizing
scheme

1 Brown and Svenson Measurement of R&D productivity across the categories of: inputs, processing system, Secondary sources
(1988) outputs, receiving system and outcomes
2 Cooper and Performance can be measured across two broad dimensions—new product program SPSS routine, principal component analysis, varimax
Kleinschmidt (1995) impact and new product program profitability rotation (based on a multi-firm benchmarking study)
3 Griffin and Page Customer-based success, financial success, technical performance success Simulations, questionnnaire (n¼ 80)
(1996)
4 Kerssens-van Balanced scorecard dimensions have been suggested as a way to systematize R&D Secondary sources, survey, interview
Drongelen and Cook performance measurement: Financial, Customer, Processes and Learning
(1997)
5 Collins and Smith Lagging, real time, leading and learning indicators across the dimensions of Based on experience (explains the Arthur D. Little
(1999) stakeholder strategies, processes, resources and culture innovation metrics framework)
6 Kuczmarski (2000) Two performance measurement categories—Innovation performance metrics (to Secondary sources
measure growth) and innovation program metrics
7 Wong (2001) Innovation scorecard based on balanced scorecard: financial, customer, processes and Based on experience
learning. further categorized on exploit/explore
8 Verhaeghe and Kfir Ten main topics—leadership, resourcing innovation, systems and tools, offering Interviews
(2002) innovation, offering development, technology transfer, technology acquisition, market
focus, innovation performance and networking
9 Godener and Seven dimensions (first 4 closely correspond to balanced scorecard): financial Secondary sources (for deriving the dimensions),
Soderquist (2004) performance, customer satisfaction, process management, innovation, strategic, interviews
technology management and knowledge management
10 Suomala (2004) Focus of measurement varies based on product lifecycle phase. Generic lifecycle Case studies, secondary sources
phases for new product development identified are feasibility studies/preliminary
phases; product development; market launch; active phase; support, maintenance
and further development; end of life phases
11 Bremser and Barsky Recommends integrated metrics based on stage-gate model mapped to the balanced Secondary sources
(2004) scorecard dimensions
12 Milbergs and Categories: input, output, innovation and process indicators (each category represents Secondary sources, observation (based on analysis of
Vonortas (2005) a generation of indicators from 1st to 4th generation) evolution of innovation metrics)
13 Muller et al. (2005) The scheme comprises of three dimensions of resource, capability and leadership Based on experience
14 Adams et al. (2006) Scheme categories: inputs, knowledge management, innovation strategy, organization Systematic review, secondary sources, Delphi, e-mail
and culture, portfolio management, project management, commercialization survey (n¼ 28)
15 Ojanen and Vuola, They have listed several methods of categorization: based on measurement Secondary sources
2006 perspective, the purpose of measurement, measurement level, R&D type and process
phase
16 Gama et al. (2007) Innovation scorecard based on balanced scorecard with innovation metrics Secondary sources, case study
17 Chiesa and Frattini Advocate the use of balanced scorecard: financial performance, market orientation, Survey, secondary sources
(2009) efficiency of R&D processes, innovation capability
18 Lazzarotti et al. Use of performance indicators and balanced score card for calculation of performance Survey
(2011) at two levels: (1) each of the five perspectives of balanced scorecard and R&D system
as a whole, (2) performance of each indicator is measured on a scale of 1 to 5 to arrive
at a comparative value, which is computed using three parameters-previous indicator
value, target indicator value and target.
19 Cruz-Cázaresa et al. Measure technological innovation efficiency using: input (R&D capital stock and high- Survey
(2013) skill staff) and output (number of product innovations and the number of patents)

Please cite this article as: Dewangan, V., Godse, M., Towards a holistic enterprise innovation performance measurement system.
Technovation (2014), http://dx.doi.org/10.1016/j.technovation.2014.04.002i
4 V. Dewangan, M. Godse / Technovation ∎ (∎∎∎∎) ∎∎∎–∎∎∎

