Innovation Accounting
The anti-Procrustean approach to key performance indicators

The Procrustean KPI system
Mass corporate standardization effect:
everything is (has to be) one-size-fits-all,
KPIs too.

The Procrustean KPI system

The Procrustean KPI system
Best way to kill innovation: measure
progress with financial KPIs

The Procrustean KPI system

The Procrustean KPI system
For relevant progress tracking, KPIs need to
be adapted.

The Procrustean KPI system

Classification of Innovation Accounting KPIs
based on the purpose they serve

Classification of Innovation Accounting KPIs
based on the purpose they serve
Reporting: measure the progress from ideation through to
product-market fit.

Classification of Innovation Accounting KPIs
based on the purpose they serve
Reporting: measure the progress from ideation through to
product-market fit.
Governance: helping company’s board with investment
decisions

Classification of Innovation Accounting KPIs
based on the purpose they serve
Reporting: measure the progress from ideation through to
product-market fit.
Global: examine the overall performance of the innovation
department
Governance: helping company’s board with investment
decisions

Innovation Accounting:
Reporting KPIs
Text

Innovation Accounting:
Reporting KPIs
Text
Cost per learning (cost per failure): businesses fail because
they ran out of $$$ before product market fit was found

Innovation Accounting:
Reporting KPIs
Text
Cost per learning (cost per failure): businesses fail because
they ran out of $$$ before product market fit was found
better fail 100 times with $1,000/failure than,1 time with $100,000/failure
fail fast, fail cheap, fail often...but do learn

Innovation Accounting:
Reporting KPIs
Text
Cost per learning (cost per failure): businesses fail because
they ran out of $$$ before product market fit was found

Innovation Accounting:
Reporting KPIs
Text

Innovation Accounting:
Reporting KPIs
Text
Experimentation velocity: the speed at which validation
happens is important for the venture to have a competitive
edge in the market place.

Innovation Accounting:
Reporting KPIs
Text
Experimentation velocity: the speed at which validation
happens is important for the venture to have a competitive
edge in the market place.
I have not failed. I've just found 10,000 ways that won't work.
- Thomas.A. Edison

Innovation Accounting:
Governance KPIs
Source: Rita McGrath

Innovation Accounting:
Governance KPIs
Knowledge-to-assumption ratio: number of validated vs.
non-validated assumptions in the business model.
Source: Rita McGrath

Innovation Accounting:
Governance KPIs
Knowledge-to-assumption ratio: number of validated vs.
non-validated assumptions in the business model.
The closer to 1 it is, the less risky the business model is.
Source: Rita McGrath

Innovation Accounting:
Governance KPIs
Knowledge-to-assumption ratio: number of validated vs.
non-validated assumptions in the business model.
Source: Rita McGrath

Innovation Accounting:
Governance KPIs
Source: Rita McGrath

Innovation Accounting:
Governance KPIs
Source: Rita McGrath
Barebones NPV: answers the question of whether or not to
continue investing in a particular venture.

Innovation Accounting:
Governance KPIs
Source: Rita McGrath
Barebones NPV: answers the question of whether or not to
continue investing in a particular venture.
Knowing when to stop doing what you are doing is sometimes more
important to knowing what to do.

Innovation Accounting:
Global KPIs

Innovation Accounting:
Global KPIs
Innovation contribution: how much money are being made
today by the ventures launched X years ago (in %).

Innovation Accounting:
Global KPIs

Innovation Accounting:
Global KPIs
Cohort performance: the innovation department should be
improving with regards to its overall contribution to company
revenues with each incubated cohort.

Innovation Accounting:
Global KPIs

Innovation Accounting:
Global KPIs
Innovation conversion: % of old customers that are
converting to new offerings replacing the old ones (or being
complementary to existing offerings — customers which are
using more than one product/service from the corporation’s
portfolio)

Conclusions

Conclusions
KPIs should be adapted to the maturity stage
of the business model. Procrustean was killed
by Theseus.

Conclusions

Conclusions
For corporate startups to prosper an innovation
accounting system needs to be put in place.

Conclusions

Conclusions
Read more on innovation accounting
and corporate startups.

www.thecorporatestartupbook.com
@toma_dan
www.danto.ma
@tendayiviki
www.tendayiviki.com
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