(from James Andrew, author of Payback)

Each earnings season reminds us that analysts often ask the wrong questions about innovation. They, like all of us, need to do a better job of focusing on the innovation issues that really matter.

Analysts, like too many business leaders, get caught up in the romance of ideas. They want to know why companies aren’t spending more on R&D, why they aren’t moving projects through the pipeline faster, how the company is maintaining its flow of “big ideas,” and why pet projects have been shut down.

What they ought to ask is:

• Who wakes up every morning in your company and worries about whether your company is being innovative enough? In too many companies, innovation is “homeless” – it has no ownership and no management.
• How good are you at shutting down innovation efforts, and how many did you eliminate last quarter? Most businesses need fewer, not more, innovation projects—but to drive the chosen ones to real, tangible, revenue and profit results.
• Who in your company is the innovation “venture capitalist” who will take risks backing ideas that might or might not make it? Many good ideas die deep inside companies because employees don’t know where to take them for support.
• How is your company organized for innovation? Are compensation, hiring and promotion set up so that you can literally profit from new ideas? Are the performance systems aligned towards supporting innovation—or something else?
• What innovation partners have you identified, and what benefits are they bringing to the table?
• Do you have a tried-and-true business model? And what is it? Is it the integrator, orchestrator or licensor model, based on assessment of critical variables? Or is it a legacy model that has a long history in the company – but can’t be justified by the metrics?

Analysts – and executives – who ask those questions will get at the heart of innovation, and really understand whether or not it’s going to pay off.