Innovation Accounting The anti-Procrustean approach to key performance indicators
Aug 26, 2014
Innovation AccountingThe anti-Procrustean approach to key performance indicators
The Procrustean KPI system
Mass corporate standardization effect: everything is (has to be) one-size-fits-all, KPIs too.
The Procrustean KPI system
The Procrustean KPI system
Best way to kill innovation: measure progress with financial KPIs
The Procrustean KPI system
The Procrustean KPI system
For relevant progress tracking, KPIs need to be adapted.
The Procrustean KPI system
Classification of Innovation Accounting KPIsbased on the purpose they serve
Classification of Innovation Accounting KPIsbased on the purpose they serve
Reporting: measure the progress from ideation through to product-market fit.
Classification of Innovation Accounting KPIsbased on the purpose they serve
Reporting: measure the progress from ideation through to product-market fit.
Governance: helping company’s board with investment decisions
Classification of Innovation Accounting KPIsbased on the purpose they serve
Reporting: measure the progress from ideation through to product-market fit.
Global: examine the overall performance of the innovation department
Governance: helping company’s board with investment decisions
Innovation Accounting: Reporting KPIs
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Innovation Accounting: Reporting KPIs
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Cost per learning (cost per failure): businesses fail because they ran out of $$$ before product market fit was found
Innovation Accounting: Reporting KPIs
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Cost per learning (cost per failure): businesses fail because they ran out of $$$ before product market fit was found
better fail 100 times with $1,000/failure than,1 time with $100,000/failure
fail fast, fail cheap, fail often...but do learn
Innovation Accounting: Reporting KPIs
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Cost per learning (cost per failure): businesses fail because they ran out of $$$ before product market fit was found
Innovation Accounting: Reporting KPIs
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Innovation Accounting: Reporting KPIs
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Experimentation velocity: the speed at which validation happens is important for the venture to have a competitive edge in the market place.
Innovation Accounting: Reporting KPIs
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Experimentation velocity: the speed at which validation happens is important for the venture to have a competitive edge in the market place.
I have not failed. I've just found 10,000 ways that won't work. - Thomas.A. Edison
Innovation Accounting: Governance KPIs
Source: Rita McGrath
Innovation Accounting: Governance KPIs
Knowledge-to-assumption ratio: number of validated vs. non-validated assumptions in the business model.
Source: Rita McGrath
Innovation Accounting: Governance KPIs
Knowledge-to-assumption ratio: number of validated vs. non-validated assumptions in the business model.
The closer to 1 it is, the less risky the business model is.
Source: Rita McGrath
Innovation Accounting: Governance KPIs
Knowledge-to-assumption ratio: number of validated vs. non-validated assumptions in the business model.
Source: Rita McGrath
Innovation Accounting: Governance KPIs
Source: Rita McGrath
Innovation Accounting: Governance KPIs
Source: Rita McGrath
Barebones NPV: answers the question of whether or not to continue investing in a particular venture.
Innovation Accounting: Governance KPIs
Source: Rita McGrath
Barebones NPV: answers the question of whether or not to continue investing in a particular venture.
Knowing when to stop doing what you are doing is sometimes more important to knowing what to do.
Innovation Accounting: Global KPIs
Innovation Accounting: Global KPIs
Innovation contribution: how much money are being made today by the ventures launched X years ago (in %).
Innovation Accounting: Global KPIs
Innovation Accounting: Global KPIs
Cohort performance: the innovation department should be improving with regards to its overall contribution to company revenues with each incubated cohort.
Innovation Accounting: Global KPIs
Innovation Accounting: Global KPIs
Innovation conversion: % of old customers that are converting to new offerings replacing the old ones (or being complementary to existing offerings — customers which are using more than one product/service from the corporation’s portfolio)
Conclusions
Conclusions
KPIs should be adapted to the maturity stage of the business model. Procrustean was killed by Theseus.
Conclusions
Conclusions
For corporate startups to prosper an innovation accounting system needs to be put in place.
Conclusions
Conclusions
Read more on innovation accounting and corporate startups.
www.thecorporatestartupbook.com
@toma_danwww.danto.ma
@tendayivikiwww.tendayiviki.com
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