While having certain metrics in place can be helpful for gauging the success of an innovation team, “innovation metrics have their dark side,” says Moises Noreña. “When you get really granular, and strict about measuring them, it almost kills the creativity.”
Noreña is currently the VP of Innovation at Fortune Brands Global Plumbing Group, a subsidiary of Fortune Brands Home & Security. Prior to his current role, he was a founding member of the Innovation Academy at the University of Notre Dame and the Director of Strategic Innovation at Allstate. Noreña also spent 13 years at Whirlpool Corporation.
In a recent conversation with InnoLead, Noreña shared insights on the financial and non-financial metrics that his team uses to measure innovation. This interview with Noreña is a part of InnoLead’s most recent research report, “Developing Innovation Metrics and Reports That Really Matter.” For more data and interviews, visit the main report page.
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What financial metrics do you typically look for when you’re trying to determine whether a project was a success or a failure?
From a project…perspective, we measure our innovations just as we measure any of our products. So there is a project value, an incremental net revenue, and there is a profitability metric.
From an innovation perspective, the only change we’ve really effectively done at a project level is that, in some of these cases, the payback may be a little bit longer. So, we stretch the time. Typically, we look at projects in three-year increments. For some of the innovations, we will get five-year projects.
Are there any non-financial metrics that you look for to gauge the success of your innovation program?
We have some soft metrics. To be honest, they haven’t stuck. They’re more for my team, and it’s more [for the] group that drives innovation. We review those in our Innovation Council. Those include: number of ideas, concepts tested, [and] the number of projects that we drive.
What metrics do you report to senior leadership? What are the most useful ways to get their support on a project?
What is going to be the return? That’s it. One of the challenges I found is that when you’re looking at things that are early in the pipeline, even [in the] discovery [phase], putting a hard metric on that is very difficult… You don’t know what you don’t know. People [who] in the company…operate the business, they have the tendency to want to [know] that. Like, “Is that big or small?” [We say,] “Well, we don’t know.”
That’s one of the biggest challenges that we have. We try to combat that…by saying, “We’re going to put that in a category of exploration, and with exploration, we’re not going to put a number on it.” But when it comes to showing it to the executive committee, it’s really just the hard numbers.
In terms of data, do you have any rule of thumb for deciding whether you’re going to push your project forward, table it, or kill it?
We have simple metrics we created with five categories. They’re strategic fit, financial significance, differentiation, channel, and degree of difficulty. We have those metrics, and a small group of people look at those. … That helps us prioritize our pipeline.
What advice do you have for other innovators who are trying to master innovation metrics?
Innovation leaders…really have to find a way to shelter themselves from [over-measuring and killing creativity]. You have to have the metrics. There’s no way around it. We just try to not make that something that creates so much burden in the organization. Because it’s so ambiguous when you’re trying to make sure that you can…measure something that sometimes is not mature enough to do so.
You can spend so much time on that. Then at the end, it’s going to be wrong. Even with our core products where you know everything, you sometimes don’t accurately predict. … You have to be part of that [business] environment that measures things in that way, but not overkill.
