Measure and Evaluate Customer Profitability Management

• In order to fully evaluate the impact of Innovation Strategy initiatives it is necessary to undertake, where possible, a quantitative assessment of their impact and assign calculable values. The following provide some simple ideas on how Innovation Strategies can be assessed:

• Innovation - New product reliance e.g. Number of improved or new products in a specified period as a % of total number of products (product range) over that period, or % total sales deriving from products launched in last number of years. This measure indicates the importance or reliance on new products as opposed to unchanged established products; it is also useful in the assessment of the effectiveness/performance of the product/service development process. The relevance of this measure will of course be influenced by the nature of the product and/or targeted market.

• Innovation – Intensity e.g. Number of new products introduced over period divided by number of employees. This is a measure which provides an input to the assessment of the effectiveness/performance of the product/service development process.

• Innovation - New product/process introduction e.g. Number of new products or processes introduced per annum or period. This measure can provide an organisation with an indication of the level of innovation or the level of success of any new innovation focus.

• Innovation - Idea conversion rate e.g. Number of ideas or suggestions implemented in a given period or, % of ideas/ suggestions that are implemented or acted upon or, average value of ideas or suggestions implemented or, average lead-time to respond to ideas or suggestions. 

The idea conversion rate measures the rate at which new ideas are assessed and implemented successfully through improvement initiatives.

• Innovation - Idea generation rate e.g. Number of ideas or suggestions for improvement received monthly or, total number of ideas per year. This is a measure which quantifies the organisation’s ability to generate new ideas.

• Innovation - Dedicated research time e.g. % of employees formally devoting time to regularly researching new ideas, or % of time spent formally by employees in researching new ideas  This measure may indicate the extent to which leadership is prepared to go in the creation of a  culture of innovation. This can be a useful benchmarking measure when assessing the innovation intensity of an organisation.

• Innovation – Patents e.g. Number of new patents obtained over a specific period. This is a measure that provides an input to the assessment of the effectiveness/performance of the product/service development process.

• Innovation - New product profitability e.g. Amount of profit gained by new product in a given period as a % of the cost to produce them in a given period. This is a measure which provides an input to the assessment of the effectiveness/performance of the product/service development process and or the organisation’s innovation strategies.