Webinar: Measuring And Monetizing Strategic Innovation

www.balancedscorecard.org
Measuring and
Monetizing Strategic
Innovation
David Wilsey and Joe DeCarlo
Balanced Scorecard Institute
March 2018

©1997-2018 Balanced Scorecard Institute.
Learning Topics
• How to define what innovation means
• How to design and implement measures of Innovation
• Keys to monetizing innovation
• How to develop and maintain a culture of innovation and
entrepreneurship

Presenters
• 40+ years experience in business structuring,
strategy formulation and implementation, change
management, design and execution of innovative
operational business models and solutions in the
private, public, government and nonprofit sectors
through first-line and executive level management
positions
• Profit and loss responsibilities:
– Senior executive university management and
instructor positions at the Milwaukee School
of Engineering
– Special Projects Manager and Systems Engineer
in marketing, hardware and software
engineering, product development and
management, consulting, education, and
publishing with IBM
– Member of inaugural Executive-in-Residence
team for technology start-ups at the Plug
and Play Technology incubator in Sunnyvale,
CA
• Bachelor in Industrial Management, MBA –
Technology Management and Doctoral candidate
David Wilsey
BSMP, KPIP, SMP, MBA
BSI Chief Operating Officer
Joe DeCarlo
BSMP, PMMP, PMM, MBA
BSI Vice President,
International Group & Senior
Consultant
• Strategic planning and performance
measurement specialist with over 12
years’ experience leading BSI client
consulting and training engagements
• Leads BSI’s internal operations and has
helped design all of BSI’s Certification
Programs
• Co-author of The Institute Way: Simplify
Strategic Planning with the Balanced
Scorecard and the Strategy Professional
Resource Center’s Association for
Strategic Planning SMP/SPP/SPA
Certification Exam Study Guide
• Bachelor in Music Education and an MBA
in Innovation Management, North
Carolina State University

Measuring and Monetizing Strategic Innovation
CHALLENGE:
How to Measure
an Intangible Like
Innovation?

Poll Question: What Do You Mean By “Innovation”
When you talk about “Innovation” at your organization,
which of the following do you mostly mean?
A. A high level “new product development”-type
strategy for the organization
B. Only one step in a larger strategy or process (E.g. we
might need to be innovative as part of our
operational excellence strategy)
C. A description of your desired organizational culture
D. Something else

There Are Different Approaches to Innovation
Innovation can be one step in a
strategy or process
Innovation can be a focus
of our culture
Innovation can be a strategy
INNOVATION
STRATEGY

The Horizons of Strategic Innovation
Horizon 1
• Extend and defend core businesses
• Core – innovation in existing operations and markets
Horizon 2
• Build emerging businesses
• Adjacent – innovation in new but related areas of
business and markets
Horizon 3
• Create viable options for new businesses
• Transformative – innovation to create new
businesses and markets
ProfitPerformance
Time (years)
Business and
Industry
Source: Adapted from The Alchemy of Growth, Baghai, Coley, White (1999)

The Horizons of Strategic Innovation
Government and
Non-Profit
Horizon 1
• Core – innovation in delivery of existing operations, and
programs and services
Horizon 2
• Improve the cost-effectiveness of existing programs
and services
Horizon 3
• Transformative – innovation to solve
problems with new solutions and/or new
partners
Time (years)
ProgramandServiceReachandEffectiveness
Source: Adapted from The Alchemy of Growth, Baghai, Coley, White (1999)

“Positioning choices made (the path) and
action taken (the plan) to move the
organization from its current state to some
future desirable state”
The Institute Way: Simplify Strategic Planning & Management with the
Balanced Scorecard
What is Strategy?

