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How to develop innovation KPIs in an execution-oriented company

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Victoria Lakiza, & Isabelle Deschamps
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Date: 2018
Type: Article de revue / Article
Référence: Lakiza, V., & Deschamps, I. (2018). How to develop innovation KPIs in an
execution-oriented company. Technology Innovation Management Review, 8(7),
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Technology Innovation Management Review July 2018 (Volume 8, Issue 7)

How to Develop Innovation KPIs

in an Execution-Oriented Company
Victoria Lakiza and Isabelle Deschamps

“ Not everything that can be counted counts, and not everything that counts can be counted. ”
William Bruce Cameron
In Informal Sociology: A Casual Introduction to Sociological Thinking (1963)
(This quotation was used frequently during the workshops in this study.)

Numerous established companies look for ways to rejuvenate their innovation capabilities,
as it is essential for their long-term survival. One way is through the development of key per-
formance indicators (KPIs) to measure innovation success. However, the wrong perform-
ance measurement approach can hinder innovation efforts. This case study explores the
steps and challenges associated with the development of innovation KPIs in an established
execution-oriented manufacturing company. Three prerequisites are proposed for such a
project in a similar context: 1) a minimal maturity level of innovation processes, 2) strategic
alignment, and 3) commitment to innovation. It is also proposed that, in such an execution-
oriented company, it might be more effective to start with KPIs that would encourage beha-
viours more favourable to innovation. Then, with stronger innovation capabilities, it will be
easier to develop appropriate KPIs to measure the success of innovation endeavours.

Introduction The starting assumption of this longitudinal research

was that the performance measurement systems in
When they grow and become more established, com- place have an influence on the company’s innovation
panies tend to lose their innovation capabilities while capabilities (Christensen, 1997; Perez-Freije & Enkel,
focusing on the execution of everyday routines. In this 2007; Pinchot III, 1985; Ries, 2011). Hence, a develop-
article, we refer to such companies as execution-ori- ment project focused on innovation key performance in-
ented, where “execution” refers mainly to short-term ac- dicators (KPIs) was seen by the Company as one way to
tions as opposed to long-term, systemic, and strategic support the development of their innovation capabilit-
thinking” (Lakiza, 2018). Such a company is risk averse ies. It was led by the first author of this paper as one of
and focuses on delivering tangible outputs without en- seven projects within a portfolio of longitudinal action
suring that the resources spent are contributing to the research supervised by the second author.
company’s high-level objectives. This approach is not
compatible with strong innovation capabilities, which Two key questions driving this research are:
are defined by Olsson and colleagues (2010) as the “abil-
ity to continuously develop innovations as a response to 1. What kind of indicators are more appropriate for
a changing environment”. innovation?

In the context of increasingly shorter company lifespans 2. How they can be used to support and improve a
(Morris, 2009), the loss of innovation capabilities be- company’s innovation capabilities?
comes a significant problem for established firms,
which lose market share to more innovative players. Indeed, according to Saunila (2016), there is a lack of lit-
This was one of the challenges faced by a 60-year-old erature on the role of performance measurement in de-
family-owned Canadian manufacturer (hereafter “the veloping innovation capabilities. Although some
company”) when our research group began its longitud- companies do not measure their innovation perform-
inal research on innovation management practices ance, many of those who measure it do not know how to
based out of their head offices. choose the appropriate metrics and systems. Ill-suited

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Technology Innovation Management Review July 2018 (Volume 8, Issue 7)

How to Develop Innovation KPIs in an Execution-Oriented Company

Victoria Lakiza and Isabelle Deschamps

indicators can result in inhibiting a company’s innova- on customer orders, and new technology development.
tion capabilities instead of supporting them These covered anything from minor incremental im-
(Christensen, 1997). Thus, the core interest behind this provements on existing products to “new to the world”
case study is to better understand how an established products. The management of the IRDT group saw the
company can rejuvenate its innovation capabilities development of innovation KPIs as a way to legitimize
through the development of innovation KPIs. and improve the visibility of the innovation manage-
ment practices being implemented.
This article is structured as follows. First, we present
the case study context. Next, we share an overview of Case company
relevant innovation measurement theories. Then, we The company is a Canadian specialized manufacturer
detail the research methodology and the case study that counts almost 2000 employees in North America
steps, along with the proposed innovation KPIs. We and Europe. It was founded in the 1950s by an inventor
then describe the biggest challenges met throughout and entrepreneur. As it is often the case in companies
the KPI development project. Finally, we conclude the founded on a single technological innovation
article with recommendations regarding some pre- (McAdam & Keogh, 2004), the founder was an engineer
requisites of innovation KPI implementation for similar with multiple patents to his credit but lacking some of
contexts. the specific knowledge and skills necessary to develop
within his company what Wolpert (2002) describes as
Case Study Context “exploration competencies”. With the high power con-
centration in the founding family’s hands for decades,
In this section, the research context is presented, fol- the company did not build solid management capacity
lowed by a quick overview of the company and its exist- nor key elements of an innovative company culture
ing performance measurement systems before our such as decision making and accountability (Rao &
intervention. Weintraub, 2013).

