Even now, I am puzzled about whether to refer to innovation as a core business process or as what a friend of mine defines as an anarchic, fuzzy, and risk-oriented creative process. Regardless of whether one prefers the former or the latter perspective, we can all agree that understanding how to measure the effectiveness of innovation activities is a key factor. For how can we prove that innovation truly makes our company more competitive if we can’t measure it? How can we prove that it really contributes to an economy’s growth and productivity gains, beyond the broad consensus that seems to exist around it?

If we want to proceed in an orderly manner, a first step should concern defining what innovation is and what types of innovation exist. Once this is done, we would still have to decide which type of innovation we take as the guiding perspective to start building our performance measurement framework. And even then, we would still not have tackled the locus of innovation: do we factor in open innovation or not? What do we do with less quantifiable measures such as creativity?

All these considerations go far beyond the purpose of this brief article, which simply wants to provide an overview of the possible measures an organisation can implement to track innovation. Luckily for me, someone has already embarked on reviewing the literature on innovation-related metrics, filtering more than 3,000 papers to distil insights from 172 relevant ones.

Here is a summary of the metrics they have identified, divided by type of innovation.

Product innovation, defined as new or significantly improved good

• Direct: introduced ≥1 new or significantly improved product in the last 3 years; count of new product introductions meeting defined novelty thresholds.
• Output: number of new or improved products launched; product-related patents filed/granted (use only when clearly product-linked).
• Internal: share of turnover from innovative products (e.g., ≤3 years old); time-to-market/concept-to-launch cycle time.
• External: market adoption/market share/demand/new markets; required regulatory approvals attained.

Process innovation, defined as new or significantly improved production/delivery methods

• Direct: validated introduction of a new or significantly improved process in the last 3 years.
• Internal: cycle time, throughput, first-pass yield, scrap/rework/defect density; cost per unit; operator training completion.
• External: delivery reliability/lead-time variance perceived by customers; compliance and audit findings trending to zero.

Service innovation, defined as new or significantly improved services and service models

• Direct: introduced ≥1 new or significantly improved service in the last 3 years.
• Output: new service introductions pushed to production; service-level outcomes such as SLA attainment, resolution time, self-service completion rate, attach rate.
• Internal: service design cadence (research cycles, prototypes tested); staff certification in new service skills.
• External: retention and expansion in service contracts; NPS/relationship health for service cohorts; churn reasons resolved.

Technological innovation, defined as novel technologies or technological combinations

• Direct: recorded movement between technology readiness stages, where used as a direct indicator.
• Output: patents filed/granted; citations; formal standards contributions.
• Internal: R&D intensity and investment; research portfolio balance, documented know-how, component/code reuse; R&D headcount/skills.
• External: adoption by internal business units or external partners; achieved interoperability with ecosystem standards.

Management or organisational innovation, defined as new managerial practices and organisational forms

• Direct: formal adoption of a management method (e.g., OKRs, agile at scale) with governance changes enacted.
• Output: establishment/maintenance of management systems and audits as documented outcomes where applicable.
• Internal: decision-latency reduction; span-of-control/layer count adjustments; meeting load reduced without loss of coordination; leadership capability uplift and psychological safety scores; process ownership clarified and used.

Business model innovation, defined as new ways of creating/capturing value

• Direct: recorded deployment of component-level changes to the value creation/proposition/capture logic (e.g., new revenue model, customer segments, channels, partnerships).
• Output: revenue-mix shift to the new model; recurring revenue share; unit economics (e.g., CAC, payback, LTV/CAC).
• Internal: cost structure rewired (from CapEx to OpEx or vice versa); partner enablement and billing capabilities stood up.
• External: cohort-level survival and expansion; marketplace liquidity (if platform); pricing power and willingness-to-pay movement.

Supply chain innovation, encompassing innovations across sourcing, logistics, and fulfilment

• Direct: new supplier collaboration mechanisms (VMI, CPFR) or co-development agreements signed and active.
• Output: perfect order rate; delivery reliability as perceived by customers.
• Internal: end-to-end lead time, forecast accuracy, fill rate, lead-time variability; dual-sourcing coverage and joint tooling investment; digital traceability coverage across tiers.
• External: supplier/customer satisfaction on collaboration; resilience performance during disruptions (time-to-recover).

Green or eco-innovation, defined as innovations that reduce environmental impact

• Direct: deployment of cleaner processes/materials; eco-design guidelines embedded in gates.
• Output: emissions intensity (Scopes 1–3 where material); energy/water use per unit; waste and circularity (re-use, recycled content).
• Internal: procurement share of certified sustainable inputs; capital expenditure allocated to abatement; eco-competence training and certification coverage.
• External: green patents (when they clearly map to environmental outcomes); compliance beyond minimums; ecolabels/certifications earned; customer uptake of low-carbon offerings.

Open innovation, including purposive inflows/outflows of knowledge beyond the firm’s boundaries

• Direct: number and depth of external collaborations (e.g., with universities, start-ups, consortia) with stage-gated objectives.
• Output: co-authored publications and disclosures; inbound licences integrated; outbound IP/licensing revenue where strategic.
• Internal: absorptive capacity (time from external discovery to internal pilot); legal/process readiness (templates, IP rules of engagement); spend on collaborative development/in-licensing.
• External: ecosystem breadth (distinct partners across domains); partner satisfaction/renewal; venture participation outcomes.

Clearly, implementing a cohesive performance management framework (PMF) to measure innovation requires a more in-depth analysis of the organisation’s strategy, architecture, and culture. Furthermore, we should also take into consideration that such PMFs will not simply allow us to monitor the effectiveness of our decision-making but will also guide decision-making within the organisation itself.

Source: Stundziene, A. et al. (2024), “The Challenge of Measuring Innovation Types: A Systematic Literature Review,” Journal of Innovation & Knowledge 9: 100620, https://doi.org/10.1016/j.jik.2024.100620