B2B Organic Growth Series: Chapter #49
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The Vitality Index (% of sales from new products) is a helpful, but lagging indicator. Here are two new leading metrics: Growth Driver Index (GDI) and Commercial Confidence Index (CCI).
b2bgrowth.video/49 Video length [2:57]
Peter Drucker said, “If you can’t measure it, you can’t improve it.” We face challenges when it comes to measuring new product innovation. Consider the most popular metric today: The Vitality Index is percent of sales from new products, where “new” products are those introduced in the last 3 or 5 years.
It suffers 3 deficiencies. It’s not predictive. This lagging indicator tells you what’s already happened… not what will happen. It’s not prescriptive. It doesn’t tell you how to improve. And it’s not precise. Is it a “new” product if we just change the color?
But don’t supplant this metric. Supplement it. A good metric should be Leading… doing more of this leads to growth. Actionable… something that employees can make happen. Benchmarkable… letting you compare year over year… and to other companies. And Impactful… where improvement will significantly drive growth.
Here are two metrics we’ve developed. The first measures your growth capabilities, the Growth Driver Index, or GDI. The second measures your customer insight, the Commercial Confidence Index, or CCI.
For the first, you can benchmark your business at www.b2bgrowthdiagnostic.com and receive this free report. Your employees take a survey to rate your business on 24 growth drivers. You’ll see how your business rates against average, top-quartile and top-decile companies. The Growth Driver Index is your average percentile for all 24 growth drivers.
The Commercial Confidence Index helps you stop squandering R&D due to unwarranted commercial risk. As discussed earlier, Market Satisfaction Gaps tell you which outcomes customers want you to work on. If a project team has this data, it’s a “Known-Need” project… because you’ve eliminated confirmation bias and internal filtering.
To calculate your CCI, put all your R&D projects into 1 of 2 buckets: Projects with a “Known Need”… and everything else, which we’ll call “Assumed Need” projects. Your CCI is simply your R&D spending on Known-Need projects… over all R&D spending.
Download our white paper, New Innovation Metrics, for more on both metrics.
The Growth Driver Index is especially easy. It just takes a couple of hours to run each year… a small investment to see if you are building or degrading your growth capabilities.