Research context The founder remained at the head of the company un-
Our longitudinal action research involved a total of 7 til the early 2000s and continued to be its main driving
field researchers over three years. Each of them was force of innovation for several more years. As in a typic-
present for 8 to 12 months at the case company and al family business generational model (Hiebl, 2015), the
had a dual mandate: second generation focused more on operations optim-
ization and acquisitions; the third generation, which re-
1. Exploration of a specific research theme related to in- cently began to access upper management positions, is
novation management and analysis of the com- trying to rejuvenate the company’s innovation capabil-
pany’s status with regards to this theme. ities (Brodeur et al., 2017).

2. Execution of a specific mandate for the company by During the presence of our research group on site, the
transferring and implementing best practices from company hired its first non-family member President
literature to improve their innovation capabilities and CEO. He joined the Company after major opera-
with regards to the research theme. tional issues started to affect its overall performance
and high-quality reputation due to significant delivery
The present case study is based mainly on the work of delays. The new CEO took on the challenge of fixing
the first author on innovation performance measure- these operational issues.
ment systems. The company asked the researcher to
help develop KPIs to measure the overall performance Existing performance measurement systems
of all types of their technical innovation projects. During the second year of our longitudinal research,
each department (engineering, marketing, sales, and
For the purposes of this action research, the researcher operations) had its own data management system.
worked as an integral part of the recently formed Innov- However, there were few links and little transversal
ation, Research & Development and Technology (IRDT) communication between the systems and the depart-
group within the company’s engineering department. ments. Few employees had access to any system from
The technical innovation performance under study in- other departments. Moreover, the main data manage-
cluded new product development projects, innovation ment systems (engineering and sales) had been built

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How to Develop Innovation KPIs in an Execution-Oriented Company

Victoria Lakiza and Isabelle Deschamps

mostly in-house throughout the years, and their usage the remaining 24 metrics monthly and to share them
was far from intuitive for someone new or from a differ- with the relevant stakeholders. However, no specific
ent department. goals were attached to most of these indicators, and
they were not strategically related to the executive
The new CEO developed a new scorecard to measure scorecard presented in Table 1. The chosen indicators
the company’s performance. Most of the high-level were associated with one of three phases: 1) Front-End
KPIs chosen were short-term financial metrics, with of Innovation (FEI), 2) Product Development Process
none regarding innovation, as illustrated in Table 1. (PDP), or 3) Post PDP. They were a mix of financial, op-
The VPs received the mandate to cascade down the erational, process, and portfolio indicators as categor-
new company goals and KPIs. Few, however, seemed to ized in Table 2. The 14 indicators that were not
know how to approach this task. implemented seemed like the most important ones to
the IRDT group. However, there were no resources
Moreover, an effort to develop and implement indicat- available to work with the relevant departments in or-
ors to measure the success of new product develop- der to implement these indicators.
ment projects only, was undertaken by the company’s
innovation management team during the first year of Innovation Measurement Theories and Their
our research (i.e., before the case study presented here) Applicability
and therefore was done without the participation of our
research team. As part of that effort, a brainstorming Performance measurement is necessary to be able to
session with innovation stakeholders on what is pos- detect poor performance and take appropriate actions
sible to measure resulted in a list of 38 indicators, towards improvement (Godener & Soderquist, 2004).
presented in Table 2. This initial step was followed by While some authors believe that control systems and
an assessment of which indicators were measurable performance measurement systems can hinder employ-
with the existing data management systems, which ee creativity and intrapreneurial efforts (Christensen,
eliminated 14 indicators that were too difficult to col- 1997; Morris & Kuratko, 2002; Pinchot III, 1985; Shih &
lect (in bold in Table 2). The innovation management Yong, 2001), others think that they can contribute to
team found that different stakeholders were interested higher innovation effectiveness by providing guidance
in different indicators. The company began to collect and highlighting where improvement is possible

