A Short History of Why are We Doing This and Where We are Going

Innovation is not just a theoretical construct… It is a real organizational prerogative -- and the marketplace needs a more credible, comprehensive and pervasive tool to measure it.

A pivotal challenge for business leaders today is to meet short term shareholder expectations while simultaneously investing in the longer term. Leaders need a compelling case to invest in innovation… What if the link between innovation investments and shareholder value was made more tangible? What if the capital markets had a credible “index of corporate innovation” to compare firms?

In the knowledge economy, “intangibles” represent an increasing portion of an organization’s valuation. Executives, accountants and financial analysts acknowledge that innovation represents a significant portion of these intangible assets. Furthermore, Canadian leaders acknowledge that “innovation” is one of their most important non-financial strategic priorities,… yet few organizations have formal means to measure it [1]. Academics have been trying to measure intellectual capital for decades, with only limited success.

ICI takes a practical, applied approach to measuring innovation capacity and performance. Starting with the cornucopia of theoretical measurement systems from around the globe, the Conference Board has developed an innovation evaluation framework, a comprehensive set of measures, and an implementation process relevant to a variety of private sector organizations.

An engaged group of business leaders and experts has directed the tool’s development, helping to build the framework, critique and select the measures, and test the Index within their own organizations. This process has not only assured an applied, practical tool, it has also benefited the participating organizations directly, in terms of their own awareness, practices and performance.

The Framework necessarily allows for organizations of all sizes (small, medium and large) and various sectors (e.g. manufacturing, resources, services, high-technology). A base of simple core indicators is applicable to all organizations. Individual organizations or sectors can apply optional indicators.

Over time, and with appropriate analysis, we will be able to better quantify cause-and-effect relationships between the capacity to innovate and improved corporate performance. (e.g. On balance, what is the return on investments in innovation?)

The Index is a tool to help managers and business leaders to “walk through” their organization to assess its capabilities, strengths and areas for improvement. The Index recognizes those groups who excel in innovation -- both in their capacity to innovate (e.g. R&D investments, skilled workers, knowledge management systems) and their actual success (e.g. shareholder value; the commercialization of new products and services). Ultimately, the Index will help to increase organizational effectiveness, productivity and value for customers, partners or shareholders.

A longer-term vision of the Conference Board is to gain acceptance of the Index in the marketplace, particularly the capital markets. Our underlying premise is that, with credible information, the marketplace is in the ideal place to value organizations’ innovation performance. Over time, this will lead to more innovative and competitive Canadian organizations in general. And thus, the innovation performance of Canada as a whole will improve.

[1] CICA / CBoC survey, 1997.