Innovation Accounting is a System for Tracking Progress in a Startup

Traditional accounting methods are not well-suited for startups. They are designed for mature businesses with a stable operating history and a predictable future. Startups, on the other hand, operate in a context of extreme uncertainty, and their primary goal is not to generate revenue, but to learn how to build a sustainable business.

Innovation accounting is a new kind of accounting designed for startups. It is a system for measuring progress and holding innovators accountable, even when traditional metrics like revenue and profit are not yet meaningful. It focuses on the "boring stuff": how to measure progress, how to set up milestones, and how to prioritize work.

The key to innovation accounting is to identify the right metrics to track. These metrics should be actionable, accessible, and auditable. They should also be tied to the core hypotheses of the business. By tracking these metrics over time, a startup can get a clear picture of whether it is making progress towards its goal of building a sustainable business.

Innovation accounting is a critical component of the Build-Measure-Learn Feedback Loop. It provides the quantitative data needed to make informed decisions about whether to pivot or persevere. It is also a key tool for achieving Validated Learning.