For Measuring Innovation in an organizational environment, one of the main indicators used to measure overall innovation effort (input) is spending on research and development.
Patent statistics are often used as an indicator of the output of the innovation process. However, this is not an ideal measurement as (depending on the industry) patents are not always used to protect innovations – for example, service sector industries are less likely to protect their inventions using patents than high tech industries and patent coverage varies across countries.
Surveys are another way often used to measure inputs and outputs to the innovation process. They can be used to determine spending on innovation activities, cost reductions realized as a result of introducing an innovation to the market and proportions of sales of new products against total turnover.
A non-profit organization that promotes innovation in the United Kingdom – the National Endowment for Science, Technology and the Arts (NESTA) is aiming to create an innovation index that will be industry-specific and provide a more accurate view of the level of innovation. This will be of particular relevance to sectors where Research & Design spend is low or non-existent such as many service-based industries.
NESTA is aware of the changing nature of innovation and in particular what they describe as the “hidden innovations” that are not effectively captured by traditional measurement techniques. Hidden innovations would include many service-based innovations, business, and management innovations, technical standards innovations, creative industries and many innovations from the public sector and also new trends in open and user-led innovation.
Similar efforts to create innovation indexes are underway in other countries.
The index plans to move away from a “linear model” of measuring innovation to one that incorporates such metrics as research and development expenditure, patent production and numbers of science and technology graduates to a more universally applicable measurement.
The index also aims to take into consideration incremental innovations which were traditionally ignored by the linear model of measurement.
The index is aiming to be industry-specific as research has shown that innovation activities differ between industries and that few measures effectively capture innovation in all industries.
The metrics will take into consideration innovation diffusion. An innovation may on paper appear to be fantastic but it provides little benefit if few people adopt it.