related to the impact of the program on the enterprise including development, technology transfer, technology acquisition, market
product success and the latter on profitability and relative perfor- focus, innovation performance and networking).
mance of the new product program. Kuczmarski (2000) proposes a Suomala (2004) has advocated a lifecycle oriented approach
similar approach citing innovation program metrics and innovation and recommended that lifecycle phase specific needs should
performance metrics as the key areas across which innovation govern the specific success measures to be considered. The life-
performance may be measured. cycle phases that Suomala (2004) has identified for new product
Griffin and Page (1996) have advocated a broader multi- development are feasibility studies; product development; market
dimensional approach spanning customer-based, financial and launch; active phase; support, maintenance and further develop-
process-based success parameters and have focused on identifying ment; end of life phases.
specific indicators for enterprises under these dimensions. Muller et al. (2005) have proposed four areas of measurement
Kerssens-van Drongelen and Cook (1997) further expand on this (resource, capability, leadership and processes) while Milbergs and
model to encompass all the dimensions of the balanced scorecard Vonortas (2005) have classified innovation measures across four
viz., financial perspective, customer perspective, internal business generations (input measures, output measures, innovation measures
perspective and innovation and learning perspective, in the context and process measures); and Adams et al. (2006) in their review of
of performance measurement of an R&D organization. Further, innovation management measurement literature bring out six key
they have underscored the linkage between R&D performance perspectives (inputs, knowledge management, innovation strategy,
measurement and R&D quality, thereby significantly expanding organization and culture, portfolio management, project manage-
the scope of performance measurement beyond the traditional ment and commercialization).
outcome based approach. Further, Ojanen and Vuola (2006) in their survey of the R&D
Collins and Smith (1999), creators of the Arthur D. Little (a literature have listed out five broad methods by which R&D
consulting firm) framework for measuring innovation have advo- performance measures can be categorized: (1) based on measure-
cated a balanced approach using lagging, real time, leading and ment perspective, (2) the purpose of measurement, (3) measure-
learning indicators across the dimensions of stakeholder strategies, ment level, (4) R&D type and process phase; (5) providing a visual
processes, resources and culture. They have highlighted the need for tool to help enterprises categorize and select the optimal R&D
cascading metrics through the enterprise to make the measure- measures.
ment system effective. Cruz-Cázaresa et al. (2013) have proposed to calculate the
Subsequent to Kerssens-Van Drongelen and Cook (1997), there coefficient of technological innovation activities using inputs
have been several other researchers advocating the use of the (R&D capital stock and high-skill staff) and outputs (number of
balanced scorecard for R&D and innovation; for example Wong product innovations and the number of patents) along with the
(2001), Bremser and Barsky (2004), Gama et al. (2007) and Chiesa yearly efficiency change based on a global Malmquist index (a
and Frattini (2009). In particular, Bremser and Barsky (2004) have standard approach to measure productivity over time).
recommended integrating the balanced scorecard with a stage- As a closing remark of this discussion, it may be of interest to
gate approach to ensure enhanced customer and market focussed note that the Organisation for Economic Co-operation and Devel-
R&D efforts and have discussed how strategic enterprise perfor- opment (OECD) measures innovation as an activity and not as an
mance indicators can be cascaded down to an R&D program level. output (Godin, 1996).
Godener and Soderquist (2004) have discussed four dimen-
sions, which correspond closely with those of the balanced
scorecard and have argued that these are inadequate to effectively 4. Guiding principles for designing the IPM scheme
measure research and new product development (R&NPD) perfor-
mance. They have recommended including three additional Our in-depth study of IPM literature led us to derive a set of
dimensions: strategic measurements, technology management mea- guiding principles around which an effective innovation perfor-
surements and knowledge management measurements. Here strate- mance measurement scheme may be designed. This section enlists
gic measurement deals with how well R&NPD contributes towards these core principles upfront, followed by a discussion of how each
enterprise goals, technology management measurement is con- of these was derived. These principles are:
cerned with the pipeline of new products, while knowledge
management measurement relates to building the R&NPD cap-  The performance measurement scheme should provide a multi-
abilities of the organization. dimensional view of performance.
Lazzarotti et al. (2011) have used a formal model for measuring  The scheme should focus on measuring performance of various
R&D performance, based upon evaluation of quantitative indica- stages within the innovation lifecycle; that is it should be
tors from each of the four perspectives of the balanced scorecard. innovation process oriented.
The indicators of performance in this model are categorized into  The scheme should effectively address organizational stake-
three categories: input to R&D, process of R&D and output from holder goals, belonging to both within and external to the
R&D. The model is built on the theory of measurement in soft enterprise.
systems to ensure validity, objectivity and inter-subjectivity of the  The scheme should support a cause and effect relationship
model. In the first stage, the comparative value of each indicator is between the performance measures.
computed using the previous indicator value (as evaluate data  The scheme should be easy to implement and use.
previous time), the target indicator value (as planned objective for
the same period) and the benchmark indicator value (as mean value A discussion of these principles is covered below supported by
computed from the available sample of competitor data). In the relevant literature citations.
second stage, the performance of the R&D system as a whole is
calculated. 4.1. Multi-dimensional orientation
Apart from the balanced scorecard, researchers have proposed
several other schemes based on their investigations. Verhaeghe The scheme should effectively accommodate a well balanced
and Kfir (2002) has presented a scheme comprising of 10 disparate combination of financial and non-financial measures (as discussed
dimensions for managing and measuring innovation (leadership, in Section 3). In other words, the performance measurement
resourcing innovation, systems and tools, offering innovation, offering scheme should be multi-dimensional. In addition, the scheme

