10 Metrics for Managing Innovation: Lessons From Growth Leaders ^Top While “small i” projects are necessary for continuous improvement and to defend the core business, they don’t give companies a competitive edge or contribute much to profitability. It’s the moves into adjacent markets and beyond that generate the profits needed to close the growth gap. “Adjacencies” achieve a better balance of risk and reward by striking into new territory while drawing on the resources and market knowledge of the busi- ness. A market adjacency has some similarity to the currently served market in that the firm’s brand promise and customer relationships still have relevance in the new market, and distribu- tion and sales activities partially overlap. For instance, USAA found a profitable adjacency among the relatives of military members. (Members of the armed forces were their original market.) There will also be some similarities in the competitors in adjacent markets, so competitive moves can be better anticipated. An adjacency on the prod- uct/technology dimension has some overlap with the company’s value chain, technology and manufacturing competency, quality standards, and so forth, and helps the firm leverage its knowledge base. “Small i” innovations make up 85 to 90 percent of most companies’ innovation portfolios but rarely generate much additional growth. The result is internal traffic jams of safe, incremental initiatives that delay all projects, stress orga- nizations, and fail to achieve revenue or earnings goals. Any effort to measure innovation performance must account for the riskiness of the initiatives along this spectrum (as defined by the probability of failure). Each growth initiative can be plotted on two dimensions: how familiar the firm is with the intended market, and the similarity of the product/technol- ogy to existing offerings. This matrix has many sources, including long-buried "Small i" innovations make up 85 to 90 percent of most companies' innovation portfolios but rarely generate much additional growth.