Is Measurement Really to Blame for Innovation Failures?

Recently, I have seen some suggestions that measurement, and more specifically, the choice of measures used, is a prime driver of innovation failure in organizations. While I agree that innovation can be problematic in organizations, I have to wonder whether when it happens it’s actually a strategy problem (maybe) or a management problem (more likely) dressed up as a measurement problem.

I understand – a lot of people REALLY dislike measurement. Measurement can be very troublesome when it is used incorrectly – to judge, blame, and humiliate people who are working very hard to do the best they can with what they’ve got access to. This is the dark side of measurement. And when all you have experienced is the dark side of measurement then it’s no wonder that people avoid and lay blame on measurement when business problems arise. Measurement is often an easy and visible target in these cases.

However, I worry that this type of response is due to the fact that measurement is largely misunderstood. Here’s what I think.

The purpose of measurement is to: (1) provide useable information and feedback on how business processes are performing, including the results they are producing; (2) provide early warning signals about possible operational and strategic issues; (3) facilitate insights into the cause and effect relationships within the business and how the organization works in an integrated way to produce business results; (4) facilitate organizational dialogue about what’s going on and to set the stage for learning and improvement, when required; and (5) support informed decision-making.

Measurement should NEVER be used to blame people for results because measures are generally designed to provide information about the performance of business processes and systems – not people. When unexpected results and under-performance occur, you likely have a process or system (i.e. organizational, management, accountability, etc.) problem on your hands – not a people problem.

That being said, when barriers to innovation occur in an organization, my experience is that it’s either a problem with the business strategy or it’s a management issue.

 

When it comes to creating and managing your business strategy, it is important to remember that measures are simply the tools we use to represent the key strategic objectives in the business strategy. You see, if you haven’t clearly defined the key elements of your business strategy, then it’s impossible to ensure that it is properly captured by a good measure set. A good measure set includes one or two indicators for each strategic objective in your business strategy – measures that directly or indirectly relate to a strategic objective based on its definition.

Let’s look closer at a business strategy that includes innovation as a key strategic objective. The first question I would ask is: What do you mean by innovation? Is it hard core R & D? Or does it look more like the incremental but important improvements achieved through continuous quality improvement (CQI)? Do you mean something altogether different and, if so, what? It is very important to realize that, if you want innovation to make its way into your measure set, it has to be included in your business strategy AND it must be clearly articulated.

If innovation hasn’t been clearly included in your business strategy and/or described in detail, don’t blame measurement for a lack of innovation. What you really have is a strategy problem.

 

In reality, most companies know whether innovation is an important factor in the success of their business and business strategy. From there, many will include some measure(s) of innovation or CQI in their measure set. So, how does innovation still end up falling by the wayside in some organizations? The answer is management problems.

Failure to execute a business strategy, such as innovation, has three primary management-based causes: (1) lack of, or inappropriate, prioritization and balancing of business objectives; (2) poor organizational alignment; and (3) a failure to build the required accountability structure and culture. 

 

1. Prioritization and Balancing of Business Objectives

What is the relative importance, right now, of your innovation strategy in relation to the other strategic objectives in your business strategy? Is it one of the top 3 – 5 key objectives for the upcoming period or is it lower on the list? It is essential for business leaders to make these prioritization decisions because it is unrealistic to think that all strategic objectives in a business strategy can receive equal work effort at the same time – no company has the unlimited organizational capacity required to do this. Organizations that fail to define, and communicate, these relative strategic priorities make business decision-making difficult for managers and employees, setting the stage for the poor execution of all of their strategic objectives.

Another challenge is being aware of, and effectively balancing, opposing strategic objectives when they exist in a business strategy. Specifically for this discussion, objectives relating to innovation versus those related to risk management/avoidance would be examples of naturally opposing objectives. While the resulting push and pull can be handled through a business strategy prioritization approach, it is often better to soften one objective and strengthen the other through business strategy discussions. This way, the challenge that is faced by trying to implement powerful opposing strategies is worked out before it comes time for strategy execution.  

