What does innovation accounting mean?

Question

Options

• ACapitalizing the cost of software development using Story points.
• BDefining, empirically measuring, and communicating the true progress of innovation.
• CDemoing Stories that come out of the IP Iteration.
• DBeing sure to account for the investment in new product initiatives on a P&L.

• A
  3% (1)
• B
  94% (31)
• C
  3% (1)

Explanation

Innovation accounting (a concept from Eric Ries's The Lean Startup) is a framework for measuring real progress in uncertain, early-stage product development - where traditional metrics like revenue don't yet apply. Option B is correct because it captures the core purpose: establishing a baseline, tuning the engine through experiments, and communicating whether a startup or innovation team is actually learning and moving toward a viable product.

Why the distractors fail:

• A is wrong because Story points measure development velocity/effort, not whether you're building the right thing - they have nothing to do with capitalization or accounting for innovation value.
• C is wrong because demoing IP Iteration stories is a SAFe ceremony for showcasing enabler work, unrelated to measuring innovation progress.
• D is wrong because tracking investment on a P&L is standard financial accounting, not innovation accounting - the whole point of innovation accounting is to measure progress before traditional financial results exist.

Memory tip: Think of "innovation accounting" as replacing the usual P&L scorecard with a learning scorecard - it answers "Are we getting smarter about our customer?" rather than "Are we making money yet?"

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