A better way to manage and measure innovation
Traditional accounting is still largely used to measure and manage innovation but this is probably also one of its biggest disablers. Innovation Accounting (IA) is designed to measure progress before ROI and similar methods have meaning. It also provides a management method for continuous innovation all the way to the retirement of a product. It fundamentally ties money and learning together.
Staying on top of an innovation process is becoming increasingly difficult. Constant disruption with a lack of data to predict the future have made traditional methods to manage and track innovation obsolete – IA provides that framework for monitoring and managing innovation.
For management accounting purposes, all financial activities (transactions) are recorded in a general ledger. Traditional Accounting is able to display activities in a number of different ways:
- Profit & Loss report. The PL displays business performance over a period.
- Balance Sheet report. The B.S. displays financial information at a point in time.
- Cash Flow report. The C.F. displays actual cash movements of money in and out of the business.
In the same fashion, Innovation Accounting is reporting on the past, present and future of an innovation portfolio and assist in investment decisions. The Innovation Ledger records in essence knowledge and remaining innovation debt assumptions and allows to constantly update financial predictions. Each new learning has the power to change the range of financial predictions. We can further priorities and budget for Learning Goals in an agile way and analyse team performance more sensible.
If you are interested in learning how to measure your innovation portfolio differently from traditional methods, please get in touch.