Please cite this article as: Dewangan, V., Godse, M., Towards a holistic enterprise innovation performance measurement system.
Technovation (2014), http://dx.doi.org/10.1016/j.technovation.2014.04.002i
 V. Dewangan, M. Godse / Technovation ∎ (∎∎∎∎) ∎∎∎–∎∎∎ 5

may appropriately address past as well as probable future perfor- 5.1. Multi-dimensional orientation
mance by accommodating both leading and lagging indicators
(Collins and Smith, 1999; Kaplan and Norton, 2001; Bremser and The IPM scheme must accommodate a well balanced set of
Barsky, 2004). financial and non financial measures. In this context, as noted in
Section 3, several researchers agree that the balanced scorecard
provides a good foundation for an IPM scheme. It was further
4.2. Innovation process orientation stated that the IPM scheme should accommodate leading as well
as lagging indicators in order to account for past as well as
The performance measurement scheme should focus on pro- probable future performance. The balanced scorecard takes care
cess performance (Suomala, 2004) to facilitate competitive bench- of past performance by including a financial perspective and
marking and identification of potential problems or inefficiencies future performance by accommodating the perspectives of custo-
(Kueng, 2000). While there are instances of performance measure- mer, internal business and innovation and learning (Bremser and
ment for R&D (e.g. Brown and Svenson, 1988) and new product Barsky, 2004; Kaplan and Norton, 1992). In view of the fact that
development (e.g. Suomala, 2004), which advocate a process or the balanced scorecard confirms with these two fundamental
lifecycle based IPM approach, most of the IPM literature hardly aspects and has been found to be useful for measuring innovation
takes this view and usually treats the innovation lifecycle as a performance by several researchers, it has been considered as the
black box. Unless the innovation lifecycle is broken down into its foundation for our IPM scheme.
constituents and measured at a granular process level, competitive Given this backdrop, it may be useful to look at the balanced
benchmarking and measurement of process parameters (followed scorecard in slightly more detail. The balanced scorecard is a
by interventions for improvement) will be quite unwieldy. popular performance measurement scheme used by enterprises
(Kaplan and Norton, 2001; Kennerley and Neely, 2002; Sandt et al.,
4.3. Stakeholder goal orientation 2001) that utilizes both financial and non-financial perspectives to
provide a holistic view of enterprise performance. The perspec-
The performance measurement scheme should effectively tives that constitute the balanced scorecard are: (1) Financial
address organizational goals (Franco-Santos et al., 2007) including perspective, which brings out the performance of the enterprise
those of multiple stakeholders like shareholders, customers, in terms of traditional financial accounting measures and is
employees, suppliers, regulators and society (Bourne et al., focused towards generating shareholder value, (2) Customer per-
2003). Addressing the needs of multiple stakeholders both within spective that is concerned with the value delivered to the custo-
and external to the enterprise is especially important given the mer, (3) Internal business perspective, which is focused on the
complex ecosystem within which enterprises operate today. business processes internal to the enterprise that facilitate value
generation for shareholders and customers and (4) Innovation and
learning perspective that deals with continuous improvement
4.4. Cause and effect relationship orientation across all aspects of the enterprise to meet its long term business
objectives and vision (Kaplan and Norton, 1992).
The scheme should have a cause and effect or mathematical
relationship between the performance measures, so that they are
logically related to one another (Bremser and Barsky, 2004; Gama 5.2. Process oriented
et al., 2007; Kaplan and Norton, 2001; Sandt et al., 2001; Wong,
2001). This enables enterprises to ascertain the value of various Having a rigorous focus on process performance is an impor-
activities performed by relating them to definite results; for tant consideration for process oriented enterprises today, as they
example, to ascertain the relationship between intangibles such are focused on continuous improvement. It may be worthwhile to
as customer relationships, process efficiencies and employee skills mention here that the focus of internal processes in the balanced
to financial outcomes. In practice, these relationships are often scorecard is limited to processes that affect either the customer
specific to the context of the enterprise (Bukh and Malmi, 2005). value proposition or efficiency improvements leading to financial
Hence, each enterprise will have to identify a consistent set of benefits (Kaplan and Norton, 2001). However, in the case of
related indicators to include in their innovation performance innovation, to take an example, a process concerned with the
measurement scheme. stage of ideation may need a stronger focus on creation of a unique
or well differentiated offering as compared to predominantly
financial considerations. Hence, the IPM schemes based entirely
4.5. Easy to implementation and use upon the balanced scorecard that were previously proposed do not
adequately fulfil this guideline.
The scheme should be easy to implement and use. In this The process performance aspect of innovation needs to be
regard, reconciling the IPM scheme with existing performance explored in more detail, as this is one of the prominent gaps in the
measurement systems being used in the enterprise is essential literature. From a lifecycle perspective, innovation may be viewed
(Muller et al., 2005). The scheme should support cascading of as comprising of four broad phases:
performance indicators through various levels of the enterprise
(Collins and Smith, 1999). 1. Generation and selection of ideas can be considered as two
stages within idea management where an idea is generated by
an innovator and subsequently evaluated and selected by an
5. Guiding principles in action enterprise innovation function for incubation.
2. Incubation of ideas that is concerned with the process of
Using the guiding principles as discussed in the previous transforming an idea into a fully developed and financially
section the structure of the IPM scheme can be ascribed. In the viable innovation application. This includes evaluating the
following sub-sections, each guiding principle and the relevant technical feasibility and business case development.
features of the scheme are discussed, along with a sample IPM 3. Commercialization of ideas, which involves scaling up the
scheme based on a generic view of the innovation lifecycle. innovation and formally introducing it to the market and also