Table 1. The case company’s executive scorecard

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How to Develop Innovation KPIs in an Execution-Oriented Company

Victoria Lakiza and Isabelle Deschamps

Table 2. New product development performance indicators developed prior to our innovation KPI mandate

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How to Develop Innovation KPIs in an Execution-Oriented Company

Victoria Lakiza and Isabelle Deschamps

(Cooper & Edgett, 1996; Griffin, 1997; Hart et al., 2003; distinguishes effective performance measurement sys-
Jiménez-Zarco et al., 2006; Marginson, 2002; Neely et tems. Storey and Kelly (2001) claim that, from a custom-
al., 2000; Neely et al., 1997). This section provides a er point of view, a successful new product satisfies new
quick overview of the history of performance measure- needs or desires and outperforms other products. Ac-
ment systems, as well as a short literature review on cording to a survey of practitioners by Griffin and Page
such systems specifically related to measuring innova- (1993), while many would like to measure customer sat-
tion. The main functions and usages of performance isfaction (44%), very few do (10%) as it usually incurs
measurement systems are also discussed and followed additional costs.
by a few guiding principles for their effectiveness.
Innovation performance measurement systems
History of performance measurement systems Innovation performance measurement brings addition-
Historically, performance measurement systems used al challenges given its dynamic and evolving nature
to be under the finance function, had mostly financial (Kirchhoff et al., 2013). While the financial metrics are
metrics, and used data from accounting and finance the most popular, there is no consensus among re-
(Bremser & Barsky, 2004; Neely et al., 2000; Neely et al., searchers (Jiménez-Zarco et al., 2006) or practitioners
1997). However, this approach provided limited dia- (Griffin & Page, 1993) on the most useful innovation
gnostic power and forced a short-term orientation, KPIs. According to Werner and Souder (1997), who re-
eventually resulting in a demand for more balanced viewed 40 years of literature, the most complex metrics
performance indicators with measures of customer sat- are often the most useful. They are also the most costly
isfaction and human capital (Jiménez-Zarco et al., to develop and use.
2006).
Following a survey of practitioners, Griffin and Page
More balanced performance measurement systems (1993) found a gap between the measures used and
covering different performance perspectives were de- those that the managers would like to use. They also
veloped to address this need. These included the Bal- found that the most innovative firms focus on meas-
anced Scorecard (Kaplan & Norton, 1992) and the ures of recent and future company growth while the
Performance Pyramid Prism (Lynch & Cross, 1991). least innovative ones prefer more efficiency-oriented
Such models focus on strategic alignment and facilitate metrics (Griffin & Page, 1996). According to Hitt and col-
translating strategy into action (Garengo et al., 2005). leagues (1996), the most innovative companies focus
While a number of authors believe that the Balanced more on strategic controls than on the financial ones.
Scorecard can be used for innovation performance Storey and Kelly (2001) also found that the truly innov-
measurement (Bremser & Barsky, 2004; Kerssens-van ative firms favour soft indicators while the least innovat-
Drongelen & Bilderbeek, 1999; Kerssens-van Drongelen ive ones focus on financial metrics.
et al., 2000), others think it is too complex to implement
and not appropriate for this context (Garengo et al., Through decades of research, it has been difficult to
2005; McAdam, 2000; Oriot & Misiaszek, 2012). achieve a common understanding and provide clear re-
commendations to managers on innovation manage-
Garengo and colleagues (2005) found that a focus on ment and decision making because of the inherent
stakeholders has become one of the key dimensions of variance of innovation and its context specificity
models for contemporary performance measurement (Brophey et al., 2013; Vorbach & Perl, 2007). The appro-
systems. According to Kaplan and Norton (1996), cus- priate success metrics depend on the type and context
tomers’ concerns generally fall under time, quality, per- of the project (Petersen et al., 2010). Indeed, some case
formance, and cost. Knowledge of stakeholders’ study research highlights the fact that the uniqueness
expectations and attention to their needs is essential of each innovation context makes comparisons and
for a company to thrive (Atkinson et al., 1997; Neely et generic best practices impracticable (Bremser & Barsky,
al., 2002), especially in highly uncertain contexts char- 2004; Brophey et al., 2013; Brophey & Brown, 2009;
acteristic of innovation (Dewangan & Godse, 2014). In Godener & Soderquist, 2004; Griffin & Page, 1996;
their study on the effectiveness of R&D performance Jiménez-Zarco et al., 2006). Consequently, the perfect
measurement in the Netherlands, Kerssens-van KPIs probably do not exist. It is more worthwhile to
Drongelen and Bilderbeek (1999) found that customer look for guidelines on how to choose appropriate met-
focus might be the most important characteristic that rics and systems based on various contextual factors.

