Even in the current economic turmoil, innovation remains a high strategic priority for most companies, and many see it as a strong contributor to growth. Yet many also struggle to measure the performance of their innovation portfolios. In a recent McKinsey Global Survey,¹ we asked senior executives which types of innovations their companies pursue, which ones they measure and with what metrics, what goals they have in using metrics, and how satisfied they are with the metrics they choose.

Companies reporting the highest contribution to growth from their innovation projects tend to be more interested in pursuing and measuring their innovations as a portfolio and therefore use metrics across the whole innovation process. In the end, they are more satisfied than others with the ability of such metrics to help their organizations do everything from aligning individual performance incentives to improving innovation performance to communicating with investors.

Sixteen percent of the respondents say that their companies don’t use any metrics to assess innovations. Among those that do, most are satisfied overall, though the findings suggest they aren’t effectively using these metrics as well as they could. Most notably, companies are much likelier to rely on metrics for outputs than for inputs, so they aren’t assessing the whole process of innovation. Forty-five percent don’t track the relationship between spending on innovation and shareholder value. Further, although many companies are satisfied with their use of innovation metrics in general, far fewer are satisfied with specific uses, such as aligning individual performance incentives.