[Original Post date 6 Oct 2014, migrated from WordPress post on Ubedge.com]
Innovation Accounting for startups was introduced by Eric Ries in his famous book ‘The Lean Startup’, however is as case with many thing written about in the book it is poorly understood even if it is acknowledged as an important and useful thing to do.
Before one can do the accounting, i.e. tracking, a good understanding of what is being tracked is needed ?
Defining something as complex as Innovation turns out to be hard. Lets try address this by asking a few simple questions
What name, object, people or thing comes to mind when the term innovation is utterance.
Typical keywords as part of the answers include Google, Apple, iPhone, Steve Jobs, Something Different, New, Solving Problem, Doing in a Better way, Novelty etc
Where do you start when you start with innovation ?
It would be great if one starts with a problem, however most people start with an idea. Key again is that it is different from something that exists. However being different by definition makes it uncertain in terms of the value it brings.
Who decides something as an innovation ?
The day iPhone was launched or any product is released in the market it does not become an innovation. The declaration of it is an innovation happens almost unconsciously when it delights the target user. Important thing to note is that it is the end user that decides something as innovation
What is the difference between an invention and an innovation ?
A key difference between an invention and innovation is that invention is declared as so by the inventor or the patent office whereas an innovation is declared so by the target user for whom it is intended for.
So in a nutshell you start with a new and different idea that has potential value but with high amount of uncertainty and after some time when it delivers value to a certain audience it is meant for it gets declared innovation. It is this journey of going from uncertain business value to certain business value that is called as Innovation.
Thing to note is that this journey is an extremely hard and only one in tens of thousands succeed.Many people confuse the journey to innovation as innovation itself. Innovation can only be look through the rear view mirror, not through the front glasses.
Now coming back to accounting innovation.
Any simple method where this degree of uncertainty is methodically listed and addressed to reduce the degree of uncertainty and confidence of business value is increased where business value can be counted through money, those would be called as Innovation tracking. To make these abstract sounding concept a little more real. Here is an example from a peer group of startups that I meet with regularly that practice Leanstartup.
Anything that you have done that helps track your startup’s journey of innovation.