Manage the development of new products and business models and align innovation with your business strategy.
To build successful innovation ecosystems, corporates should not look exclusively to traditional accounting methods to manage innovation and measure the impact. To make informed investment decisions on corporate startups, we can use a combination of the innovation thesis, strategic goals and the need to create a balanced portfolio. Innovation Accounting can than be used to measure and manage the progress of these corporate startups from great idea to validated business model.
In his book The Lean Startup, Eric Ries explores the topic of Innovation Accounting to measure the progress of a single startup. In The Corporate Startup, we expand the principle of Innovation Accounting to measure and manage the whole Innovation Ecosystem.
Innovation Accounting is the process of defining and measuring the innovation within an organisation. Especially when we are still creating and testing ideas we need non-financial indicators for success. That is why every modern organisation needs innovation accounting next to traditional financial accounting.
Innovation Accounting focusses on managing the following three innovation activities:
That means that Innovation Accounting needs to be implemented at different levels of the innovation ecosystem.
Within our innovation accounting framework, there are three types of key performance indicators (or KPIs) each company should be tracking for innovation:
Reporting KPIs are connected to Innovation Practice. These focus on product teams, the ideas they are generating, the experiments they are running and the progress they are making from ideation to scale.
Governance KPIs are connected to Innovation Management. The focus here is on helping the company make informed investment decisions based on evidence and innovation stage.
Global KPIs are connected to Innovation Strategy. The focus here is on helping the company examine the overall performance of their investments in innovation in the context of the larger business.
Activity metrics focus on how busy the company has been with innovation. They measure the level of innovation activity going on (e.g. number of new products launched, number of experiments run, ideas prototyped).
In contrast, impact metrics measure the tangible results that are emerging from this innovation activity. Revenue and profits are the ultimate measure of impact.
Innovation Labs have the tendency to focus on activity metrics rather than impact metrics. That is fine to show early signs of success, but in the end innovation has to have a real impact on the organisation.
We created a printable infographic poster of all information about innovation accounting on this page. You can download and print it for free.