Open innovation is a practice where organizations seek input from external sources including clients, partner organizations, and academic institutions. This has many benefits. It allows you to get out of your comfort zone, embrace new thinking, realize new innovation horizons, and achieve diversity of thought. This blog takes you through how to measure open innovation success.
With innovation management, it is important to have a clear goal in mind to enable you to gain a detailed understanding of what success looks like. There are many areas you can focus on, but I like to break measuring success into 3 simple areas:
- Define
- Measure
- Learn
Now, let’s have a look at how to measure open innovation.
Define Open Innovation Success
Fundamentally understanding what open innovation can do for your business is a key first step. Open Innovation enables organizations to:
- Reach a larger audience (this is particularly useful for smaller organizations)
- Adapt to changing markets
- Improve external opinions of the organization.
Knowing this…
What is your objective? Why have you decided to use open innovation? What is it you’re hoping to achieve?
Before you start to determine success, you’ll need to have a think about what that looks like. What is the ultimate goal? This will help you with measuring open innovation.
It is important to think big and think small when defining success metrics. I break this into 2 key areas:
- Strategic
- Tactical
Strategic goals relate to your high-level business targets. Which markets do you wish to expand into? What business transformation do you wish to see? What new direction will using open innovation help your business go in?
Tactical goals are your mundane, day-to-day goals. How will using open innovation improve business processes? How will employee engagement improve? What will it teach us about current and future ways of working?
Measuring Open Innovation
Now you have defined what success looks like, you need to measure performance against these objectives.
Innovation – unsurprisingly – is a tough subject to pin down and measure. Businesses can also overcomplicate how they measure open innovation success.
However, there are key indicators that you can use to ensure that your open innovation strategy is heading in the right direction. Capturing simple metrics and measuring against these would always be my recommendation. Data points such as:
- Ideas submitted
- Ideas carried forwards
- Deadlines hit and missed
- Completed projects
- ROI of completed projects
- Costs incurred
Regardless of your objectives, I find it is key to simply understand where your efforts are being spent and whether these efforts are actually paying off. Two key metrics that can help measure this are:
- Idea attrition rate – how many ideas are submitted against the number of users you have on the platform
- Idea conversation rate – of these submitted ideas, how many are actually good?
Measuring open innovation against a number of different data points is the easy bit – actually understanding how these relate back to your objectives and what the metrics actually mean is the hard bit.
That brings me to my third area of focus.
Learn from your data
Now you have captured lots of data and performance metrics, it is key to learn from this and understand what the data means for your open innovation strategy and how they affect where you go next with your efforts.
Some examples of metric interpretations are as follows:
- Ideas submitted – how many suggestions are being put forwards? This metric could simply tell you that people are engaged (or not) in your Open Innovation strategy. Could fewer ideas mean people are disengaged? Or could it mean your idea form is too complex so people don’t know what to do? Are further and better communications needed?
- Ideas carried forwards – this is a crucial metric for analyzing the practicality of ideas being submitted. How many ideas are being put through to the consideration stage and actively being considered for projects? What does the success rate tell you about your processes and review procedures? Does a low conversion rate mean further education of idea creators may be needed?
- Deadlines hit and missed – are you missing out on potential value due to bottlenecks in your processes?
- Completed projects – once ideas have been validated and selected to be realized as full-blown projects, it’s essential to monitor how many are then completed. Having metrics that prove the open innovation efforts actually lead to projects with the potential to add business value is simple to track but so important to understand.
- ROI of completed projects – Of these completed projects, what is the actual business benefit? It is so important to track this to prove the real value of your open innovation efforts
- Costs incurred – finally, to see the true value of your efforts, you need to take into account costs incurred whilst gathering ideas and realizing projects.
Once you have learned from the performance metrics and data collected, you need to take action. These actions could take many forms and are too many to list in this blog!
In summary – how to measure open innovation
Open innovation is a vital tool for increasing your innovation reach and bringing in ideas into your business that add diversity of thought and perspective. Such key ingredients for any innovation strategy.
Here’s how to measure your open innovation efforts:
- Define what your strategic and tactical objectives are
- Identify and evaluate key metrics that tie into these objectives
- Learn from the data collected and take action to continually improve your approach.
Talk to our team
Like to know more about our innovation management software, business case platform, or project management tools? Head to our homepage to book a meeting with our team.
