ROI (Return on Innovation)

not everything that counts can be countedI attend the Rail Innovation Association workshops and one of the interesting discussions that took place with a panel of experts / practitioners was about the ROI ratios (in this case ROI refers to Return on Innovation). In other words, the money they get from innovation activities against the money they spend.

The target for the industry, set by the Department of Transport seems to be 3:1.

There is some ambiguity as to what they include in the ‘cost of innovation’ but I am making the assumption that it includes a direct cost of labour for staff involved in Innovation activities. If that includes a Senior Manager or Director and some full time employees, then you can see they need to be proving something like £500k of benefit from innovation (ROI) and that’s before they spend any money testing and prototyping any ideas let alone the cost of deploying the ideas that pass the prototyping and business case stages.

Some innovations will be easy /easier to calculate the ROI. Take for instance an idea that improves the dwell times for a train at the platform by making it easier for passengers to alight and board a train, this impacts on punctuality which impacts on a percentage of fines for poor performance.

But what about an idea that is purely about improving customer experience – let’s take an idea that makes customers more comfortable and productive on their journey by improving wifi. This will surely impact on customer experience scores which of course is of value, but how do you attribute that to ROI?

Doubtless they will agree a structure, but it led me to think, what is a good ROI – is it 3:1 or something different? I’d love to know what you think.