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How to Develop Innovation KPIs in an Execution-Oriented Company

Victoria Lakiza and Isabelle Deschamps

Functions and usage of performance measurement systems From a different perspective, Cirka (1997) groups con-
Innovation performance measurement is idiosyncratic trol strategies into three categories based on what they
for each company at a given point in time and for each do: 1) regulate the organization’s inputs, 2) govern em-
type of innovation project (Bremser & Barsky, 2004; ployees’ behaviours, or 3) measure achievement and
Brophey et al., 2013; Brophey & Brown, 2009; Godener & outputs.
Soderquist, 2004; Griffin & Page, 1996; Jiménez-Zarco et
al., 2006). It is important to understand the reasons why Guiding principles for an effective performance measure-
there is a need to measure performance and what is the ment system
intended use of the data, before looking into what to Based on a study of the literature of performance meas-
measure (Ojanen & Vuola, 2005; Perez-Freije & Enkel, urement systems for innovation, Dewangan and Godse
2007). (2014) propose five guiding principles for an effective
performance measurement scheme, arguing that it
Kerssens-van Drongelen (1999) identified the seven fol- must:
lowing functions of a performance measurement sys-
tem: 1. Be multi-dimensional

1. Provide insight into deviations of performance from 2. Measure performance of various stages within the in-
objectives to allow management to decide if steering novation cycle
measures are necessary
3. Address organizational stakeholder goals
2. Provide insight into deviations of performance from
objectives to allow staff to decide if steering measures 4. Support a cause-and-effect relationship
are necessary
5. Be easy to implement and use (aligned with existing
3. Fuel learning on the system that is being controlled to performance measurement systems and cascaded
enable better planning and control in the future through various hierarchical levels)

4. Facilitate alignment and control of objectives According to Bremser and Barsky (2004), properly selec-
ted metrics should be drivers of sustained profitability.
5. Support decision making with regards to perform- To do so, the firm should develop a set of hypothesized
ance-based rewards cause-and-effect relationships that show the expected
long-term results from specific current actions (Brem-
6. Provide input to support and justify decision making ser & Barsky, 2004). Over time, the hypotheses can be
verified and adjusted if proven wrong. Finally, Collins
7.Motivate employees through feedback and Smith (1999) believe that there has to be a balance
between leading, lagging, real-time, and learning indic-
Godener and Soderquist (2004) examined the literature ators.
and regrouped the possible uses of performance meas-
urement for R&D and new product development into Summary of insights from literature with regards to our
five categories: case study
There is no consensus in either the literature or prac-
1. Communication of objectives, agreements and rules tice on the appropriate KPIs to use for innovation per-
formance measurement (Griffin & Page, 1993;
2. Definition of corrective actions based on diagnosis Jiménez-Zarco et al., 2006). Nevertheless, the literature
and control review allowed for the identification of several common
characteristics of performance measurement systems
3. Resource allocation that are more conducive to innovation, as presented in
Table 3. Based on our analysis of the company’s con-
4. Decision making on individual rewards and incentives text, these characteristics did not apply to the com-
pany’s performance measurement systems at the time
5. Learning and continuous improvement of study and were used to guide our propositions.

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How to Develop Innovation KPIs in an Execution-Oriented Company

