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Innovation Matters: How to Measure Innovation Capabilities

Simon Spier

Launching a groundbreaking new joint research project between L Marks and the University of Cambridge to establish a large-scale measurement index of corporations’ capability to innovate

Innovation Matters is an invitation-only series of events, bringing together innovation leaders to exchange ideas and address shared opportunities.

In this session, Jeremy Hutchison-Krupat, Associate Professor in Innovation from the University of Cambridge discussed the approach to this groundbreaking research. The joint project together with L Marks aims to establish a large-scale measurement index of corporations’ capability to innovate. This will allow firms to establish benchmarks to assess their own progress, but also gain insight into how they compare to others.

Be a part of this research

The following summary captures the deeper discussion on what capabilities are fundamental to innovation and how you’ll be able to use the benchmark findings from the research in your organisation.

How will you be able to use this research?

In the session, we discussed how the research should be created in a way that makes it useful and practical to innovation leaders, such as being able to:

  • Compare your business to others
    Looking at companies that are of a similar size or have similar objectives and understand where your business stands in terms of specific capabilities.
  • View capability trends over time
    For example, are we seeing businesses similar to us stagnate? At what pace are other businesses developing their capabilities and in what areas?
  • Diagnose where you need to improve
    We discussed how all businesses go through ideation, selection, and execution to innovate. But some organisations might be good at coming up with novel technologies. They might also do a really good job of selecting the right initiatives to take forward. But when it’s time to execute, they just can’t do it. Other organisations are good at execution and ideation, but the processes used for selection are poor or the culture doesn’t allow them to select the most promising ideas. The research will help you reflect on what your capabilities are, and understand where you are weakest.
  • Resource & budget planning
    While the research won’t be able to inform these areas in any detail, it would be able to indicate whether you have the necessary capabilities in place to effectively use an increase in innovation budget, for example.

How do we define innovation capabilities?

These are two words that prompt many different interpretations. So to kick off the discussion we established a working definition.

To be classed as an innovation;

  • It has to be something new. How new or novel will be characterised by the type of innovation, as well as being organisation-specific.
  • It has to be implemented. This requirement differentiates it from being ‘just an idea.’ The time it takes to be implemented doesn’t matter, however. It might be implemented over a few months, years or decades, depending on the type of innovation.
  • It has to be useful to a set of people. Most commonly its value is economical but it could be valuable in other ways e.g the well-being of citizens.

It’s important to note that this definition isn’t limited to products or technology. An innovation could be a new process, business model or organisational practice. The type of innovation is what will impact the process and subsequent capabilities needed. For example, the capabilities needed to create a world-first, breakthrough technology vs. creating a product-line extension, will differ greatly. Whatever the type of innovation, however, the process will always include some form of ideation, selection and execution.

In the session we also discussed the boundaries we’d need to set in the research, to avoid scope creep;

  • We’re not looking at an organisation’s ability to monitor the external environment.
  • We’re not looking at the ability to set strategy.

Instead, we will focus on the pursuit of different innovations and how these are translated and put into action.

The ideation, selection, execution process forms the “engine room of innovation” that is driven by the innovation strategy, which in turn is influenced by the overall business strategy and external environment.

A framework for innovation capabilities

The conversation then turned to what type of capabilities were needed to innovate. As the model below shows, we’d identified several underlying components that interact and evolve to create an organisation’s “innovation capability”. These components fall into five broad categories;

Do people across the business understand the purpose and objectives for innovation? Given the objectives, who is involved in the pursuit of innovation internally?

How are skills acquired and utilised? How do people collaborate on innovation?

What is the structure of the organisation? How fluid is it? How does information flow, laterally, vertically and so forth throughout the organisation?

What type of processes exist?

What sort of incentives are used? How are innovations measured and deemed a success?

What impacts all five of these components is culture. But measuring culture is very difficult. The participants discussed how we could try to assess culture by seeing:

  • How clear are the business values?
  • How consistently are the business values understood across the business?

We could also look at the five components to see how well each of those is understood by different people across the business. But these are proxies for culture.

The missing feedback loop

The models above may seem to imply that innovation happens in a purely top-down manner based on existing business strategy. Yet we know innovation is not purely a top-down activity, and that emergent strategy, bottom-up happens too and is equally important. This feedback loop was not included in the models above as the innovation capability index will not incorporate an organisation’s capability to adapt their strategy rather it is intended to help inform this adaptation.

Any business strategy should adapt, as leaders learn through innovation and understand their capabilities better. For example, you can have a lofty business strategy, but if you don’t have the capabilities to execute, it will never come to fruition. For L Marks this is one of the main objectives for creating an innovation capability index: it can form part of the feedback loop to not only improve innovation but help develop better overall business strategy.

Alchemy vs. process

One of the innovation leaders who joined the session asked a great question; the core capabilities all appear very tangible but what about the role of speed or alchemy, or luck in innovation?

While some businesses might chalk their success up to timing, you could argue that many other organisations may have been even better placed to succeed, had they been ready with the necessary capabilities themselves.

As Jeremy put it; what’s more impactful on innovation success is how willing an organisation is to work on something that might not be a success. For example, culture impacts innovation by framing how something that isn’t successful is viewed and thus impacts their capability to innovate in the future. One company may view a failure and think, “oh, we didn’t make the timing” and cut their losses. Other organisations might say, “what have we learned from this?” and work to shift those learnings towards another goal or iteration.

How will we measure the core components of innovation?

For L Marks, it’s an important goal to get a large data set that enables us to see trends in what is working for different businesses. It’s also an important question posed by those in attendance. After all, businesses need to be comfortable sharing data for us to conduct the research. Therefore, we’re approaching this, not by asking about specific innovation projects but at an organisation level, reviewing the five components to understand elements such as:

  • What are the objectives of the organisation?
  • What types of innovation do they seek to pursue?
  • What type of people are they hiring? What skill sets have they acquired?

The Research Plan

In Summer 2021, L Marks and The University of Cambridge will begin engaging with organisations from across the Innovation Matters network to form a small pilot. The pilot will allow us to test the instrument, validate it, and understand what needs to be adapted in our methodology. We’ll gather feedback from participants and then iterate and distribute the first survey in the autumn. If you’d like to be involved in the research, please complete this form:


Innovation Matters is a new invitation-only series from L Marks, bringing together business leaders and corporate innovators to discuss key issues on business trends and shared innovation opportunities. To learn more about Innovation Matters, please visit Innovation Matters.