Innovation Benchmark: Is It Worth Testing Your Business's Innovation Level?

Note: This article references a Danish public benchmarking tool. Equivalent frameworks and comparisons are available internationally.

The basic idea behind benchmarking is simple: you compare your business to others — either within your own industry, or with businesses from entirely different industries that have solved similar challenges in a different way. Applied to innovation, benchmarking becomes a tool for finding out whether your business is genuinely renewing itself at the pace and in the way needed to keep up — and where the concrete opportunities for improvement lie.

Is it worth it?

Short answer: Yes, in most cases. An innovation benchmark is cheap or free, typically takes only minutes to complete, and gives you a concrete, comparable starting point instead of a gut feeling. It doesn't replace a thorough strategic analysis, but it's a good place to start — both if you want to develop the business, and if you're preparing it for sale.

What is an innovation benchmark, specifically?

In Denmark, there's a specific, free tool for this purpose: Innovationbenchmark, developed by CBS, SDU and the Danish Technological Institute with support from the Danish Industry Foundation, and available via the Danish Business Authority's Virksomhedsguiden. The tool is specifically aimed at small and medium-sized manufacturing businesses, and lets you compare your business's innovation level with around 1,876 other comparable businesses. The result is a quick, directional assessment — the tool itself is honest that it provides inspiration for reflection and dialogue, not a precise answer key or concrete action plan.

If you don't run a manufacturing business, that particular tool isn't directly aimed at you — but the thinking behind it can easily be applied to any industry, as we cover below.

What do you actually measure when talking about innovation?

The internationally recognized reference framework for measuring innovation is the OECD's Oslo Manual, which also underlies the EU's own innovation statistics (Community Innovation Survey). Here, innovation is typically divided into several types, relevant to know regardless of which industry you're in:

• Product innovation: New or significantly improved products or services.
• Process innovation: New or improved ways of producing, delivering or running the business.
• Marketing innovation: New ways of positioning, pricing or marketing.
• Organizational innovation: New ways of organizing work, management or collaboration with external parties.

A genuine innovation assessment looks at all four types — not just whether the business has recently launched a new product.

How to do your own informal benchmark, regardless of industry

If you don't have access to an industry-specific tool, you can gain much of the same insight by asking yourself structured questions:

• When did we last launch something new — a product, a process, a way of going to market?
• How large a share of revenue comes from things we weren't doing 3 years ago?
• How do the 3–5 businesses we most often compare ourselves to look — are they doing something we're not?
• Are there industries outside our own where a similar problem has been solved markedly differently?

This is exactly the exercise that also goes into a good business plan, and it's closely tied to knowing your competition and knowing your market.

Can the innovation level affect a business sale?

Yes, in practice it can. Buyers — particularly professional and strategic buyers — place weight on the business's future growth potential, not just historical earnings. A business that can document a deliberate, ongoing effort to renew itself comes across as less risky and more future-proof than a business that has run purely on the same business model for years. This is closely tied to the goodwill a buyer is willing to pay for — goodwill is precisely about the part of the business's value that can't be read directly from historical accounting figures.

Conversely, a documented lack of new thinking — or an insight that competitors have genuinely overtaken the business — can become a negotiation point that pushes the price down, if it's only discovered late in a sale process, for example during due diligence.

Frequently asked questions

Is an innovation benchmark the same as a valuation?

No. It says something about how innovative the business is relative to comparable businesses — not what it's worth in money. If you need a genuine assessment of value, you can start with our free valuation tool.

Should I do an innovation benchmark if my business isn't a manufacturing business?

The formal Danish tool is aimed at manufacturing businesses, but the principles — comparison with the industry and with other industries, and the four types of innovation from the Oslo Manual — can be used by any business.

How often should I repeat it?

There's no fixed rule, but once a year, or when you're considering a sale, is a sensible starting point.

Considering selling your business and want to stand stronger in the negotiation? Book a no-obligation call with us.