Victoria Lakiza and Isabelle Deschamps

Indeed, the case company’s performance measurement suitable indicators (Ojanen & Vuola, 2005; Perez-Freije
systems are not balanced as they are mostly financial & Enkel, 2007).
and have a significant lack of customer-based metrics.
Success from a customer point of view is difficult to Innovation KPI Development at the Case
define as there are no efficient feedback loops between Company
the company and its customers. In addition, there is
little alignment between their executive scorecard and The objective of the researcher’s mandate was to devel-
the one for new product development, notably because op a set of three to five simple but comprehensive KPIs
innovation is not part of the executive scorecard. to assess the performance of technological innovation
and to evaluate the contribution of the IRDT team to
Moreover, the case company favours easy and accessible the company’s overall performance. The KPIs were
efficiency-oriented metrics. However, when asked about meant to cover new product development, innovation
what really needs to be measured, the stakeholders are on customer orders, and technology development. Be-
interested in intangible indicators that are difficult to low, we present a brief overview of the researcher’s gen-
measure, but they do not invest the resources necessary eral methodology before diving into the key steps taken
to develop the appropriate measurement systems. This in the development of the innovation KPIs.
is typical of the least innovative firms according to both
Griffin and Page (1996) and Storey and Kelly (2001). Research methodology
The central interest of this study was to better under-
Several authors agree that innovation performance stand how organizational change unfolds in practice.
measurement is idiosyncratic to each company’s specif- Research design choices, as presented in Figure 1 were
ic context (Brophey et al., 2013). Consequently, some au- made to achieve this goal. Although some general re-
thors propose guidelines on how to choose the search steps were planned, the multiple data collection
appropriate metrics for each case (Dewangan & Godse, methods presented in Figure 1 were used mostly iterat-
2014). Finally, it is important to determine the intended ively, adapting to new questions and opportunities
use of performance measurement in order to choose arising as the research unfolded.

Table 3. Characteristics of performance measurement systems favourable to innovation (reproduced from Lakiza, 2018)

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How to Develop Innovation KPIs in an Execution-Oriented Company

Victoria Lakiza and Isabelle Deschamps

Figure 1. Research design choices

Although not all the research data collection methods their expectations, and build trust (Patton, 1987). A
were directly associated with the KPI development total of 16 interviews were carried out with stakeholders
mandate, the resulting observations also contributed to from the Engineering, Marketing, Sales, and IT &
the thinking on the most appropriate innovation KPIs. Strategy departments. External company stakeholders
were not involved in this mandate, primarily because of
KPI development steps the general lack of external input in the company’s
Figure 2 presents the general process flow of the innov- activities, as explained later. The project-scope inter-
ation KPI development mandate within the case com- views identified a clear need to bridge the gap between
pany. Some of the key high-level steps are described in different stakeholders’ views on innovation and their
greater detail below. measurement needs. Therefore, a participatory work-
shop was developed to build shared understanding
Stakeholder input through discussions among key stakeholders on their
At the beginning of our mandate, we met the internal main expectations and needs for measurement. The
innovation stakeholders in order to outline the pro- aim was to achieve a common view on the most import-
ject’s scope, describe the researcher’s role, understand ant aspects to be measured.

Figure 2. Process flow for developing innovation KPIs

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How to Develop Innovation KPIs in an Execution-Oriented Company

Victoria Lakiza and Isabelle Deschamps

First, the participants were asked to share what func- Finally, of all the topics discussed during the work-
tions of performance measurement systems (Kerssens- shop, each participant was asked to identify the single
van Drongelen, 1999) they were looking for and how most important one that they believe will demonstrate
they would like to use the future innovation KPIs innovation success. The responses were then clustered
(Godener & Soderquist, 2004). This input helped the in categories and voted on. The “Customer Wow
stakeholders focus on what matters to them, instead of Factor” was determined as the main aspect to measure.
choosing some existing popular metrics without ensur-
ing their usefulness. Feedback discussions and KPI decision making
Following the KPI requirements workshop, input from
Further questions helped explore what successful in- the participants was analyzed and discussed with fel-
novation meant to the participants. This step contrib- low researchers as well as with the lead academic re-
uted to the sharing of different views on the subject so searcher. During the development of the first KPI
as to start building a common understanding on how proposal, several discussions were held with some of
they want success to look for the company’s projects. the key stakeholders including the IRDT director, some
managers from the IRDT group, and from the Market-
The alignment of innovation activities with corporate ing department. The first set of KPIs was then presen-
strategy is judged by many as essential (Bremser & ted to 11 stakeholders for feedback during individual
Barsky, 2004; Jiménez-Zarco et al., 2006; Kuratko et al., interviews. This led to modifications to the proposed
2014). Moreover, senior management involvement is KPIs before the final proposal.
crucial in order to ensure successful implementation
and overall alignment of key measures within a score- As functional integration has a positive impact on pro-
card (Kaplan & Norton, 1992). However, it was not pos- ject lead-time and cost (Clark & Fujimoto, 1991; Gomes
sible to work fully in alignment with the upper & Pearson, 2001), Godener and Soderquist (2004) be-
management and strategy as innovation management lieve that inter-functional processes and measurement
efforts were not well integrated with high-level priorit- can improve the performance of innovation endeav-
ies. However, efforts were made to obtain key input ours. However, Engineering and Marketing decision
from the stakeholders in order to apply some of the Bal- makers were unable to agree on common measures to
anced Scorecard philosophy. As part of the workshop, implement; each group focused on its own interests
key questions addressing each of the four Balanced and avoided getting involved in the other’s KPIs. Unfor-
Scorecard perspectives (Kaplan & Norton, 1992) were tunately, this resulted in working separately with En-
used and are presented in Table 4. gineering and Marketing stakeholders on different
metrics.

