by Jack J. Phillips, PhD, and Patti Phillips, PhD, are coauthors of “The Business Case for Learning: Using Design Thinking to Deliver Business Results and Increase the Investment in Talent Development”
In recent years there’s been lots of passionate discussion around the topic of innovation. Leaders are obsessed with it. Politicians cheer it. Consumers demand it. Investors reward it. And the media won’t stop talking about it. But here’s the thing: No matter how aware we are that innovation is vital for any company seeking wealth creation and business growth, companies can’t blindly charge ahead with project after project. In fact, the very existence of all the hype has brought critics out of the woodwork.
This backlash makes sense. Where there’s a lot of innovation, there’s also a lot of failure. When there’s a lot of failure, there are also a lot of “I-told-you-sos.” (Deservedly, in many cases.) And all of this leads to a chorus of CEOs and CFOs saying, “Show us some results!” — especially in uncertain times when companies can’t afford to waste money on ineffective programs.
These demands for ROI leave innovation leaders in a tricky spot — you’ve got ideas and plans, but you still need proof they’re going to get real, measurable results. You can’t just assume your project will pay off. And once you’ve chosen a path forward, you need to know if your efforts are getting results, and, if so, to what extent.
To successfully innovate — and, frankly, to safeguard your own future as an innovation leader — you’ve got to keep ROI at the center of your projects. Yet most existing systems of measuring ROI fall short of providing the proper system for accountability, process improvement, and results generation.
Here are eight reasons to make demonstrating ROI a priority:
1. Your innovations may be out of alignment with business needs.
The ROI Methodology ensures this alignment in three steps. First, even before the innovation project is initiated, the methodology achieves alignment upfront at the time the project is validated as the appropriate solution. Second, by requiring specific, clearly defined objectives at the impact level, the project focuses on the ultimate outcomes, in essence driving the business measure by its design, delivery, and implementation. Third, in the follow-up data, when the business measures may have changed or improved, a method is used to isolate the effects of the project on that data, consequently proving the connection to that business measure.
2. The value of your innovation projects may not be clear to decision makers.
The goal of most innovation projects is to deliver value. However, the definition of “value” isn’t always clear — or doesn’t match the desires of your project’s sponsors, organizers, and stakeholders. The ROI Methodology can forecast the value in advance; and if the value has been delivered, it verifies the value proposition agreed to by the appropriate parties.
3. Your processes need continual improvement (and always will).
The ROI Methodology collects data to evaluate how things are, or are not, working. When things are not where they should be — when projects are not proceeding as effectively as expected — data is available to indicate what must be changed to make the project more effective. Or, when things are running smoothly, data is available to show what else could be done to make them even better.
Throughout the project, results are collected and feedback is provided to the various stakeholders for specific actions and improvement, which drives the project to better results. Then, those results are measured while the process continues. In essence, this methodology process uses design thinking principles to design for the results needed.
4. Innovation programs and projects may lack middle-manager support.
Many projects enjoy the support of top-level managers who allocated the resources to make projects viable. Unfortunately, mid-level managers may not support certain projects because they can’t see the value the projects deliver. Having a methodology that shows how a project or program is connected to the manager’s business goals and objectives can change this. When middle managers understand that a project is helping them meet specific performance indicators or departmental goals, they will usually support the process, or will at least resist it less.
This is more important when many individuals are involved in innova¬tion activities. As innovation becomes a part of everyone’s job, the support level needs to move from ‘we are involved in innovation activi¬ties when we have time’ to ‘innovation is our top priority.’
5. Chances are, your function or profession could use an image makeover.
Many functions — and even entire professions — are criticized for being unable to deliver what is expected, and their public image suffers. The ROI Methodology helps build the respect a function or profession needs.
The ROI Methodology can make a difference in any profession, and not just those under fire. It proves over and over again that your projects have a connection to the bottom line, and shows the value delivered to stakeholders. In the process, it removes any question about the value of your department or function and its supposed lack of contribution to the organization.
6. Demonstrating ROI gets your budget off the chopping block.
When a particular function is budgeted, the amount budgeted is often in direct proportion to the value that the function adds. If little or no credible data supports the contribution, the budgets are often trimmed — or at least not enhanced. Organizations can use ROI (and the ROI Methodology) to support proposed budgets. Because the methodology shows the monetary value expected or achieved with specific projects, the data can often be leveraged into budget requests.
Bringing accountability to this level is one of the best ways to secure future funding. CEOs and CFOs need proof, and the proof is in the ROI.
7. It helps you build partnerships with (sometimes reluctant) key executives.
Almost every function attempts to partner with operating executives and key managers in the organization. Unfortunately, some managers may not want to be partners. They may not want to waste time and effort on a relationship that does not help them succeed. They want to partner only with groups and individuals who can add value and help them in meaningful ways. Showing the project results will enhance the likelihood of building these partnerships, with the results providing the initial impetus for making the partnerships work.
8. It earns you that coveted “seat at the table.”
The person leading innovation in an organization should be participating in strategy and important tactical discussions at the top of the organization. The chief innovation officer should report to, and be an important advisor to, the top executive. Unfortunately, this is not the case in every company. Being able to show the actual contribution, and getting others to understand how the function adds value, can change that.
Most executives want to include those who are genuinely helping the business and will seek input that is valuable and constructive. The use of the ROI Methodology may be the single most important action that can be taken to earn the seat at the table.
When you start demonstrating ROI, it opens up a new world for your organization.
Because it helps you silence the criticisms that so often squelch innovation projects, more and more projects go through. And because more of those projects are successful, people begin to embrace an innovation mindset. Ultimately, a culture of innovation evolves easily and organically across your organization — and high performance and growth are likely to follow.
Jack is the chairman of ROI Institute, the leading provider of services for measurement, evaluation, metrics, and analytics. A world-renowned expert on measurement and evaluation, Phillips provides consulting services for more than half of the Fortune 100 companies and workshops for major conference providers worldwide. Jack is a former bank president and has authored or edited more than 100 books.
Patti is president & CEO of ROI Institute. Her clients include Fortune 500 companies, federal and state government agencies, and non-governmental organizations. She serves as faculty for the UN System Staff College in Turin, Italy, and the Escuela Bancaria y Comercial in Mexico City, Mexico. A former electric utility executive, Patti is author, coauthor, or editor of over 75 books and dozens of articles on the topic of measurement, evaluation, and ROI.