Please cite this article as: Dewangan, V., Godse, M., Towards a holistic enterprise innovation performance measurement system.
Technovation (2014), http://dx.doi.org/10.1016/j.technovation.2014.04.002i
6 V. Dewangan, M. Godse / Technovation ∎ (∎∎∎∎) ∎∎∎–∎∎∎

INVENTION EXPLOITATION

1. Generation & selection 2. Incubation of ideas 3. Commercialization of 4. Realization of

of ideas ideas innovation

Activities* Activities* Activities Activities

• Ideation • Technical feasibility • Scaling up • Steady state support
• Review and • Commercial viability • Market introduction • Promotion and
refinement • Innovation • Promotion distribution
• Selection development • Distribution • Market feedback
• Investment analysis • Business planning
Outputs Outputs
Outputs Outputs • Scaled up • Increased profits
• Conceptual • Working innovation infrastructure • Revenue growth
innovation • Patents • Consumer awareness • Enhanced brand
• Investment plan • Business plan • Distributor network value

* Iterative

Performance feedback

Fig. 1. A process view of innovation.

includes brand building, market promotion and distribution 5.3. Alignment with stakeholder goals
activities.
4. Realization of innovation, which is concerned with the accrual of Aligning a balanced scorecard based performance measure-
financial and non-financial benefits to the enterprise. ment scheme to organizational goals can be achieved by the use of
‘strategy maps’ (discussed in Section 5.4). Further, organizational
goals can be addressed by cascading the relevant performance
These lifecycle phases correspond closely with the definition of indicators for the innovation program to the department, team
innovation discussed in Section 1, where innovation was defined and individual level (discussed in Section 5.5). To touch upon
as a combination of invention and exploitation. Invention includes stakeholder alignment, Clarkson (1995) defines corporate stake-
the first two phases, viz. idea management (idea generation and holders as:
selection) and incubation of selected ideas; whereas exploitation
Stakeholders are persons or groups that have, or claim, own-
includes the two subsequent phases, viz. commercialization of the
ership rights or interests in a corporation and its activities, past,
innovation and realization of benefits.
present or future.
Each phase of this lifecycle has its own unique activities and
outputs, amenable to measurement and benchmarking. Fig. 1 Kaplan and Norton (2001) posit that the balanced scorecard
provides a generic view of the innovation lifecycle. To keep the when used along with strategy maps can effectively address
discussion focused on performance measurement, decision gates stakeholder needs. For instance, the needs of shareholders can
have not been indicated in this figure. be addressed through financial perspective metrics, customers
Notably, these phases are quite different from those discussed through customer perspective metrics and employees through
by Cooper (2001) in the well-known stage-gate approach. The five innovation and learning perspective metrics.
stages of the stage-gate framework are preliminary investigation, Primary stakeholders are the participants without which the
preliminary business case development, product development, enterprise cannot survive (Clarkson, 1995). Given the definition of
validation and testing and production and launch. Each stage is stakeholders, it is argued that using the balanced scorecard will result
immediately preceded by a gate; the five gates being preliminary in only a limited view of primary stakeholders; as strategy maps are
screening, interim approval, project approval, product develop- mainly designed to address the larger organizational vision and