If innovation is not happening in your organization when it should be, it is important to determine whether the root cause relates to the prioritization of this objective. If innovation is a recognized business strategy for your organization but it has a lower priority at this point in time, you would expect to see evidence of some innovation activity but at lower levels of intensity. If, however, business priorities are unclear in your organization, it is important to determine whether innovation has fallen off the agenda as a result.

 

2. Poor Organizational Alignment

Is innovation, as defined in your business strategy, adequately supported by your organization? That is, does your organization have the organizational structure, business processes, and projects in place to support the execution of an innovation agenda, do employees have the skills and capabilities they need to execute the innovation objective, and are the plans, tools, technologies, and resources (including budget dollars) required to support an innovation strategy in place in your organization? Poor organizational alignment with an innovation strategic objective will prove to be a key barrier to innovation in any organization.

 

3. Failure to Build the Required Accountability Structure and Culture

Who in your organization has accountability for the completion of your innovation strategy? Who is taking ownership for ensuring that the innovation agenda moves forward appropriately? Who is the owner of your innovation processes? Who has accountability for providing the necessary data and performance commentary for your innovation measures? Do the people in your organization display a dedication to action and follow through and demonstrate a shared commitment to seeing that your innovation strategy achieves its desired results? These are all elements of the accountability structure and culture that is required to ensure that your innovation strategy is executed as planned. If your organization’s innovation agenda is falling behind, unclear or undefined accountabilities for action and a poorly developed culture of accountability could be possible root causes.

 

Innovation is an important business strategy for many organizations, however, it is frequently not fully realized. Sometimes, poor measure selection and utilization is identified as the reason for this outcome, however, this is almost always a red herring. It is far more likely that a failure to execute an organization’s innovation agenda is either a strategy problem or a management problem. When barriers to innovation exist in a business, it is critical to complete a root cause analysis and then implement the necessary changes to get the innovation strategy back on the desired course.

Is innovation an important but problematic objective for your organization? Take the time to clearly identify and then eliminate the REAL barriers to success.

 

Comments

[Sandy Richardson]

Hi Jelena: I will start off by saying that I tend towards the "form follows function" approach (i.e. strategy first). That being said, when I start off working with a client, we begin by defining the structure of their strategy map/BSC hierarchy based on the way they see their business flowing. That is, unless they are a private sector organization,how do they want to place their strategy map/BSC perspectives in relation to each other? So in some ways, the "structure" of their business does inform the structure of their strategy map and BSC.

To me, organizational alignment has less to do with the BSC and everything to do with the strategy map. This is because I see the strategy map as the business strategy that informs the BSC indicators. Once a company's customer value proposition and strategy/strategy map have been defined and the supporting business processes and projects have been identified, then I think that a company is in a better position to ask the question - "How do we need to be structured to best deliver our value proposition and execute this strategy?" Aligning the organizational structure at this point is just as important as aligning resources, tools, and budget dollars.

So I guess that I am saying that the strategy/strategy map should drive the organizational structure. If the strategy map is created in the correct way (i.e. it is the value chain for as long as the CVP and mission stand) then the aligned structure should hold up for as long as they remain consistent. However, things have to stay fluid and dynamic as we learn about how our strategy works and as things change. This means that organizations must stay open to modifying their structure if required.

I hope that this helps - just let me know if you have more questions on this or another topic! Regards, Sandy

[Jelena]

I would like to know significance of Balanced Scorecard in designing organization which supports strategy? Is it like Chandler said "Structure follows strategy" and how we can design organization according to BSC?

[Sandy Richardson]

Hi Jelena: thanks for your question though it is a big one! Can you be a little more specific about what you are looking for/hoping to learn?

For example, do you want to know about the type of resources that should be put in place to implement and support a balanced scorecard? Or do you want to know about the accountability structures that you should implement to ensure that your strategy gets properly executed and managed using BSC results? Other? If there is a particular issue you are facing, it might be easier to give you some practical ideas to address your specific problem.

I'll look forward to hearing back from you and will provide you with a focused answer to your question then.

Regards, Sandy

[Jelena]

I would like to know how organizational structure can help in implementing Balanced Scorecard?