Innovation As a Strategy
Theme:StrategicPartnering
Theme:InnovationExcellence
Strategic
Result
Strategic
Result
Strategic
Result
Strategic Themes:
Main focus areas of the
organization; the organization’s
“Pillars of Excellence”, used to
focus staff effort on
accomplishing the vision. For each
Theme there is a Strategic Result
Strategic Result:
Desired outcome for the
main focus areas of the
strategy.
Theme:OperationalExcellence

Innovation Management As a Process
SOURCES
OF INNOVATION
Design In
House
Form a New
Venture
Market Opportunity
Analysis
• Opportunity Identification
• Market Research
• Voice of the Customer
• Competitor Analysis
• Product Planning
New Product Development (NPD)
• Concept Generation
• Product Specification
• Concept Refinement and Testing
• Manufacturing Prototyping
• Process Prototyping
• Market Launch Strategy
• Project Management
Technology Evaluation
& Selection
• Portfolio Prioritization
• Market Opportunity Scanning
• Market Matching
• Technology Refinements
New Venture Creation (NVC)
• Opportunity Analysis
• Business Planning
• Firm Financing
• Organizational Design
Launch / Commercialization
• Manufacturing Ramp-Up
• Operations Management
• Distribution and Fulfillment
• Product Management
• Follow-on Sales and Service
NPD
Adapted from Innovation Management, Montoya-Weiss, M, Integrated Product Development Lab. (2004). BUS 565, Raleigh, NC: North Carolina State University.

Example: International Multimedia Company
Financial
Perspective
Customer
Process
Organiztional
Capacity
Strategic Result : We will be a leading innovator of multimedia products
Maximize
Technological
Capacity
Improve
Culture of
Innovation
Improve Cross-
Functional
Teamwork
Improve Project
Management
Expertise
Improve New Product Development
Improve
New Product
Marketing
Improve Project
& Portfolio
Management
Improve
Product
Launch
Improve Concept
Development &
Prioritization
Improve Market
Opportunity
Analysis
Expand
Number of
Markets
Improve
Customer
Satisfaction
Increase
Speed to
Market
Lower Life-cycle
Production
Costs
Increase
Revenue
Increase
Profits

Innovation as a Part of Strategy
City Mission: Be a world-class model for a successful urban community
Theme:EconomicAbundance
Theme:GovernmentReform
Strategic
Result
Strategic
Result
Strategic
Result
Theme:OperationalExcellence
Supporting (Innovation) Initiatives:
1. Service Redesign Project
2. Cost Reduction Process Redesign Project

Innovation As a Culture Focus
“If you want to be inventive, you have to experiment a lot, which
means you will fail a lot. You want to embrace “high-judgment
failure” — this was worth trying, it didn’t work, so let’s try
something different…All of our most important successes at
Amazon have been through that kind of failure: Fail, try again,
and repeat that loop.”
Jeff Bezos, CEO Amazon.com

Enablers of Successful Innovation
Leadership:
• Innovation becomes a priority and is managed systematically
People:
• Empowered employees, partners, customers and others
• Failure is accepted as a part of the process
Process:
• Ideas are systematically identified and captured
• Structured but dynamic
• Develop new capabilities
• Support business cases
• Ensure the innovations are subsequently delivered
• Benefits realized and visibly counted

Inclusion and Ownership is a Key Benefit of a
Team-Based Approach
• Strategies created by a cross-functional
representation of the organization are owned
by…
ꟷ the organization
• Strategies created entirely by a consultant are
owned by…
ꟷ the consultant
• Strategies created entirely by a small exclusive
team are owned by…
ꟷ the exclusive team


KPIs and Performance Measures:
• Are expressed quantifiably, such as:
– # of safety accidents
– % of product defects
– Graduation rate
• Are NOT initiatives, actions or tasks (e.g.
“redesign the website”)
• Are NOT “surveys” (the tool itself)
• Are NOT a piece of software
Performance Measure (KPI) Definition
Performance Measures (or Key Performance Indicators - KPIs) are
the critical (key) indicators of progress toward a desirable outcome


Good Performance Measures:
• Provide objective evidence of progress on achieving a
strategic objective
• Measure what is intended to be measured to help inform
better decision making
• Offer a comparison that gauges the degree of performance
change over time
• Track efficiency, effectiveness, quality, timeliness,
governance, compliance, behaviors, economics, project
performance and resource utilization
• Are valid, verifiable and balanced between leading and
lagging indicators
Characteristics of Good Performance Measures

