Beyond ROI
GUEST POST from Chateau G Pato
Every quarter, innovation leaders are faced with the same reductive question: “What is the ROI of that experiment?” This question, while financially necessary for short-term accounting, is fundamentally flawed when applied to strategic innovation. It traps innovation in a transactional mindset, demanding a dollar value on ideas that are, by definition, intended to create entirely new markets or transform existing systems.
The true, sustainable value of an innovation program is not found in the immediate Return on Investment (ROI) of a single project. It resides in the Intangible Assets — the cultural and organizational capabilities — that the program builds. These assets, though difficult to quantify on a balance sheet today, are the ultimate determinants of long-term survival, market resilience, and future dominance. A relentless focus on short-term ROI kills the critical exploration necessary for genuine disruption.
The Four Intangible Assets of a High-Innovation Culture
When an organization invests in systematic, human-centered innovation, it accrues four non-financial assets that provide exponential returns over time:
- The Adaptability Quotient (AQ): Innovation programs are essentially training grounds for AQ, the organization’s capacity to recognize, navigate, and thrive in constant change. They force teams to unlearn old methods, embrace ambiguity, and pivot quickly. A high AQ is the organization’s most valuable insurance policy against unforeseen disruption.
- The Intellectual Agility Network: Innovation breaks down departmental silos by forcing cross-functional teams to solve wicked problems together. The resulting trust, shared language, and established network of communication — from engineering to marketing to legal — enables the entire organization to execute any strategic pivot faster and with less friction. This network connectivity is a massive advantage over siloed competitors.
- Attraction and Retention Currency: Top talent, especially younger generations, prioritize purpose and the opportunity to create impact over stability. A demonstrated commitment to challenging the status quo and funding experimental projects acts as a powerful magnet. It transforms the company brand from a cost-center employer to a future-focused destination for change agents. The cost of replacing talent far outweighs the cost of running a few failed experiments.
- De-risked Market Intelligence: Every failed innovation project provides invaluable information about what the market doesn’t want, what the technology can’t do, or what the internal structure won’t support. This failure is not a cost; it is cheap, high-fidelity market intelligence. It allows the organization to de-risk the next, larger investment by avoiding pitfalls already discovered in smaller, faster experiments.
Case Study 1: The Financial Firm’s Crisis Resilience
Challenge: Organizational Complacency and Inability to Pivot
A global financial services firm faced paralysis when FinTech startups eroded their lending division. Their internal structure had zero Adaptability Quotient (AQ), making change slow and painful.
Intangible Asset Focus:
The firm launched an internal Venture Studio program. While the immediate financial ROI of the first ten projects was poor, the program successfully created a pipeline of innovation leaders and built the Intellectual Agility Network via mandatory cross-functional teams. Two years later, when a major, unforeseen regulatory change hit, the company leveraged this new internal network to execute a massive, complex systems pivot in six months — a timeline that was previously unthinkable. The intangible asset of AQ saved the company hundreds of millions in potential fines and preserved market share, a value that exponentially exceeded the cost of the failed initial projects.
Measuring the Intangible: Shifting the Innovation KPI
To move beyond ROI, leaders must adopt Innovation Key Performance Indicators (KPIs) that directly measure the accrual of these intangible assets. These should be tracked alongside traditional financial metrics:
- Network Score: Percentage of innovation project members who come from non-traditional departments (e.g., Legal, HR).
- Unlearning Rate: Number of old, inefficient processes officially decommissioned due to learnings from an innovation project.
- Talent Flow: Promotion rate or retention rate of employees who participate in high-exposure, cross-functional innovation projects.
- Failure Value: Clear documentation of the “most valuable lesson learned” from projects that failed to launch.
Case Study 2: The Energy Company and the Talent Magnet
Challenge: Stagnant Image and Failure to Recruit Digital Talent
A traditional energy company struggled to attract top software engineers and data scientists, who saw the firm as technologically backward and environmentally unfriendly. The firm needed to visibly signal its commitment to a sustainable future.
Intangible Asset Focus:
The company invested in highly visible “moonshot” innovation labs focused on renewable energy grid optimization and carbon capture (projects with very high financial risk and long ROI timelines). They openly publicized the failures and learnings. The immediate ROI was negative, but the intangible return was immense: Attraction and Retention Currency. Potential recruits saw the firm was actively funding high-risk research into societal problems. By positioning the firm as a place where engineers could solve societally relevant wicked problems, the recruitment metrics soared, allowing them to fill their critical digital talent gap and secure the specialized knowledge required for future core business transformation.
Conclusion: The Portfolio of Capabilities
Innovation is not a vending machine where you insert budget and expect immediate profit. It is an insurance premium and a strategic investment in organizational capabilities. When you only focus on short-term ROI, you are essentially demanding that a corporate training program must immediately produce a best-selling product. It’s an illogical mandate.
True visionary leadership understands that the investment in a strong innovation culture builds a Portfolio of Intangible Capabilities — a resilient organization that can adapt, attract talent, and learn faster than the competition. These are the assets that don’t appear in quarterly reports, but they are the only ones that guarantee relevance a decade from now.
“If you can’t measure the return on a healthy culture, you haven’t yet calculated the staggering cost of a fearful, rigid one.” — Braden Kelley
Your first step toward valuing the intangible: Change the primary success metric for your next three innovation experiments from ‘Revenue Generated’ to ‘Most Valuable Lesson Learned and Applied.’
Extra Extra: Because innovation is all about change, Braden Kelley’s human-centered change methodology and tools are the best way to plan and execute the changes necessary to support your innovation and transformation efforts — all while literally getting everyone all on the same page for change. Find out more about the methodology and tools, including the book Charting Change by following the link. Be sure and download the TEN FREE TOOLS while you’re here.
Image credit: Pixabay
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