Corporate innovation teams are money losers. This isn’t because teams lack talent, drive or funding. Nor is it because corporate culture isn’t conducive to innovation. It’s because innovation teams are not focusing the majority of their time to bring to market the most valuable opportunities as quickly as possible.
Innovation’s most important metrics are the NPV and strategic value of their backlog (adjusted for risk). Using these metrics as KPIs for innovation, would create a focus on launching the most valuable and important products. This might sound obvious, but it isn’t straightforward because it requires leadership to take responsibility for giving exceptinal preference to select projects.
To maximize the value, both financial and strategic, from innovation, leadership needs to make innovation investment decisions the same way managers of socially responsible mutual funds make stock portfolio decisions. These fund managers and innovation leaders need to select a portfolio (of stocks or projects) that are most likely to deliver the highest return of dollars AND strategic value. Fund managers do this by objectively identifying which combination of stocks to purchase with analytical simulations and innovation teams can as well.
An analytical simulation of the innovation backlog will enable prioritization and focus, making the team faster and clearer. Reducing time to market captures revenue from the most valuable opportunities sooner, helping make corporate innovation a profitable driver of growth.