The first metric to measure innovation is return on innovation investment (ROI2), an output-related metric. This metric evaluates the effectiveness of the investments a company puts into new products or services. You calculate ROI2 by comparing the profits from the sales of new goods and services to the expenses generated by the research and development and other expenditures incurred creating the new services or products. ROI2 is a powerful tool because not only does it measure how well a company is performing in transitioning investments in new products into profits, but also how efficient their research and development spending is (Anthony, S., et al., 2008). Another output-related metric I will review is the percentage of profits from new customers. The reason companies create new innovative products and services is to attract new customers and to retain current ones. New growth innovations should, in turn, create legitimate new growth. By measuring the profits generated by the new customers, a company can quantify the expenditures …show more content…
To encourage innovation, you must commit real resources. A new company starting out may not have a significant enough budget to allocate a huge amount to innovation, but sometimes a restrictive budget helps teams develop more lean and flexible solutions and find cheaper ways to test them (Kaplan, S., 2012). Another type of input-related metric used to measure innovation is the number of key personnel dedicated to the project. This measurement helps ensure time is allocated to be spent on innovation projects. It is crucial that the company identifies skills and the quantity of critical staff required to complete the project successfully. Monitoring this metric provides valuable information about the management of senior management's time spent on innovation versus time devoted to day-to-day operations (Anthony, S.,