ment review and final approval for product launch. These five strategy. Enterprises in order to sustain and flourish need to con-
stages and gates are preceded by an ideation stage and followed by tinually focus on addressing multiple stakeholder needs (Neely et al.,
a post implementation review (Cooper, 2001). 2002), which includes both primary and secondary stakeholders. This
Cooper’s (2001) approach is specific to new product develop- is even more important in the context of innovation, where the
ment (NPD), whereas the innovation lifecycle has been generalized uncertainty is higher. The innovation measurement scheme should
for all kinds of innovations including NPD, new services develop- offer an increased opportunity to address diverse stakeholder groups
ment (NSD) and technology innovations among others. For some by separating out each innovation life cycle stage and make the
kinds of innovations such as process and business model innova- IPM scheme more effective than a purely balanced scorecard based
tions, some lifecycle stages (for instance, commercialization) or approach. For example, the idea management stage may involve
sub-stages (for example, technical feasibility) are optional depend- innovation enthusiasts and intellectual property experts, incubation
ing on the scenario. A detailed discussion on the specific innova- may involve special interest groups and commercialization may
tion lifecycle relevant to various kinds of innovations is beyond the involve downstream partners and innovation evangelists, as well as
scope of this work and merits a separate discussion. secondary stakeholders like the media. Once the stakeholders involved
Instead of applying multi-dimensional schemes like the balanced in each stage of the innovation lifecycle and their corresponding goals
scorecard for IPM as a whole (as previously proposed), it is better to are identified, the KPIs corresponding to each element in the IPM
apply them at each stage of the innovation life cycle. This has a scheme can be determined such that they are aligned to these goals.
notable advantage of enterprises being able to keep a close watch on
past as well as anticipated future performance of each stage and 5.4. Causal relationship
thereby increase the chances of success of their innovation programs.
Moreover, as the skills required and people participating in each stage The innovation measurement scheme must have a cause and
may be different, using this scheme can promote better management. effect relationship between the measures to make it effective.

Please cite this article as: Dewangan, V., Godse, M., Towards a holistic enterprise innovation performance measurement system.
Technovation (2014), http://dx.doi.org/10.1016/j.technovation.2014.04.002i
 V. Dewangan, M. Godse / Technovation ∎ (∎∎∎∎) ∎∎∎–∎∎∎ 7

Apart from the innovation management schemes based on the

Percentage commercial success rate (i.e. percentage innovations

balanced scorecard, where the cause and effect relationship

Percentage increase in innovation revenues per employee

between the dimensions is well defined (Bremser and Barsky,
2004; Bukh and Malmi, 2005; Kaplan and Norton, 1996, 2001), the
literature on other performance measurement schemes hardly

Percentage impact on customer satisfaction index

discusses this subject. As surveyed in Section 3, a significant body
of the research on IPM schemes appears to be on effectively
categorizing the metrics into distinct areas (a bottom-up

that met financial benefit projections)

approach) rather than developing a holistic and scientifically
designed scheme with robust relationships between the measure-

Innovation portfolio ROI realized

ment areas (a top-down approach).

