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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