Strategy is hard to measure because it is often written using
abstract language or vague ideals that are hard to interpret:
• We employ “best practices”
• Performance is “Optimized” or “Maximized” or “World
Class”
• Employees are more “Efficient,” “Effective” or
“Productive”
The “Intended Result” in the Objective Commentary should
avoid this practice:
• Use plain concrete language: Not “Improve Thought
Leadership,” but “More people read or recommend our
content”
• Use sensory language to visualize the desired end result
Describe the Intended Result of Innovation Strategy
Adapted from the PuMP Performance Measure Blueprint Workshop, by Performance Measure Specialist Stacey Barr (www.staceybarr.com)


• Concrete, sensory-specific language describes things you can see, hear, smell,
taste, or feel
• Abstract language refer to concepts or vague ideals like sustainable, innovative,
reliable, leadership, quality, effective, leverage, efficient, resilient, optimized,
world-class, responsive…
• Concrete words are 2-3 times more memorable than abstractions
Write Intended Results Using Concrete Language
Objective:
Improve the
Customer
Experience
Intended Results:
• Checkout is faster
• Facilities are safe and clean
Measures
• Checkout cycle time
• Store safe/cleanliness audit score
You can only measure what you can observe or detect.

Concrete Language Is More Memorable
and Measurable
You can only measure what you can observe or detect
Concrete: I want a fleet of
quiet, blue, four-door, fuel-
efficient cars
Abstract: I want world-class,
high quality, great value, high-
performing cars

• New Market Revenues Increase
• Successful New Products Are Developed
• New Potential Markets Are Identified Quickly
• Avoidable Costs Are Reduced
• Customer Needs Are Met Quickly
• Employees Tell Us They Feel Empowered
• Targeted Potential Employees Want to Work Here
Examples of Innovation Results
The right result(s) for your organization will depend
on your own specific strategy.

“Monetizing” Innovation Means Realizing Value from Your
Innovation Strategies and Initiatives
• Innovation is about Creating New or Additional Value, Not Necessarily New Things
• Innovation Comes in Many Forms in an Organization
• Innovation is Systemic and Should Take Into Account All Aspects of the Organization
For example:
Companies Develop innovative
new products or services
• Gillette Mach3 Turbo razor and the creation of additional Blue Ocean competitors for a period
of time (Harry’s, Dollar Shave Club, Dorco, Bevel, Wet Shave Club,
• Apple iPod music player, iTunes music service, Amazon Music, Pandora and the creation of
additional Blue Ocean competitors for a period of time
Redefine how company gets
paid or create innovative new
revenue streams (value
captures)
• Paid search versus free search
• Blockbuster revenue-sharing with movie distributors (What happened to Blockbuster?) Redbox
springs up. Streaming video Blue Ocean. Amazon Prime. And at one time Netflix was though to
be the next Blockbuster
Redesign or upgrade core
operating processes to improve
efficiency and effectiveness
• Any international automotive manufacturer or warehousing systems embrace automation and
robotics
• Artificial intelligence foothold in knowledge based and databased systems

“Monetizing” Innovation Means Finding and Managing the
Connections Between Leading and Lagging Measures
Leading Indicator:
An indicator of performance that is
a precursor of future success.
Leading and Lagging are Relative Terms
Lagging Indicator:
An indicator of past performance that
shows how successful we were in
achieving results.
# of High Potential
Market Opportunities
Identified
# of New
Products
Launched
Revenues
from New
Markets
This is a leading indicator for… …this lagging indicator
Which is a leading indicator for… …this lagging indicator


“Monetizing” Innovation Means Finding and Managing the
Connections Between Leading and Lagging Measures
Outcomes
Outputs
Processes
Inputs
Technology
Tools,
Infrastructure
Innovation
Funding
Culture of
Innovation
Talent
Management,
Knowledge and
Skills, Branding
Improve
Project
Management
Expertise
Innovation
Portfolio
Expansion
Quality of
Innovation
Idea Flow
Improve
Product &
Production
Launch
Partner and
Alliance
Additional
Value
Effective
Project
Execution
Technology
Leadership
Sales to
Current
Customers
Growth
Expanded
Customer
Base
Profit, ROE
Growth
Sales and
Revenue
Growth
Value
Recognition
Process
Improvements
Product and
Service
Performance
Efficiency
through Cost
Reduction
Improved
Quality of
Life

www.balancedscorecard.org
Questions?
David Wilsey and Joe DeCarlo
Balanced Scorecard Institute
March 2018

Webinar: Measuring And Monetizing Strategic Innovation

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