Realization of innovation
The cause and effect relationship among the balanced scor-
ecard dimensions for an enterprise can be effectively represented
by creating a ‘strategy map’, which is a generic business model of
the enterprise representing the firm’s strategy showing linkages
between specific elements in the four dimensions (Bremser and
Barsky, 2004; Bukh and Malmi, 2005; Kaplan and Norton, 2001).
For creating a strategy map, an enterprise will need to define the
elements that are relevant to its business within each perspective.
Some examples of these elements are revenue growth and profits

Number of marketing partners added

Commercialization expenditure for

for the financial perspective, price and satisfaction for the custo-

Rate of customer adoption of new

Rate at which new offerings are

mer perspective, operational efficiency and customer delivery

Commercialization of ideas
processes for the internal business perspective and employee

the innovation portfolio

competencies and knowledge asset base for the innovation and
learning perspective.
Each enterprise will have its own contextual relationship

being launched
between the balanced scorecard dimensions (as discussed in

Exploitation
Section 4), its own unique elements as well as vision and therefore

offerings
a unique strategy map.
The four phases of the innovation lifecycle, discussed in Section
5.2 (viz. Generation and selection of ideas, incubation of ideas,

Current idea portfolio NPV/ROI/IRR (net present value/return

commercialization of ideas, and realization of innovation) are

Number of ideas incubated in collaboration with customers

inherently linked by a cause and effect relationship. The output
of each innovation lifecycle phase is an input to the next and the
The indicative innovation performance measurement scheme (with illustrative key performance indicators).

success of each phase is dependent upon the previous; with

Percentage of incubated ideas found viable for

realization of the innovation program objectives and thereby the
enterprise’s relevant strategic goals being the last link in the causal
chain. With both the balanced scorecard and innovation lifecycle

on investment/internal rate of return)

phases meeting the cause and effect relationship criteria, it is
deduced that each element in the scheme is causally connected.
Table 2 delineates the scheme in which indicators are provided
only as an example and are by no means comprehensive or
Number of patents filed

representative of a real life scenario.

Incubation of ideas

Enterprises must be able to measure the performance of

commercialization

invention and exploitation aspects of innovation separately (see

Section 1), as these involve significantly distinct resources, skills
and outcomes. The scheme provided in Table 2 provides a clear
demarcation between invention on one hand (idea generation and
idea incubation phases) and exploitation on the other (commer-
cialization and realization phases).
Percentage of ideas generated with
Generation and selection of ideas

Average expenditure per selected

Percentage of ideas generated in
Ratio of selected ideas to ideas

5.5. Ease of implementation and use

Innovation lifecycle stages

customer participation

The IPM scheme being based on the balanced scorecard

provides a notable advantage that enterprises already using the
balanced scorecard will find it easier to correlate innovation KPIs
new domains

with their enterprise KPIs. In addition, cascading of goals is

Invention

submitted

supported by the balanced scorecard (Bremser and Barsky, 2004;

Kaplan and Norton, 1996). This implies that a balanced scorecard
idea

can be defined at an enterprise level based on the vision and

strategy and relevant goals can be cascaded down; for instance at a
Dimensions of

Innovation &
Non-financial

department, team and individual level.

IPM scheme

Customer

processes

For our IPM scheme, the innovation program goals can be derived
Learning
Internal

Financial

from the organizational goals across the balanced scorecard perspec-

Table 2

tives of financial, customer, internal process and innovation and

learning perspectives. The goals for each innovation lifecycle stage

Please cite this article as: Dewangan, V., Godse, M., Towards a holistic enterprise innovation performance measurement system.
Technovation (2014), http://dx.doi.org/10.1016/j.technovation.2014.04.002i
8 V. Dewangan, M. Godse / Technovation ∎ (∎∎∎∎) ∎∎∎–∎∎∎

relevant to each perspective can be derived next, which will result in

Percentage of ideas about consumer experience which

became financially viable of the total ideas submitted
specific goals for each of the 16 elements within the four-by-four

