Innovation through Measurement

Innovation through MeasurementInnovation can be a daunting thing. Depending on whom you talk to, innovation can be credited for everything from revolutionary marketing campaigns to unique organizational structures. It is cited as the lynchpin upon which massive organizations either climb to the highest ranks of success or crumble beneath the weight of their stodgy, decidedly un-innovative cultures.

Surely some of this is deserved; bold, innovative concepts and business strategies have helped the likes of IKEA, Apple, and Walmart (to name just three) become titans of the business world. However, this grand view of innovation can be blinding. The reality is that innovation is not always propagated in large sweeping visions, but in the innovative execution of those visions. Data is essential to this execution, and an innovative use of business metrics and data can be your simplest and most effective tool for innovation.

The following five principles can help any organization drive innovation through measurement:

1. Focus your objectives. Start with high-level goals. Don’t say, “we want to lower the number of customer service complaints”. Instead say, “we want to provide the best customer experience in our industry”.

2.  Break it down: Ask yourself what makes the customer experience. What do you have control over, and what can you measure? Break each element down into a SINGLE METRIC; avoid weighted averages, “scores”, or “stop-lights” (green, yellow, red) at all costs. This can be tougher than it seems. For example: how do you measure satisfaction with a retail experience? You have to think hard about why people are coming to your store, how your store is designed, and ultimately what constitutes a good experience. What does time spent in the store say about the shopping experience? How about number of repeat visits? Chances are you can boil everything down to a few key metrics that represent the 4 or 5 characteristics of an ideal customer experience. Remember, one metric per characteristic. This gives you concrete levers to pull.

3.  Ask tough questions about your data: Chances are your data, like most organizations, is deeply flawed. If you’ve hired the right kind of analysts, they should be able to tell you every caveat to the data you’re looking at. Understanding that you are looking at a limited sample set, or that your categorizations don’t accurately capture the all the details you seek to measure is extremely important. If you’re not careful you may think you are optimizing your product mix according to past customer preferences, when the reality is you are measuring one group of products (Group A) that really contains three groups of products (Groups B, C, D) of which only Group C is popular. You only need 3 months of robust data (depending on the maturity of your business) to start drawing conclusions, quickly retool your systems to capture the right metrics. Remember, innovation is also about quick and efficient execution.

4.  Test, test, and re-test: As you rearrange your stores for optimal shopping time and product mix, pick up on what people are saying via social media or word of mouth. Does it jive with your original assumptions? You may have thought that 10 minutes in the store was optimal; a good amount of time for people to soak in your hip, aspirational displays, while not getting stuck for 30 minutes every time they want to make a purchase. But, maybe 10 minutes is still too long, or maybe the decreased time in store reflects people being frustrated with the layout and giving up. Math and data cannot solve these problems. You have to keep your ear to the ground and re-tweak.

Note: Saying “we want to get our customers in the store for the maximum amount of time” is an example of confusing inputs with outputs. You want your customers to have positive associations and therefore come back and spend more money, not simply graze around your store.

5. Solidify gains. Say your approach has worked. Sales are up and a new brand study shows that your retail experience is improving your cool factor and trustworthiness among customers. Ingrain the practices that have caused this in your culture. Make sure that everyone in your organization is operating on your new, leaner metrics. Most importantly make sure that everyone understands the process by which they were derived and the strengths of that process. Breaking down a high level concept into its constituent components and then measuring each component in a straightforward manner allows you to have clear visibility into the levers necessary to drive your objectives. The alternative is cloudy metrics that mix multiple causes with a singular effect (the more time in the store = more money metric is a good example of this).

The most crucial thing about innovation through measurement is that it can be applied to any business, in any industry, of any size.

You do not need large capital investments (unless you do not have an existing data infrastructure), and you do not need to embark or massive initiatives. Innovation through measurement is about viewing your business – whatever it may be – in a new and innovative way. The focus it brings allows your to drive forward growth and strategic objectives with a new clarity, and allows you utilize innovation without betting the farm on a new product or strategy.

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Innovation through MeasurementBen Forgan is an entrepreneur based in Chicago who most recently helped to launch and manage Groupon’s product channel, Groupon Goods. Prior to Groupon, he worked in finance and management consulting with banks and government agencies to develop innovative, data-driven solutions to abstract problems.  A lover all of things data, his experience includes managing through hyper-growth, innovation in sales operations and business intelligence, and novel algorithm design.

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5 Responses to Innovation through Measurement

  1. Guy Nirpaz says:

    I agree that “you can’t manage what you can’t measure”. If there were only one thing to measure it would be user engagement. Why? It’s the strongest buy (or churn) signal you can find and acting on customer intelligence (preferably in real time) has a very direct impact on revenues. Besides customers expect it.

    I wrote a post on behavioral triggers here:

    Guy Nirpaz
    CEO and Founder of Totango

  2. Frank Norton says:

    From the WallStreet Journal:
    Is it time to ban the word “innovation”?
    The word “innovation” is a fluffy, substance-free cliché that’s abused by many companies to mask a lack of real growth, some experts say. Company securities filings mentioned “innovation” 33,528 times last year, up almost two-thirds from five years before, without evidence of a corresponding increase in creativity. “It is a chameleon-like word to hide the lack of substance.        
    Innovation means inventing a product that has never existed.

  3. Pingback: Innovation through Measurement | October 15, 2012

  4. Peter says:

    My assuption is, that the statement “chances are, that you can boild down everything to a few metrics” is context-dependent. IMO, from complex system theory point of view, this might often not be the case. In complex systems relevant effects have significant probability to be “caused” by small changes. The sheer number of potentially relevant changes is likely to be so high, that it is unlikely that your measurement is sufficient(limited # of metrics; below measurement resolution, indistinguishable from noise etc) to predict system behavior within the desired certainty.

  5. Pingback: Innovation Excellence | Innovation through Meas...

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