Saturday, May 16, 2009

Metrics for Open Innovation – “what’s my open innovation quotient”

[One slightly disconnected thought! – Can percentage of people quitting from a particular organization and becoming an entrepreneur provide any kind of metric? More the better or less the better?]

Metrics have always amazed me, be it for how different people perceive it differently or for the conviction with which it can drive one away from facts! It has amazed me equally for its subtle power to steer one to the goals at hand..

This post is for you and me to come up with measurement criteria for an open innovation effort in an organization.

Thinking aloud for the pointers … a) Is my organization doing enough to promote open innovation, b) Where and how much to invest, c) Am I utilizing all possible resources, d) Metric can’t help me remove any mental blocks, but how can I keep the open innovation in say top 5 priorities e) What is the Return on investment, f) How much is the open innovation productivity, g) How much Risk I can take for how much return?

With this laundry list, let’s create the metrics, in no particular order.

Metric A: Open innovation budget allocation proportionate to the profitability hotspots.

First I need to track and arrive at the hotspots which have potential for open innovation. Then rank them according to the profitability per unit and volume it can fetch. Allocate the open innovation budget in the similar proportion while maintaining the hotspot diversity.

Overly simplified example - For a consumer durable product, the hotspots could be the pricing or psychology of a first time buyer, the yield per unit could be low and volume high. For a new techno yacht, yield per unit could be high and volume low.

Metric B: Extent of talent utilization from outside the core team.
Measure how much non core team individuals contributed from rest of the organization and/or from outside the organization.

Example / Pointers - How many idea-bar-camps my organization organized this quarter. Someone should be telling - we received 30 ideas from the core team, 70 from rest of the organization and another 50 from outside the organization for a given hotspot. In 2006, P&G’s 50% of the product and process ideas came from outside of P&G.

Metric C: Extent of Leadership involvement.
This one is bit difficult, but open innovation won’t take roots without it.
How much effort the leaders putting to leverage the opportunity of open innovation?

Example / Questions - How many times employees hear about the genuine support for open innovation from leadership? How much time does the leadership spend on open innovation vis-à-vis overall routine work. How recently your leaders heard and discussed the idea which came from outside the core team or from outside the organization.

Metric D: Percentage of skin
% of risk taken with respect to the investment in last one year. A conscious strategy to analyze and make Proactive + Reactive investment in future.

Example/ Questions – Was my TV ad budget for the existing service line far bigger than the innovation budget? Does my organization invest for short, medium and long term innovation outcomes or is there an imbalance?

Metric E: Percentage of fresh footprint
% of number of product, service, process or business model launched in last one, two, three year(s) which were not similar to the existing ones and had an open flavor.

Example/ Pointers – The ones where we changed the color and packaging may not be counted here, repurposing the same product for a new user group might. Still better is the one where you incorporated the end user feedback.

(A fair process to decide what is genuinely ‘open’ i.e. if the contribution came from outside the core group or not, and how much, is a different topic altogether and we will discuss this in subsequent posts.)

Metric F: Percentage of fresh dollars
% of revenue generated from NEW product, services, and processes launched in last one, two and three year(s)

Example / Pointers – Revenue from a really innovative product launched 5 years back be better kept off, and if it takes effort to associate the dollars as fresh dollars, its probably a wrong association!

Metrics are a very personal thing, each organization need to derive the ones which suites them. But as a rule of thumb, the metrics which resemble the simplicity of GPS, gives you the X, Y and Z coordinates of your current open innovation state, are more likely to take you where you intend to go.


  1. one of the most important factors in encouraging and measuring innovation is the environment created which rewards success but equally allows failure without retribution.



  2. Hi Ashok,

    I like the idea about the allow for failure without retribution and I hear that it is popular in management circles now. However I was wondering exactly how much failure can be tolerated? For example, would one allow their R&D staff to drive the company into the ground? When is the time to stop? Sometimes it can take a great many failures to hit the jackpot.

  3. Ashok, Mark - I completely agree that failure needs to be tolerated (as someone has said - one should plan to fail as fast as possible. The next question is how to you measure it? How about a metric which enforces disclosing x number of failures for every single success in innovation and share the learning's from the failures with rest of the organization. Do let me know your thoughts and suggest additional ones.

  4. Jayesh/Mark,
    I don't think it is the number of failures which is worrying or which needs to be tracked. It is the kind of failures. If we seem to be repeating our mistakes or not learning from it, then we need to stop that. But as long as we are learning from our failures that is perfectly fine. After all, even Edison took many attempts before he discovered the electric bulb and nobody remembers the number of failures that he had. Since the original point is about metrics, I think we need to classify the failures in different categories and see if we can learn something from that. My feeling is that we will be able to identify paths not previously explored which is great food for thought and action. Another learning from this will be to focus on one particular step/area where we seem to have many failures and check if there are alternate paths available.

    Hope this makes sense.



  5. One way to balance between succesful innovation and risk taking is to make people work on a mixture of risky and safe projects in a specified time period.