Volume 3, Number 3 – September 2006

Keeping Score:  Lessons from Europe 

If there’s one thing that business, non-profit, and public sector managers agree on, it’s this:  we need to do a better job of keeping score.  Managers need effective tools to assess how their organizations (and their workers) are performing, and a means to use this information both to report progress and to improve subsequent performance. 

When it comes to performance measurement, business seems to be doing a fairly decent job.  The job is somewhat easier when financial metrics dominate, but it’s also easier when lots of money is thrown at the problem.   Businesses spend hundreds of millions, if not billions, of dollars each year on measurement efforts such as the balanced scorecard, six sigma, and the like.  Government agencies similarly plow significant resources into these efforts. 

Despite all of these investments, we still don’t seem to do a very good job of tracking the outcomes and outputs of various economic development efforts.   This is particularly true with some of the newer approaches that seek to foster innovation, promote entrepreneurship, nurture the creative class, and so on.   As these new strategies have been put into place, we have thought a lot about how to implement the programs, but less about how to measure them.  In many cases, we’ve simply imported old metrics—jobs created or retained or investment dollars stimulated—-that have typically been used in traditional infrastructure or business relocation projects. 

These traditional measures worked well when used for traditional purposes, but what if you’re trying to do more.  You not only want to create jobs, you want to create quality jobs, a friendly business climate, a culture that embraces innovation, and a quality of life that attracts talented workers and their families.  As our economic development objectives have been transformed, our efforts at measurement haven’t kept up. We don’t really have a good consensus set of tools for measuring our ability to build regional innovation systems.

We are not the first observers to recognize this disconnect—many organizations are trying to intervene. Leading organizations, such at the Council on Competitiveness, ACCRA, and SSTI, are all promoting initiatives to develop better innovation metrics and better performance measurement systems.  Washington is even getting into the act.   The US Department of Commerce is now setting up its own “Measuring Innovation in the 21^st Century Economy Advisory Committee.”

These initiatives are very exciting, but the real action appears to be overseas where the European Union, the OECD, and many national and regional programs are developing interesting new ways to measure progress in innovation policy.  They’ve also made major efforts to go beyond studies and to get practitioners to use these tools in the field.   For example, the OECD has produced the very detailed Oslo Manual for collecting and interpreting innovation data.   Not to be outdone, the European Union has its own PAXIS Manual, a 400-page behemoth that profiles hundreds of effective measurement tools and practices.   Lots of national governments are also doing good work in this area.  For example, Britain’s Department of Trade and Industry has recently published a useful study of UK innovation indicators. 

Why is Europe so engaged in this exercise?  The simplest answer is that they actually invest in performance measurement instead of simply mouthing the appropriate rhetoric. Perhaps a more compelling reason is that Europe’s leaders believe that this matters.   Europe’s performance on a variety of innovation measures continues to lag, so “getting innovation policy right” is a national and European-wide priority.  As a result, European policy makers are investing in new innovation policies and in new approaches to measuring their effects. 

We’re not advocating that the US adopt a European-style innovation policy, but we are advocating that federal, state, and local officials adopt a European-style innovation measurement policy.  What would this look like?  At a minimum, it requires increased investments in performance measurement—not just to track program performance, but also to assess community outcomes in terms of regional economic competitiveness.  It also requires that performance measurement become a critical part of various professional development activities.   All economic development professionals should receive some level of basic training in how to do performance measurement right.  This job is too important to leave to researchers and consultants alone.   Finally, the many interesting experiments now underway need to be continued.  New efforts like the Labor Department’s WIRED Initiative are emphasizing the importance of performance measurement.  These efforts, and others, need and deserve more resources and more public support. 

Note to Readers:  The “Oslo Manual” can be found on-line at the Eurostat website at:  http://epp.eurostat.ec.europa.eu.  The PAXIS Manual is available at:  http://cordis.europa.eu/paxis/src/home.htm.  Finally, the British DTI Innovation Indicators report is available at:  www.dti.gov.uk/files/file31569.pdf.

Innovation Policy Resources

Europeans aren’t the only ones trying to think in an innovative way about tracking innovation policies.  Many American researchers are also on the case.  Here are a few good places to learn more:

Council of Competitiveness, Measuring Regional Innovation, 2006.   A very useful guide to various measures for tracking the innovation economy.  Available at:  http://www.compete.org/nri/regional_innovation_guide.asp.

Edward Lowe Foundation, Michigan:  Toward an Entrepreneurial Economy, 2005-2006.  Prepared by Graham Toft of Growth Economics.  An excellent state level example of using indicators related to entrepreneurship and innovation.  Available at:  http://edwardlowe.org/index.peer?page=ENTscorecard

Fund for our Economic Future, Dashboard Indicators for Northeast Ohio Economy, 2006.  Prepared by Randall Eberts, George Erickcek, and Jack Kleinhenz. An excellent example of an effective regional indicators initiative.   Available at http://www.futurefundneo.org/page10474.cfm

What’s New At Entreworks?

EntreWorks Consulting has been part of the team helping to develop a nationwide series of celebrations to coincide with Entrepreneurship Week USA, to be held between February 24 and March 3, 2007.  The week will help us recognize the critical importance that innovation, creativity and entrepreneurship play, not just for the national economy, but also for the individual lives of all of our citizens.  If you’re not already involved with this effort, we need your help.  To learn more, visit www.entrepreneurshipweekusa.com.

• New Articles and Presentations in the EntreWorks Library:  The following article has been added to the EntreWorks library.  You can access it at:  www.entreworks.net/library.
• “Hello, My Business Name Is . . .:”  A Guide to Building Entrepreneurial Networks in North Carolina.  (Research Triangle Park, NC:  Council for Entrepreneurial Development, September 2006).

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