- October 1, 2008
- Posted by: matt
- Category: Archived Newsletters
Regional Innovation Benchmarking 101
This issue of EntreWorks Insights, and our next issue (coming in December), examines how regions can set up a system to benchmark their innovation performance in relation to other similar communities. The first part of this review introduces the concept of regional innovation benchmarking. Part 2 will offer some guidance on how to do it right. This work is based on ongoing research and consulting engagements in partnership with Growth Economics, Inc., and its President, Graham Toft.
When it comes to 21st century economic development, innovation is the name of the game. States and localities recognize that their future prosperity depends on their ability to nurture innovation in local communities, local businesses, and in local residents. Hundreds, if not thousands, of economic development programs seek to foster innovation. These take numerous forms ranging from cluster development strategies to technology commercialization programs to business incubators to youth entrepreneurship programs and so on.
States and localities want to support and nurture innovation, but how can they be sure that they are succeeding in the process? Benchmarking regional innovation offers one approach to keeping score and tracking a region’s innovation trajectory. Regions across the US and across the globe are creating local report cards or innovation indices that track how they, and their economic development programs, are performing.
Savvy economic developers have always benchmarked themselves against competitors and the “best in class” programs and regions. Yet, the importance of this process has grown in recent years as innovation-based economic development strategies have become more prevalent. While the pace of change has quickened, innovation strategies require a sustained long-term effort. Big job gains do not usually materialize over night. Instead, innovation manifests itself as gradual improvements in local business productivity, new product launches here and there, new business starts buttressed by fewer business failures, gradual relocations of young companies into the area, and other often barely perceptible shifts in the economic landscape.
All of these transformational improvements are seldom apparent on a day-to-day basis. Big changes may be underway, but may not be recognized until after the fact. In contrast, a new plant opening is readily apparent and likely to generate immediate and measurable local impacts.
Since innovation strategies operate according to a different pattern and timeline, they similarly call for better and different ways to measure progress and to continuously assess the strengths and weaknesses of a local innovation economy. That is where benchmarking comes in. In short, to do innovation right, you need to keep score.
Communities seeking to assess their innovation performance or potential must find surrogate metrics and using comparisons with competitors to know if you are achieving and sustaining it. That is where benchmarking comes in.
The basic concepts of benchmarking originated in business as a tool to evaluate various business processes in relation to industry “best practices.” For example, many manufacturers seek to benchmark their processes vis-a-vis the vaunted Toyota Production System, or retail firms might benchmark their distribution systems against industry leaders like Wal-Mart.
When these concepts are moved to a non-business setting, they can sometimes be misapplied. Many communities simply assess how they are performing on certain key measures, such as job growth or new business starts, and consider the benchmarking job done. But, benchmarking is not just an analytical exercise. It is a process that begins with analysis, and hopefully ends with a diagnosis of business shortcomings and solutions to help fix them.
In many cases, economic development organizations will go through the rigor of the analytics, but they may fail to follow through with the examination of the best practices of the leading competitors or the engagement of key local actors to ensure steps for constructive change.
Benchmarking is often confused with performance measurement, which seeks to assess how a particular program or organization is operating. Benchmarking is more of a comparative exercise that assesses performance in relation to the best in class. Ultimately, benchmarking helps you to identify the smartest ideas and practices, and then creatively adapt them then to your situation.
Benchmarking is a strategic function –it must be driven by broader goals and strategies that can be either explicit or implicit. For example, a community might be developing a new strategic plan that seeks to position the region as a leader in the life sciences industry. In this case, the region should seek to assess its performance on key measures of life sciences strength, and compare this performance to regions already identified as strong biotech hubs.
As the process unfolds, remember that the analytics of benchmarking are a means to an end. The primary outcome is change –becoming more like “best in class.” The analysis helps communities figure out how to get there. There is no “one best way” to undertake a benchmarking analysis. As we will see in Part 2 of this report, the analytics will require qualitative investigation (interviews, roundtables, collective explorations) as well as quantitative measures.
NOTE: The next edition of EntreWorks Insights will review potential measures and techniques that can be used in a regional innovation benchmarking exercise.
What’s New at EntreWorks Consulting?
A big event for supporters of innovation and entrepreneurship will get underway next month when Global Entrepreneurship Week is celebrated during the week of November 17-23, 2008. Seventy-five countries will be involved in a global celebration and exploration of what it means to be innovative, creative, and entrepreneurial. To learn more, visit www.unleashingideas.org.
New reports in the EntreWorks Library are listed below.
“Creating an Entrepreneurial Appalachian Region: Findings and Lessons from an Evaluation of the Appalachian Regional Commission’s Entrepreneurship Initiative, 1997-2005.” Prepared for the Appalachian Regional Commission. The full report will soon be published, but a detailed executive summary is now available. To access the report, click here.
Erik Pages recently summarized the finding of a major evaluation project undertaken for the Appalachian Regional Commission. His presentation is available here.
FUTURE TRAVEL SCHEDULE
Erik Pages of EntreWorks will be making presentations and leading training sessions at several locations this Fall. We hope to see you on the road!
- October 20: International Economic Development Council (IEDC) Annual Conference, Atlanta, GA
- November 6: IEDC Entrepreneurship and Small Business Development Training Course, Baltimore, MD
- November 19: Michigan Entrepreneurship Summit, Lansing, MI
- December 10: Economic Development Institute, Indianapolis, IN