Innovation isn’t just an idea pipeline. It’s a performance engine. You can have moonshot vision, a brilliant matrix, and A-list talent—but if you’re not measuring, governing, and tracking progress, you're basically hoping for magic.
Innovation, by definition, is the structured creation and execution of new ideas that deliver value. But real Innovation requires more than spark. It needs systems. Controls. Feedback loops. Execution muscle.
There are plenty of forms:
- Product Innovation – new or improved features and offerings
- Process Innovation – time-saving, cost-cutting, or system upgrades
- Technology Innovation – using Digital to redefine operations
- Business Model Innovation – rethinking revenue, Pricing, or delivery
- Cultural Innovation – changing how people behave and decide.
But none of that sticks unless Innovation is measurable, fundable, and trackable.
Innovation Portfolio Management (IPM)
Think about IPM like a Supply Chain for ideas. You manage inputs, optimize flow, triage weak links, and scale the good stuff. It’s not about micromanagement. It’s about visibility and strategic allocation.
IPM forces a discipline that most organizations avoid: saying no. It defines funding rules. It sharpens prioritization. It stops you from flooding the roadmap with half-baked experiments or zombie projects that refuse to die.
IPM isn’t a dashboard. It’s a governance mindset. And it only works when metrics are built into the process.
The Innovation-Ambition Matrix
The Innovation-Ambition Matrix helps plot every Innovation initiative based on two axes:
- Market Focus – Are we playing in current, adjacent, or new markets?
- Product/Asset Development – Are we using what we’ve got or building something new?
The result is a three-part Innovation Strategy:
- Core Innovations
- Adjacent Innovations
- Transformational Innovations
Source: https://flevy.com/browse/flevypro/innovation-ambition-matrix-9434
Each quadrant has a different risk-reward equation. But here’s the kicker: they also need different governance. Different metrics. Different funding cycles.
And that’s where most organizations flinch.
Metrics That Matter (and the Ones That Don’t)
Innovation without metrics is just expensive intuition. But not all metrics are useful.
Here’s how to think about it:
- Input Metrics – How much are we investing? (R&D spend, team allocation, time commitment)
- Process Metrics – How fast are we moving? (Prototypes created, cycles completed, decisions made)
- Output Metrics – What did we launch? (Revenue, adoption rates, usage growth)
- Learning Metrics – What did we learn? (Experimentation, failure analysis, iteration velocity)
- Portfolio Metrics – Are we balanced? (Percentage of spend across Core, Adjacent, and Transformational)
The smartest organizations track learning as a performance outcome. They treat failed experiments as data. Because when you learn faster than the market, you win.
Let’s discuss the first 2 types of Innovation in detail, for now.
Core Innovations
Core initiatives are easiest to measure and easiest to kill. They improve what already works. They’re predictable, trackable, and fast to ship.
Metrics here should focus on:
- Cost savings
- Margin improvement
- Customer satisfaction
- Feature adoption rates
Example: McDonald’s rolling out digital menu boards to speed up ordering and personalize promotions. Low risk, measurable ROI.
Adjacent Innovations
These push you just outside your comfort zone—new users, new use cases, new regions. Key metrics here are:
- New customer acquisition
- Market penetration
- Cannibalization vs. expansion
- Time to first revenue
Example: Spotify launching audiobooks to supplement music and podcasts. Familiar platform, new format, new monetization.
Case Study
3M is often held up as the poster child for Innovation discipline. Yes, they give employees space to invent—but they also monitor the entire pipeline with laser focus.
Each project must:
- Pass multiple validation gates
- Show potential market need
- Align with platform strengths
- Deliver clear commercial or IP outcomes
That’s how Post-it Notes and medical adhesives both came out of the same machine. Innovation isn’t random. It’s managed.
3M tracks:
- % of revenue from products <5 years old
- Failure-to-launch rates
- Pipeline throughput
- ROI by Innovation type
Their matrix is real—and it’s audited.
FAQs
How do we track early-stage Transformational projects?
Don’t use revenue or ROI. Track learning velocity, pilot feedback, and validated assumptions. You’re buying insight, not income.
What’s the most abused Innovation metric?
"Number of ideas generated." Useless. Ideas are cheap. Execution is expensive.
How do we align metrics with each Innovation type?
Use a tiered system. Core = financial KPIs. Adjacent = customer + traction metrics. Transformational = learning + strategic alignment.
How often should we review the Innovation portfolio?
Quarterly at minimum. Monthly for fast-paced orgs. Portfolio reviews should inform budget reallocations, not just status updates.
Who owns Innovation governance?
Depends. Strategy teams define it. Finance funds it. Ops scales it. But ultimately, the CEO sets the tone. If the top’s not in, the matrix is dead on arrival.
Closing Thoughts
Innovation isn’t a vision problem. It’s a follow-through problem. The organizations that win don’t just have big ideas—they have systems that hold those ideas accountable.
The Innovation-Ambition Matrix isn’t about creativity. It’s about clarity. And the only way to achieve that clarity is through rigorous, flexible, dynamic governance.
You don’t manage Innovation by gut. You manage it by signal. Metrics. Dashboards. Decision points. Feedback loops.
That’s not bureaucracy. That’s how Innovation scales.
Interested in learning more about the categories of Innovation in detail? You can download an editable PowerPoint presentation on Innovation-Ambition Matrix here on the Flevy documents marketplace.
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