23 Metrics for Managing Innovation: Lessons From Growth Leaders ^Top valuable outputs. This takes deep insights into the linkages between input, process and output measures. The best performers in our study were much better at making connections and relating their innovation investments to shareholder value creation. Pitfall Two: Encouraging Incremental Innovation Some of the most popular innovation metrics subtly, or overtly encourage a focus on “small i” incremental innovations. Such small projects are necessary for continuous improvement but don’t contribute much to material improve- ments in profit or revenue growth. Because they absorb scarce development resources they displace spending on riskier “BIG I” projects that take the firm into adjacent markets or new technologies that promise higher profits. Our survey respondents were sensitive to the problem, with half agreeing that their innovation metrics were much more useful for shorter-term, incremen- tal innovations than for longer-term breakthrough innovations. Two metrics with possible toxic side effects are the percent of sales from new products in the past N years (sometimes called the “vitality index”), and the new product success rate. The first measures the rate of change in the offer- ings, and emphasizes the need to keep the products and services up-to-date. With a simplistic emphasis on total revenue this metric fails to differentiate profitable and unprofitable investments. The second can be useful for mea- suring the effectiveness of the innovation process, but may encourage too many minor projects that “succeed” due to their low thresholds for success. Exactly what is a new product? Without keen oversight by leadership any “new and improved” tweak would qualify. The potential for mischief is magni- fied when bonuses are tied to this metric. 3M reputedly ran into this problem when it increased the corporate goal for sale of new products in the past three