October 8, 2024

Measuring Innovation: The Industry’s Struggle and How the “Idea-to-Cash Wheel” Solves It

Measuring Innovation: The Industry’s Struggle and How the “Idea-to-Cash Wheel” Solves It

Innovation is the lifeblood of any business, but it’s also one of the most challenging aspects to measure effectively. While the business world has developed sophisticated tools to track financial performance, operational efficiency, engineering productivity, and marketing effectiveness, we have fallen short in measuring innovation. Many leaders rely on intuition or proxy metrics—such as R&D spend, the number of features released, or the number of patents filed—to gauge their innovation efforts. But these are, at best, indirect indicators, leaving us with little insight into the actual efficiency of our innovation processes.

This lack of effective measurement tools creates a significant challenge for organizations aiming to grow and adapt in competitive markets. If we can’t measure innovation, we can’t manage it effectively. This is where the “Idea to Cash Wheel” comes in—a key framework within the Pivoting Life Operating Model (PLOM) that fills this gap and allows businesses to take control of their innovation outcomes.

The “Idea to Cash Wheel” Framework
The Idea to Cash Wheel is one of the ten core frameworks of the Pivoting Life Operating Model ( PLOM), designed to manage and measure the entire innovation lifecycle—from the inception of an idea to its eventual monetization. It’s an iterative framework that helps companies continuously drive ideas through various stages of development, assessment, and market launch. This model is powerful because it isn’t just a theoretical representation; it comes with practical metrics that quantify the speed and effectiveness of innovation. Two key metrics associated with the Idea to Cash Wheel are Lifecycle Velocity and Conversion Ratio. Together, these metrics form the foundation for understanding and optimizing innovation processes.
Lifecycle Velocity: Measuring Speed to Value

Lifecycle Velocity is a metric that measures the speed at which an idea moves through the innovation lifecycle—from conception to cash generation. In other words, it’s about how quickly you can take an idea from an abstract concept to a value-generating product or service.

In a business landscape that evolves at lightning speed, time is of the essence. Companies need to be able to develop, test, and launch new products faster than their competitors. Lifecycle Velocity provides a clear and quantitative view of how efficiently your innovation process operates.

Measuring Lifecycle Velocity answers critical questions such as:

  • How long does it take to validate an idea?
  • What bottlenecks exist that slow down progress?
  • How can we accelerate our innovation processes?

With Lifecycle Velocity, organizations can pinpoint process delays and implement strategies to streamline operations, ultimately reducing the time it takes to bring innovative ideas to market.

Lifecycle Conversion Ratio: Measuring Effectiveness

While Lifecycle Velocity tells you how fast you’re moving, Lifecycle Conversion Ratio measures how effectively ideas are being transformed into cash-generating products. It is the ratio of ideas that successfully pass through each stage of the innovation lifecycle and eventually lead to a successful market offering.

A high Conversion Ratio indicates that your organization is not only coming up with great ideas but also executing them well—developing, testing, and refining concepts in a way that ultimately leads to successful commercialization. Conversely, a low Conversion Ratio could indicate that while your organization may be good at generating ideas, there are gaps in execution—perhaps a lack of alignment between teams, insufficient validation processes, or a misfit between the idea and market needs.

The Conversion Ratio helps answer questions such as:

  • How many of our ideas are viable?
  • Are we effectively identifying and discarding low-potential concepts early enough?
  • Where in the lifecycle are ideas getting stuck or abandoned?

By focusing on this metric, companies can better allocate resources to the most promising ideas, improving overall innovation efficiency.

How the Idea-to-Cash Wheel Solves the Innovation Measurement Problem

The framework and its associated metrics allow businesses to measure the speed and effectiveness of their innovation processes. This dual focus provides a holistic view that has been missing from traditional innovation management.

Data-Driven Decisions: These metrics enable data-driven decisions, replacing gut instinct with empirical evidence. Business leaders can better understand how their innovation process performs and what actions they need to take to improve.

Continuous Improvement: The Idea to Cash Wheel’s iterative nature, supported by these metrics, encourages continuous improvement. By tracking the time taken and the success rate of ideas at each stage, companies can learn from failures, refine their approach, and ultimately innovate more effectively.

A Shared Framework for Innovation: The structured approach of the Idea to Cash Wheel provides a common language and framework for innovation across departments, from product management to finance. This alignment is crucial for breaking down silos and ensuring that the entire organization works together to move ideas forward.

Making Innovation Manageable

Innovation should not be a mysterious, intangible part of business. With tools like the Idea to Cash Wheel, paired with actionable metrics like Lifecycle Velocity and Conversion Ratio, companies can bring clarity to their innovation processes. They can measure, manage, and ultimately optimize how ideas are turned into marketable products and services—paving the way for sustained growth and competitive advantage.

The path from idea to value is complex, but by using the right metrics and frameworks, it becomes not only manageable but also repeatable and scalable. As one of the ten frameworks within PLOM, the Idea to Cash Wheel offers a clear and effective way to measure and improve innovation, serving as the compass that organizations need to navigate the often-turbulent waters of bringing ideas to life. By embracing this approach, companies can ensure that the journey from idea to cash is as efficient and effective as possible.

For more information about PLOM’s ten frameworks, five disciplines, and fifty metrics, refer to Pivoting as a Way of Life.