Table 4. Balanced Scorecard perspectives questions Proposed KPIs

used at the KPI requirements workshop The five guiding principles proposed by Dewangan
and Godse (2014) and presented above were used for
the development of proposed KPIs, as presented in
Table 5.

The introduction of innovation performance metrics

can contribute to higher performance by providing
guidance and direction to the innovation efforts (Mar-
ginson, 2002). However, it might sometimes be too
early to effectively introduce KPIs. According to a re-
view of 10 business process management (BPM) mod-
els by Röglinger, Pöppelbuß, and Becker (2012), in
most models, the development of KPIs is at maturity
level 3 (out of 5). In this case, the company’s innova-
tion processes were assessed as being mostly between
BPM maturity level 1 and 2 (Houllier, 2017) by a mem-
ber of our research team.

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How to Develop Innovation KPIs in an Execution-Oriented Company

Victoria Lakiza and Isabelle Deschamps

Table 5. Guiding principles for KPI development, based It was possible to propose a set of KPIs suited for a com-
on Dewangan and Godse (2014) pany with an immature innovation management system
working towards rejuvenating its innovation capabilities.
Table 6 presents a summary of the KPIs proposed as well
as the practices they encourage and the behaviours they
are meant to change in order to improve the company’s
innovation capabilities over time.

Summary of KPI Development Challenges

In summary, there was a significant gap between what

came out as the appropriate measures from the stake-
holder input activities, the type of measures they were
using, and the specific indicators they had in mind for in-
novation. This is not surprising, as Griffin and Page
(1993) found little overlap between the measures used
by practitioners and those that they would like to use.
When asked why they would not use what they believe
would be more useful, the reasons from the survey by
Griffin and Page (1993) were:

1. Lack of appropriate systems in place (37% of respond-

ents)

2. Company culture does not support measuring (17%)

3. No one is held accountable for the results (12%)

4. Short-term orientation (10%)

5. Lack of understanding of the development process

(10%)

6. No time to measure (8%)

7. Measuring is unimportant (6%)

These reasons align well with some of the challenges met

In such circumstances, instead of developing KPIs to when trying to develop innovation KPIs at the case com-
measure the success of innovation activities, it was de- pany. As mentioned in the previous section, the level of
cided to focus on KPIs that could help drive the right be- maturity of the company’s innovation processes was too
haviours to help the company mature its innovation low for an efficient introduction of innovation KPIs.
processes and improve its innovation capabilities. Sev- Therefore, it was decided to focus on KPIs that would
eral characteristics of the case company that hindered help improve innovation capabilities and mature the
its ability to continuously develop innovations were company’s overall innovation management processes.
identified (Brodeur et al., 2017; Lakiza et al., 2017) and In addition, four other KPI development challenges were
further confirmed by results of an Innovation Quotient met: the lack of strategic alignment both internally and
(IQ) questionnaire that was used to assess how favour- externally, as well as risk aversion and execution mind-
able the company’s culture was to innovation (Rao & set. Table 7 summarizes how the five challenges inhib-
Weintraub, 2013). ited the successful development of innovation KPIs.

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Victoria Lakiza and Isabelle Deschamps

Table 6. Proposed innovation KPIs with encouraged practices and desired behaviour change

