When it comes to early stage innovation, we can’t rely on metrics such as ROI or NPV to determine success, particularly given that such metrics favour short term returns whereas disruptive innovation can take years to deliver the kind of returns that large companies are seeking. If you’re evaluating disruptive innovation through a short term lens then disruptive concepts will either not get funded or the plug will be pulled prematurely in the event that they receive some initial funding.
What we want to measure early on in the innovation lifecycle is learnings.
In order to validate that the assumptions underpinning an idea or business model are flawed or valid, we must experiment, learn and iterate relentlessly in order to move closer to product market fit.
With that, I bring you 5 innovation metrics you need to know which leverages Dave McClure’s Startup Metrics for Pirates.
1. Rate of Acquisition - validating the problem
The first indication that people actually care about an idea is whether or not they actually click through to a website via say, an advertisement.
2. Rate of Activation - validating the solution and features
Upon people finding out a little bit more about the solution, do they leave their email address, contact the company or sign up to a mailing list?
3. Rate of Conversion - validating the revenue and pricing model
Do people ultimately pay for a product or service?
4. Rate of Return - validating stickiness and engagement
Do people come back?
5. Viral coefficient - validating viral qualities
Do people refer friends and family?
At Collective Campus, we’ve been working with a global life insurer in this space.
The insurer is interested in building an online
Rather than overcommit and invest millions in design, development, marketing, accounting and legal support before finding out whether people will actually engage, we’re helping them generate the
Based on an evaluation of the portal’s business model we were able to define:
- Target customer segments
- The problem being addressed
- The solution to the problem
- Key features
- The revenue and pricing model
We then performed the following activities to generate the metrics that matter across the different tiers of the funnel.
Acquisition: Ran an assortment of customer segment targeted Facebook ads and Google display ads with ad copy addressing the problem we defined and to a lesser degree, the solution.
Activation: Developed a large number of landing pages with different copy to reflect the solutions and features being proposed.
Google Analytics was
Conversion: Once people click Find Out More, they are asked to enter their details and click submit. Once they do this a pop-up box appears inviting them to sign up to the portal for one month at a special early bird rate of $10 per month. Note: the portal doesn’t exist at this point and upon clicking ‘sign up’ users are told that “we’re not ready yet and you will be notified as soon as we are”. It’s important to use a mock brand to avoid reputational damage here.
Desired action: Click 'Sign Up' button
Return: We send marketing emails to emails we’ve collected and see if they will open the emails and click back into the site.
Refer: We send marketing emails to users asking them to share the product with friends in order to receive a month’s free subscription. A simple calculation you can run to test how viral your platform is the viral coefficient. Invitebox is a great tool to help you embed a referral function into your emails.
Desired action: Shares product with friends
Ultimately, you want to determine what your metrics look like today, where you want to be tomorrow and what you need to do to start tweaking these metrics towards where you want to be tomorrow.
However, if after numerous tweaks the numbers still aren’t moving, then it might speak volumes about the commercial viability of the problem, solution or business model you’ve identified.
Don't want to take this approach? The alternative is simply taking big bets on unvalidated ideas and pay up to 1,000x more for an exponentially riskier approach. This alternative approach, which ultimately shuns the customer in favour in inside the building