Innovation portfolio ROI realized Mean ROI per idea

matrix. Here an advantage is that for instance, at an individual level,
goals for all four balanced scorecard perspectives can be considered;

Percentage increase in revenue per innovator

while considering only a limited number of innovation lifecycle
phases depending on the individual’s involvement. For example, a
product designer may be involved in the idea generation and

The speed at which idea is realized

incubation phases, while an innovation marketing manager may be
involved only in commercialization and realization. The same applies

Realization of innovation
to teams, groups and departments. Further, this IPM scheme facil-
itates a roll up of actual performance measurements in multiple ways
to make reporting easier: across innovation lifecycle stage, balanced
scorecard dimension or vertically, by means of consolidating indivi-
dual, team or department figures.

6. Case study

successfully commercialized of the total ideas submitted

The speed at which idea is successfully commercialized

portfolio Mean commercialization expenditure per idea

Percentage of ideas successfully commercialized of the
In this section, we have discussed a case study where we

Commercialization expenditure for the innovation

leveraged our guiding principles for developing an IPM scheme.

Percentages of ideas about consumer experience

This case study pertains to a bank that adopted innovation as a
business strategy for becoming a market leader in their geography.
Providing best consumer experience is the business strategy of
the bank; an innovation strategy was put in place to meet this
goal. The bank wanted to drive their innovation program in a very

Commercialization of ideas
structured way. They took a systematic approach to define and
implement the governance structure and innovation processes,
based on inputs from academic and industry experts. Customer

total ideas submitted

experience being the focus of innovation, the bank wanted
participation of every employee in the innovation process. There-

Exploitation
fore, during the first year of the innovation program, the focus was
to maximize employee participation. After the first year, the focus
would be to make the innovation program financially sustainable.
The following were the key parameters of the innovation program:

Percentage of ideas accepted for incubation of

 Consumer experience was the goal of innovation.


experience incubated of the total ideas

Employee engagement was a key factor.
The speed at which idea is incubated
Percentage of ideas about consumer
 Innovation needed to be adopted in a very structured way.
The innovation performance measurement scheme implemented for a bank (with relevant KPIs).

 Financial sustainability was important for sustainability of the

overall innovation program.
the total ideas submitted

Internal rate of return

The IPM scheme for the bank was developed considering the
Incubation of ideas

above points, innovation lifecycle stages and the guiding principles

discussed earlier. Refer to Table 3 for the IPM scheme and
submitted

associated KPIs, which were proposed and is currently in use for

the innovation program of this bank.

1. Guiding principle: The performance measurement scheme should

experience of the total ideas submitted

provide a multi-dimensional view of performance.

The speed at which idea is selected
Percentage of idea about consumer
Generation and selection of ideas

Percentage of ideas submitted per

Features of IPM scheme for the bank: Based on this principle, the
IPM scheme was designed with two key dimensions—financial and
Average expenditure per idea
Innovation lifecycle stages

non-financial. Further, the non-financial dimension was divided

into three sub-dimensions—innovator participation, internal pro-
cesses and consumer experience.
2. Guiding principle: The scheme should focus on measuring
performance of various stages within the innovation lifecycle;
Invention

generated

that is it should be innovation process oriented.

employee

Features of IPM scheme for the bank: Using this principle, four
phases of the innovation lifecycle (as discussed in Section 5.2)
were defined for the innovation program and the IPM scheme
Internal processes
Innovation area:

was developed accordingly for these phases—(1) generation

Dimensions of

participation
Non-financial

and selection of ideas, (2) incubation of ideas, (3) commercia-

IPM scheme

experience
Consumer
Innovator

lization of ideas, and (4) realization of innovation.

Financial

3. Guiding principle: The scheme should effectively address

Table 3

organizational stakeholder goals, belonging to both within

and external to the enterprise.

Please cite this article as: Dewangan, V., Godse, M., Towards a holistic enterprise innovation performance measurement system.
Technovation (2014), http://dx.doi.org/10.1016/j.technovation.2014.04.002i
 V. Dewangan, M. Godse / Technovation ∎ (∎∎∎∎) ∎∎∎–∎∎∎ 9

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Please cite this article as: Dewangan, V., Godse, M., Towards a holistic enterprise innovation performance measurement system.
Technovation (2014), http://dx.doi.org/10.1016/j.technovation.2014.04.002i