From the public cloud to artificial intelligence to data science, every firm on Wall Street is embarking on their fair share of innovative efforts.
But how does one quantify those types of investments? A new tool or feature might not always lead directly to a new line of revenue.
Helen Shan, chief financial officer at FactSet, offered insight into how she quantifies innovation and productivity gains for the data giant.
Shan, who spoke on Monday at Business Insider's Global Trends Festival, highlighted several ways that FactSet tracks projects.
One measurement is the percentage of projects that have failed. And while that might seem like a way to keep track of wasteful spend, it's actually about making sure the company is staying on the cutting edge, Shan said.
"It's really around if you're not failing at all, then maybe you're not pushing yourself hard enough," Shan said.
"If everything is green in the status, then that's an issue," she added.
Retention is key
Shan also highlighted traditional forms of measurement around tracking tech spend: what is your cost of research and development as a percent of your revenue; what is the return on investment; what is the net present value (NPV) based off of a risk-adjusted hurdle.
And while those are useful metrics, they don't always tell the full story.
Tracking customer retention is also a key factor. While everyone likes to imagine products will create news lines of business for a company, sometimes it's about making existing products better, Shan said.
"Speed, reliability, ease of use. People don't necessarily think of that as innovation, but the reality is that is. Because that is what keeps clients with us," she said.
Internal processes are also important to consider. Anything that can cut down on manual work, consolidate disparate systems, or lower the cost-per-revenue will be looked at as a big win.
"Ultimately, the outcome we want there from our colleagues is greater engagement and productivity," Shan said. "Less admin and more thought."
More BI Global Trends Festival coverage:
- Nasdaq's CEO says the cloud is the 'future of the industry' and the tech could be used to conduct actual trading within the next decade
- Mastercard's incoming CEO sees an opportunity and obligation to help SMBs and consumers through economic recovery. Here are some of his plans to help them recover.
- Cycles of disruption: AlixPartners' CEO lays out what has separated winners from losers in 2020
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