Innovation Accounting is an organized system of principles, tools and KPIs established to gather, record, classify, analyze and present accurate and timely data about a company’s breakthrough and disruptive innovation efforts – working to complement the existing financial accounting system.
Dan Toma and Esther Gons
To build successful innovation ecosystems, corporates should not look exclusively to traditional accounting methods to manage innovation and measure the impact. To make informed investment decisions on corporate startups, we can use a combination of the innovation thesis, strategic goals and the need to create a balanced portfolio. Innovation Accounting can than be used to measure and manage the progress of these corporate startups from great idea to validated business model.
The term Innovation Accounting was first coined by Eric Ries in his ground breaking book The Lean Startup.
In his book The Lean Startup, Eric Ries explores the topic of Innovation Accounting to measure the progress of a single startup. In The Corporate Startup, we expand the principle of Innovation Accounting to measure and manage the whole Innovation Ecosystem.
Innovation Accounting is the process of defining and measuring innovation within an organization. Especially when we are still creating and testing ideas we need non-financial indicators for success. That is why every modern organization needs innovation accounting next to traditional financial accounting.
Innovation Accounting focusses on managing the following three innovation activities:
- Making investment decisions on different products at different points in their innovation journey.
- Tracking and measuring the success of specific innovation projects.
- Assessing the impact that innovation is having on the business as a whole.
That means that Innovation Accounting needs to be implemented at different levels of the innovation ecosystem.