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How Can We Measure Success With Open Innovation?

Business Intelligence

Many organizations are adopting Open Innovation and Crowdsourcing as ways to generate new products or services. Opening up your innovation initiatives to outsiders is seen as more effective than relying solely on your internal R&D or marketing departments. However, because this approach is so new there is a dearth of guidance on how to measure the success of open innovation activities. This issue is addressed directly in a paper by Erkens, Wosch, Piller and Luttgens from Ernst Young in Germany and the University of Aachen. The report points out that 90% of corporate innovation efforts do not result in new products or services so a tool to help us understand how to measure success is badly needed. Furthermore, companies that do measure innovation tend to use generic metrics based on R&D and product-development (e.g. number of patents filed) which are of very limited value

The authors advocate three principles:

1. Use separate metrics for each different OI method – e.g. leadusers, contests or broadcast searches.
2. Use measures for input, process, output and outcomes.
3. Use metrics in ways which are instrumental, conceptual and symbolic. (You have to read the article to understand what they mean by this.)

They carried out a survey among major European companies in different sectors and analysed 117 responses. They propose three different scorecards with up to 14 metrics on each depending on the type of OI initiative being used. Each scorecard has sections for initiation, implementation and overall KPIs with metrics for inputs, process, outputs and outcomes. Some of the metrics are numeric such as percentage of external ideas that turn into company projects. Many are subjective such as increase in company reputation. The two most highly rated metrics on each scorecard might seem obvious but they are absolutely telling:

1. The degree to which top management is committed to Open Innovation
2. The customer benefit from the innovation provided.

The report is a valuable addition to the OI literature and the scorecards are very useful even if they are little over-engineered in my opinion.

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