Recommendations being measured are themselves in development and

constantly change. In a context of limited resources, de-
The results of the IQ questionnaire confirmed that the veloping KPIs to measure the performance of immature
company’s culture was not favourable to innovation at processes might not be the best investment. KPIs to en-
the time of study. During the development of the innov- courage desired behaviours that are hypothesized to im-
ation KPIs, numerous challenges resulting from the prove future performance might be a more efficient
company’s culture were met, such as risk aversion, approach than KPIs to measure the performance of in-
silos, and an execution-oriented mentality. Based on novation processes.
these challenges, three conditions were identified as
prerequisites to implementing successful innovation Second, the lack of strategic alignment made this man-
KPIs: a minimal BPM maturity level of innovation pro- date less efficient. It was not possible to fully align the
cesses, the strategic alignment of the innovation efforts proposed KPIs with the company strategy. In addition,
with the company’s goals as well as commitment to in- alignment among the innovation stakeholders revealed
novation. Each of these conditions is addressed in itself to be a significant challenge in a context of strong
greater detail in the following paragraphs. silos. Discussions on the KPI development were drag-
ging as both sides were focused on their own ideas,
First, when most innovation processes are in the early biased by their functional background, and with little
stages of being developed and tested, it is difficult to de- common innovation language. A holistic approach is ne-
velop robust and useful KPIs, as the processes that are cessary to ensure that the different parts of the company

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How to Develop Innovation KPIs in an Execution-Oriented Company

Victoria Lakiza and Isabelle Deschamps

Table 7. Key challenges and their impact as inhibitors on innovation KPI development

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How to Develop Innovation KPIs in an Execution-Oriented Company

Victoria Lakiza and Isabelle Deschamps

are working together towards higher performance (Ka- company’s innovation capabilities, as well as research-
plan & Norton, 1992). When development work is done ers in the field of innovation performance measure-
without alignment and is not prioritized by upper man- ment systems and management. However, the specific
agement, it ends up being half completed or used incor- KPIs proposed in this study may not necessarily be
rectly, and is sometimes dropped (Garengo et al., 2005). transposable to a different situation, even with a similar
Experience with these outcomes makes the stakehold- context.
ers lose faith in such projects and makes similar efforts
even more difficult in the future. Performance measurement systems are idiosyncratic to
the context (Bremser & Barsky, 2004; Brophey et al.,
Third, there was no commitment, particularly from up- 2013; Brophey & Brown, 2009; Godener & Soderquist,
per management, towards innovation. The longitudinal 2004; Griffin & Page, 1996; Jiménez-Zarco et al., 2006).
research was taking place in the midst of numerous or- Thus, our approach was to use guiding principles for an
ganizational changes, most of which were focused on effective performance measurement system by Dewan-
fixing the company’s operational issues. While many gan and Godse (2014) in order to propose appropriate
believed that innovation is important, there was no KPIs for the company at its specific state of innovation
formal commitment to innovation and it was rarely an management capacity, rather than searching for the
employee’s priority. Important resources were granted “perfect” KPIs.
to develop new teams, tools, and processes towards op-
erational excellence, while the IRDT group was strug- The mandate at the case company was originally to pro-
gling to justify a dedicated budget and resources for pose KPIs to measure the success of innovation efforts.
new product development. While IRDT employees The low BPM maturity level of its innovation processes,
were encouraged to innovate, they were constantly the lack of strategic alignment, as well as the lack of
pulled into day-to-day incremental improvements and commitment to innovation made this task very challen-
firefighting. Without commitment, no risk will be suffi- ging. However, “the measures are not an end point but
ciently encouraged as it will never be prioritized over a dynamic phenomena that must be continually re-
the day-to-day operations. viewed and developed during the transitional period
when creativity and innovation is [sic] developed”
These three prerequisites also influence one another. (McAdam & Keogh, 2004). Given that a bigger goal was
When there is real commitment to innovation, it will be the rejuvenation of innovation capabilities, it made
part of the company’s strategy and it will be easier to sense to focus on KPIs that would help drive behaviours
align the innovation management development efforts favourable to innovation and the development of better
with the company’s goals. When there is alignment, innovation capabilities rather than KPIs that measure
more resources will be available and focused on devel- innovation success. If we are right in believing that bet-
oping more solid and mature processes. ter innovation processes are the foundation of better in-
novation performance, this will ultimately have the
These prerequisites are by no means meant to be ex- desired results.
haustive, especially in a general context. They represent
the biggest barriers met during the innovation KPI man- The introduction of KPIs with a goal to encourage beha-
date at the case company and are indicative of what viours more conducive to innovation is believed to
can make a similar project challenging in a comparable eventually contribute to changing the company’s cul-
context. ture, opening it up to opportunities. With a more in-
trapreneurial culture, an introduction of KPIs with a
Discussion and Conclusion goal to measure the success of innovation activities
might be easier, as some of the challenges and inhibit-
The purpose of this article was to share learnings from ors met in this case study will normally be less promin-
the development of innovation KPIs in an execution- ent. For more on this aspect and a conceptual
oriented Canadian manufacturing company. It brings framework on the triple dynamic relationship between
to light the current state of the literature on innovation intrapreneurial culture, performance measurement sys-
performance measurement and proposes steps and tems, and innovation capabilities, see Lakiza (2018).
guidelines that could be followed to develop appropri-
ate innovation KPIs in an execution-oriented company. This case study lays the groundwork for several re-
The lessons learned and challenges met could benefit search opportunities. First, the proposed framework
managers embarking on a journey to rejuvenate their mentioned above, as well as the findings shared in this

