How much is an idea worth in terms of return on investment? It’s an intriguing question in part because it seems hard to measure. Yet, it’s possible to nail down an estimate of just how much an idea can do for your business, provided you have the right sense of both the investment and what you’re expecting for a return.
Any innovation strategy has to begin with goals, both short and long term. There’s no way to define success without goals as context.
Part of this is the more concrete the goal, the more specifically you’ll define both “return” and “investment.” A non-profit working towards ending hunger might, for example, have a goal of serving a certain number of meals to the hungry by the end of the year, and also a goal of building systems to prevent people from going hungry in the first place.
You can also see how this shifts the tone of ideas; the former goal will need ideas on sourcing, preparing, and serving, while the latter will need ideas on politics, social infrastructure, and coordination with other non-profits and organizations.
Don’t forget that short-term goals are often in service to long-term ones, as well. This helps align ideas on both axes and consider multiple forms of return. This sets definite metrics to help you consider the value of ideas.
When defining goals:
- Ensure the communication process is open, so everyone on the team understands each goal and why it was chosen.
- Be transparent on how each goal is related to your innovation strategy or product development strategy, and which are steps towards others.
- Shorter-term goals should be more concrete, while longer-term ones should be more abstract.
- Leave room for flexibility, especially with longer time frames; circumstances can change rapidly, even in the most staid of industries.
Defining Return and Investment
ROI is a fiscal term, and it’s tempting to stick entirely to financial definitions. That is, however, misleading.
First, we need a broader sense of the word “investment,” especially since this is as much about change management as it is about bringing a product to market or improving a service. Putting money into an innovation is one measure, but there’s also time and effort on the part of your staff, both those actively involved and those keeping up engagement. Some of this is investment you’ll make anyway; if it’s a priority to build connections with clients, for example, running ideas by those clients would be part of that.
Similarly, return can be measured financially, but it’s not necessarily the best measure. For example, let’s say your team spends a lot of time and energy overhauling your front end. They talk to customers, research how customers use the various methods you make available to purchase from you, and communicate between departments. What matters more? The short term possible sales boost or the benefits that come out of closer departmental communication and tighter bonds between your clients and your team?
This can affect the financial return. If there’s no immediate results from an idea, and yet over time your overall sales steadily rise faster than they had before, can that be credited as a return? If there’s little return on overall sales, but you spend less to make each one, is that a good return?
In order to get a sense of proper return and proper investment:
- Choose a set of metrics tied to your goals, both short and long-term. How they’re measured and why they’re chosen should also be clear.
- Evaluate your resources and the current demands on them. How much time, energy, and budget can be dedicated to each idea?
- Look to how ideas can dovetail with current work goals and resources.
- Don’t forget that your team is looking at the ROI for themselves, as well. Beyond team unity, what’s in it for them? What results should they be looking to achieve? What will they get for their hard work beyond what’s in their pay envelope?
Measuring ROI on Ideas
Once you have goals and metrics, you can begin getting a sense of what you’ve put into an idea and what you’ve gotten out of it. There are, however, some approaches that will clarify both.
- Limit “friction” on data gathering. For example, if employees are logging time spent working on an idea, that should be as simple and intuitive as possible. Also, limit the amount of time spent writing reports, discussing results, and otherwise updating the team.
- Put an upper limit on the metrics you’re going to measure, three at most for return and investment. It’s never been easier to collect data, from how long it takes a customer to buy to how much time team members spend on an internal website. Yet you can easily become lost in this forest. Pick a path, and stick to it.
- Scale your measurement to the size of the idea. If someone on the team comes to you with a simple method to speed up an internal process that only involves a few stakeholders, that will be a much different proposition compared to rallying the entire company to launch a new product.
- Build checkpoints into your process to offer updates to those involved and consider if you’re on track. In addition to forecasting trends, give room to those involved in implementation to offer feedback and suggestions. If some are outpacing others on your metrics, it’s worth asking why.
- Transparency for all stakeholders will be key. Everyone involved should know what’s going on and why. But encourage a “look away” mentality on these statistics at the same time. What matters is the overall trend in your metrics, not any potential up-and-down blips.
- At the end of the process, conduct an analysis, and solicit honest feedback. What worked? What didn’t? What surprised people? What were the unexpected benefits and drawbacks? Is everyone happy with the results?
Finally, remember as a rule of change management that no strategy survives contact with the real world. There will be bumps in the road, unexpected surprises, and other moments that you’ll have to roll with. It’s
Finally, remember as a rule of change management that no strategy survives contact with the real world. There will be bumps in the road, unexpected surprises, and other moments that you’ll have to roll with. It’s not uncommon for the direction to change entirely during this process. Rolling with it is the only way to keep on track. To learn more about innovation strategy and ROI, get a free consultation.