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You Measure What Matters

| On 29, Feb 2008

Cass PursellIs innovation mutually exclusive with continuous improvement? “Incrementalism is innovation’s worst enemy!” Sam Walton has declared. “We don’t want continuous improvement, we want radical change.” Large, established firms seem to find it much easier to focus on incremental improvement than to embrace change of any kind, let alone radical change. I wonder if there is a psychology of success that makes it more difficult to take significant risk; it’s logical to assume that the more you have to lose, the less likely you are to take risks. It would explain why many large organizations focus on developing continuous improvement programs for their core business and attempt to buy innovation either by creating stand-alone innovation “towers” or by acquiring start-up companies.

Many executives believe that the “normal” culture of their firms are toxic to innovation, and physically separate their innovation programs from the rest of the organization. Approaches like this explain why it is difficult for many firms to get a handle on the benefit they can expect from a given dollar of innovation spend. The innovation parts of their businesses are not designed to be measured, for fear of choking off good ideas. Google’s chief executive is a champion of this mindset, and has even said that innovation is “anti-six sigma,” in that he feels that variance in the innovation process is at least somewhat desirable. On the other side of the innovation conference room are the CEOs who believe that innovation is more about process and less about creativity and inspiration, and as such it is a process like any other, whose throughput and return on investment can be specifically measured.

What I can’t help but notice is the CEOs who believe, like Google’s Schmidt seems to believe, that innovation should not be burdened by measurement are those who run organizations with an extreme surplus of cash flow. CEOs who are becoming increasingly invested in understanding the return they are getting on their innovation spend are more typically leading organizations that are actively competing on margins. I can’t help but think of the maxim, “You measure what matters.” It is a luxury to be able to ignore or take on faith the benefit of any program; I’m thinking that for the large majority of firms, innovation programs will not remain exempt from the calculus of waste for very much longer.