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Technology Innovation Management Review July 2018 (Volume 8, Issue 7)

How to Develop Innovation KPIs in an Execution-Oriented Company

Victoria Lakiza and Isabelle Deschamps

article, could be further tested in other companies of

similar and different types to understand what com- About the Authors
pany aspects have an influence on similar projects.
More comprehensive research regarding the barriers to Victoria Lakiza is a consultant, facilitator and coach
the implementation of innovation KPIs in an execution- committed to unlocking the potential of people and
oriented company could follow. Additional longitudinal organizations. She is passionate about change man-
research focusing on innovation KPI implementation agement and organizational transformation. Victor-
and its impacts on the case company’s culture and in- ia’s Master’s degree in Industrial Engineering from
novation capabilities a few years later could help verify Polytechnique Montreal allowed her to deepen her
the propositions raised by our longitudinal action-re- knowledge and understanding of organizational
search study. change dynamics and of the role of performance
measurement in promoting culture change. Her pro-
fessional experience includes supporting a culture
shift towards intrapreneurship, developing a com-
Acknowledgements plete performance measurement system and man-
aging an organizational restructuring and
This work was supported by Mitacs Canada through the re-branding in an innovative engineering consulting
Mitacs Accelerate Program, which is sponsored by the company. Concurrently she was co-leading a volun-
Government of Canada and the Government of Que- teer initiative aiming to accelerate sustainable in-
bec. This research would not be possible without the novations in organizations through the
support of the case company and its employees and development of intrapreneurial leaders.
managers, as well as the academic support of Polytech-
nique Montreal. The authors also wish to thank other Isabelle Deschamps is a Professional Engineer, Busi-
researchers involved in this longitudinal research – ness Manager, Coach and Entrepreneur active in
Jonathan Brodeur, Amélie Beaulieu, and Guillaume Tech Incubation, Venture Capital, Intellectual Prop-
Houllier – for their ongoing contributions and feedback erty Strategy and Hi-Tech Financing. In her 35-year
on the mandate described in this article. The authors career, she has been involved with 100 start-ups,
are also grateful to Dana Giacobbi for his valuable feed- SMEs and R&D groups in Information Technologies,
back and insights on the concepts and content of this new materials, 3D print, CleanTech and Medical
article. devices. Isabelle is a recognized professor and re-
searcher (HEC Montreal, ÉTS and Polytechnique
This article was developed from a paper presented at Montreal). She is a speaker and expert in technology
the ISPIM Innovation Forum in Boston, USA, March entrepreneurship, innovation & product manage-
25–28, 2018. ISPIM (ispim-innovation.com) – the Interna- ment, science and technology policy & ecosystems,
tional Society for Professional Innovation Management and SME financing. Isabelle advises Canadian indus-
– is a network of researchers, industrialists, consultants, trial clusters, R&D consortia, governmental agencies
and public bodies who share an interest in innovation and ecosystem members, such as National Research
management. Council Canada, Prima Quebec, Aero Montreal and
TechnoMontreal. She specialized in longitudinal
and action research field studies and has published
on technology implementation, crisis management,
open and collaborative innovation, and start-up in-
cubation. Isabelle is a metallurgist (Polytechnique
Montreal) and holds an MBA (HEC Montreal) and a
DBA (Harvard Business School).

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How to Develop Innovation KPIs in an Execution-Oriented Company

Victoria Lakiza and Isabelle Deschamps

Godener, A., & Soderquist, K. E. 2004. Use and Impact of Performance

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Citation: Lakiza, V., & Deschamps, I. 2018. How to

Develop Innovation KPIs in an Execution-Oriented
Company. Technology Innovation Management Review,
8(7): 14–30. http://doi.org/10.22215/timreview/1168

Keywords: KPI, organizational culture, innovation,

PMS, case study, action research, performance
measurement, execution orientation, innovation
capabilities

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 Technology Innovation
Management Review timreview.ca

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