To Measure Is To Know!

Happy New Year! After all the champagne and the Top 2000 it’s time for good resolutions, also for your organization! We come together and determine what our goals are for 2022. This blog provides you with a new way to measure the progress of your innovation goals so 2022 will be an even more successful year!

Measuring business results

Let’s start at the beginning. It is important for your organization to set clear and shared goals. Clear goals so everyone knows what the organization strives for and what is expected of them. Shared goals because they motivate people to contribute to achieving these goals, together.

After these goals are set, it’s time for the next step. That is, you want to gain insight into the progress of those goals and assess whether you are on the right track. So, you will need to measure your activities and its related results. The information you gather with this will help you improve your business results. Key Performance Indicators (KPI) is answer to this and allows you to measure and monitor your business results.

Leading- and lagging KPIs

An often-unknown way to measure business results is using leading KPIs and lagging KPIs. Leading KPIs measure outcomes of processes in the now, which could influence processes in the future and their outcomes. You could say that leading KPIs predict the future. On the contrary, lagging KPIs measure outcomes of processes that have taken place in the past, these are therefore no longer adjustable.

The following example helps to clarify the difference between the two types of KPIs:

Imagine… It’s the middle of August, 30 degrees, you’re walking through the park and feel like having an ice cream. Fortunately, the ice cream man with Italian ice creams is a little further away. This ice cream man does not go to the park unprepared; he first checks the outside temperature that day. The result of this helps him to estimate how many ice creams he will sell that day. Thus, he knows how many ice creams to bring to the park. Measuring the outside temperature is an example of a leading KPI, you are measuring something in the now which can influence something that will happen later. The ice cream man is at the park all afternoon and evening and decides to close his stall at 9:00 pm. At home, he counts how many ice creams he sold that day. These sold ice creams are an example of a lagging KPI; you are measuring the outcome of something that happened in the past and that you can no longer influence.

Leading- and lagging KPIs for innovation

We examined more than 120 companies to see if using leading KPIs and lagging KPIs can help improve innovation within your organization. We then further investigated whether the use of leading KPIs and lagging KPIs for innovation can lead to an improvement of business results. We validated that it is beneficial to use both leading KPIs and lagging KPIs for innovation processes for value creation. Here is why:

Firstly, to ensure that you can improve and sharpen the innovation during the innovation process, it is important to use leading KPIs. These KPIs give you new insights that you can implement during the innovation process. It helps you to iterate your innovations in time to minimize the risks and increase the chances of success.

Secondly, after you have used leading KPIs and used those insights to fine-tune the innovation process and/or innovation, it is important to use lagging KPIs. This is because the outcomes of the lagging KPIs will tell you how successful your innovation is/has been. Because of using leading KPIs, you may expect an of the lagging KPIs.

Finally, it is important to know that an organization’s innovation processes, and therefore its innovation performance, contribute to achieving good financial business results. In short, this means that more innovation leads to more value creation.

Becoming Future Proof

In short, using leading KPIs and lagging KPIs helps your organization to gain more insights into business processes such as innovation. These insights are the basis for optimizing processes and innovation quality and thus lead to more value creation, including more turnover. Leading KPIs and lagging KPIs are therefore indispensable for your organization!

Here are some examples of leading KPIs and lagging KPIs that you can implement today in your way of working:

Leading KPI’s: Net Promoter Score (NPS), Customer Satisfaction Score (CSAT), # Pre-Registrations, Click Through Rate % (CTR %).

Lagging KPI’s: Cost, Revenue, Profit, Number of Customers, Return on Investment (ROI).

Want to know more about integrating leading KPIs and lagging KPIs into your way of working? Feel free to schedule a (virtual) cup of coffee with us at Hello@StayFutureProof.com.

about the author

Carolijn Coolen

Thanks for reading, I hope you’ve gained some valuable insights from the article! I’m Carolijn Coolen, Strategy Designer at Stay Future Proof. Want to learn all about strategy, innovation and transformation? Reach out and let’s talk!

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