PurposeDuring the past year, the authors have built a framework for a suite of metrics that senior managers can customize to track and promote innovation success in their companies.Design/methodology/approachSenior executives can use the suite of metrics to assess their company's innovativeness over time and hence combat the insidious strategy decay that often afflicts a company's business.FindingsThe framework combines three views on innovation – resource, capability, and leadership – providing the perspective to develop a suite of metrics for assessing and developing a company's capacity for innovation.Research limitations/implicationsThe optimal selection of metrics and the optimal value or “sweet spot” of any particular metric will vary from company to company.Practical implicationsAs more firms develop strategic innovation metrics and a database that validates their relevance, top managers will learn to assess and guide a company's innovation capability more effectively.Originality/valueThis is the first strategic guideline for building a customizable system of innovation metrics.

Large corporations persist in the belief that innovation can be acquired. But market leadership comes from truly organic innovation. Internal market forces can prove a dynamic mechanism to make such innovation a reality, say Liisa Välikangas and Paul Merlyn of the Strategos Instititue.

Can companies learn to avoid the periods of ups and downs and turnarounds and just become well-managed companies? These authors believe the corporate cycle that prevails today ± from periodic tailspin to meteoric recovery and back again ± is not preordained destiny. Managers can instill in their companies considerably more resilience than they realize. Ford Motor Company under Don Petersen in the 1980s. National Semiconductor under Gil Amelio in the early 1990s. IBM under Lou Gerstner in the mid-1990s. Canon and Fujio Mitarai in the late 1990s, and, most recently, Nissan under Carlos Ghosn. Are you tired of reading about yet another corporate turnaround, complete with CEO as epic hero? Imagine a world without turnarounds ± just well-managed companies.Implausible? We're not suggesting a corporate utopia. Not every company can be above average. Competitive differentiation necessarily makes some more successful than others, and macroeconomic forces are ever-present, causing even the best companies to regress a little on the ebb of a falling tide. But the corporate cycle that prevails today ± from periodic tailspin to meteoric recovery and back again ± is not preordained destiny. Managers can instill in their companies considerably more resilience than they realize. An organization's capacity to renew itself ± before some crisis impels seismic transformation ± is measured by its strategic resilience. IBM in the mid-1990s was resilient: it walked through the valley of death and emerged the other side. But it wasn't strategically resilient. Its strategy carried the company headlong into crisis, and at some cost: Between 1991 and 1993, IBM's cumulative losses stood at almost $16 billion (see Figure 1). Strategic resilience is preemptive. That is a different modus operandi. Most companies deal with defective strategies reactively, taking action only after revenue or pro®tability has undergone signi®cant decline.

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In a session of the Strategos Innovation Academy, participants considered how a number of core management processes – for example, strategic planning, capital budgeting, performance assessment and product and process development – inhibit innovation. Working in groups, the participants identified problems with existing practices and then suggested a number of ways to make the process less toxic to innovation. Today’s strategic‐planning processes rarely emphasize radical innovation – the new business concepts and operational models that are necessary to keep corporations at the head of the pack – either implicitly or explicitly. Another failure that participants identified is the linkage between strategy planning and the annual budgetary cycle. To improve strategic planning, participants made a number of other suggestions, many of which derive from the toxicities and failures of the existing strategic‐planning process. Companies should first ensure that their business definition and associated mission statement are broad. Narrow definitions are likely to reduce a company’s identity to its current business model, thereby impeding the possibility of renewal. Companies should also explicitly include innovation in the strategic‐planning process. A chief innovation officer – a new senior‐level appointee in the company – can help ensure that innovation remains central to the strategic‐planning process. Greater scrutiny of strategic plans can also help. For example, CEOs can reject strategic plans that do not include a substantial amount of innovation. The introduction of new metrics for innovation would help formalize this commitment to innovation. Participants also recommended that companies find ways to dissociate the strategic‐planning process from an annual schedule. Instead, the process needs to become continuous. To this end, some participants advocated renaming the process strategic evolution instead of strategic planning.

Will your company be like so many “one‐hit” wonders that failed because of their inability to adapt through innovation? Many companies meet this fate. Management shortfalls on the path to developing new market successes include: (1) A lack of the requisite skills and resources to sustain growth; (2) A CEO’s preoccupation with the existing business. This latter case should quickly be challenged given that the business environment will ultimately render any business concept an anachronism. The only way for a company to sustain itself is through conceiving and nurturing new business ideas that can succeed for the parent business; (3) Either no genuine product innovations, or so few the company does not develop the skill to cultivate them; (4) Entry into the innovation phase too late, such as in Polaroid’s case; (5) Belief that an investment in a new business cannot coexist with the existing business. The company sees true innovative concepts as more as a nuisance or threat to their comfortable lives than as the offer of hope for a new future; (7) The ability to create an abundance of innovation but exhibit a peculiar incompetence in creating a market for it. Witness Xerox. The challenge, then, is to foster a capability for innovation – not merely product enhancement. This capability allows a company to migrate from one business concept to the next as the market changes and opportunities emerge.