As R&D organizations moved in the late 1990s to focus on true breakthrough innovation– not just in technology per se but also in unique business models associated with the new products and services– models like the TVP, as comprehensive as they were, were leaving a gap. This led to formation of an IRI subcommittee on metrics for the fuzzy front end.

It is characteristic of environments such as the fuzzy front end of research that the qualitative nature of the measures demands descriptive anchored scales to create a ranking. Over 20 companies participated in the validation stage of the subcommittee’s investigation. From an initial list of more than 90 brainstormed measures, the team developed 20 anchored scale metrics.

Fuzzy Front End Metrics

The 20 final metrics were grouped into eight areas of the innovation process. Because these were a mix of “apples and oranges” measures, one way in which the results were displayed is shown in the “Fuzzy Front End Metrics” figure. Of most value was comparing the patterns derived from companies in similar industries, or of one company over time. Even with an anchored scale, it is the context of other companies or one company over time that produces the insight needed to both improve and persuasively sell R&D’s early ideation stage work to senior management. Hard measure forecasting revenues and profits from FFE efforts were ineffective in correctly forecasting the future (too much guesswork in the variables), so these anchored scales were found to be best practice. Note however that it requires a high-level of thought or mental processing capability in the CEO and his or her team to use these metrics. CEOs with less processing capability do not get much from such metrics, and so with them careful selection of the Technology Value Pyramid metrics is a compromise solution.

The most recent trend in R&D is the extensive use of external R&D capabilities. Procter & Gamble, for example, has gone on record as moving toward a 50/50 split between internal and external resources. Xerox led the way using spinout ventures, Intel the use of minority funding of start-ups, and Cisco the use of acquisitions to supplement internal R&D and meet new business growth targets. Solid metrics for these activities have not been agreed upon. Outcome metrics related to standard financial performance measures of such investments in the case of Cisco and Intel are easy to utilize. In the case of Xerox and P&G, the metric is improved company performance, but attributing the return to the presence of external interactions is harder to quantify.

Today a small number of TVP metrics are in place for organizations utilizing external R&D resources. These include the percentage of new products coming from technology obtained externally within the last five years and the ratio of external to internal R&D spending. Which metrics will ultimately provide the best insight for improvement and/or audit is still undetermined.