Community Forum – Feelings About Open Innovation

Resource Type
Survey (Community Forum)
Author
Innovation Research Interchange
Topic
Open Innovation and Contests
Associated Event
Publication

Can you measure how the rest of the company feels about open innovation?

As a company’s OI activities progress from entirely informal to having an established program and/or function to having an OI team fully engaged with the business strategy and activities, what are the best practices (or good practices) for measuring the attitude and engagement of the organization towards OI? Is it simply a measure of the number of projects influenced by OI activities? Are there other factors? Is there anything available for a new organization to use in the early days to establish a baseline and use to measure and report on progress going forward? – David Porter, External Innovation Manager, Mars Petcare US

Community Responses

Response 1
We do keep track of number of projects that are being influenced by OI activities. While that is an indication of how much OI is being employed and therefore an intangible indication of attitude and engagement of an organization towards OI, it is not all encompassing enough.  We also monitor the use of the OI tools that we provide to our community to see how frequently they are  being used by our technologists and engineers.  We also require our technologists to document what OI tools they employed in the execution of a project and monitor that data for quality.  Ultimately, it comes down to the corporation having a reason to believe that these OI tools will generate new products and services that will provide a competitive advantage. Success as measured by new products and services where OI played a key role will quickly gain a high level of engagement and positive attitudes about leveraging it more frequently and broadly.  Thus we measure three areas—projects influenced by OI, frequency and quality of use of our OI tools, and finally commercial successes realized.  The latter will go a long way in generating enthusiasm and buy in for OI approaches. – John Homoelle, Director of New Technology and HERA, Michelman Inc.

Response 2
Assuming your projects are all aligned with your business strategy, you should track the projects that contain OI partners and compare those project metrics with historic projects without OI partners.  In terms of time to commercialization, % success to gate 4 or 5 and average $ spent per stage.  For successful OI projects, they should show overtime a reduced time to commercialization and overall $’s savings. – John Tao, IRI Emeritus

Response 3
Here are some background data that might be helpful in understanding the remarkable environment in which you find yourself. The U.S. spends about $50 billion a year for basic research, more than all other countries spend combined. So we get about 70% of the Nobel prizes and make almost all the seminal discoveries. But then we have the “valley of death,” where risk capital has long been lacking to further develop and commercialize those new discoveries. the Economic Recovery Tax Act of 1981 inadvertently changed that. Among other things, it reduced the  capital gains tax to 20% (from 49% in 1979). This was designed to incentivize large businesses …hit hard by the deep 1980-2 recession…to renew themselves. (A few even did)

However unexpectedly, this tax reduction (1) pulled hundreds of $millions of risk capital (almost overnight) from tax shelters ($billions since then); and (2) funneled it directly to several hundred million ”latent” entrepreneurs who have since incorporated some 30 million new small businesses, (50,000 a year), generated 90 million new jobs in those small businesses and 95% of household American wealth ($66 trillion up from $3 trillion in 1981). Europeans have called this the “American Miracle”. Reduction of the capital gains tax created an unintended “capital distribution function”  unique in the world.

Concurrently 87% of the famous corporate names listed in the Fortune 500 have disappeared (losing about 30 million jobs in downsizing and restructuring). Only about 5% of these new businesses grow to be big businesses feeding off those investments in basic research, but they are they are the wave of the future, in which you might find a collaborative interest.

Internally, in your company, you can make incremental improvements in cost and performance of existing operations. But it’s more efficient to joint venture with already discovered new businesses that might benefit from your existing market presence and other complementary capabilities. The Limited Liability Corporation (LLC) model of organization and management was developed for this purpose.

Also, a screening methodology “Constraint Analysis” has been developed which statistically has resulted in 8 or 9 out of 10 commercial successes. (You might want to subject your current operations to this analysis.) Most organizations internally resent siphoning off limited capital and other resources to outside operations. However, the LLC model in which they can have equity can mitigate this concern.

It would be my opinion that every company should develop some formal process of strategic search, analysis and planning. Hope this is helpful.. – Bruce Merrifield, IRI Emeritus

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