How to Measure Open Innovation Value – Part 1.

Innovation is essential for companies to survive and grow, yet only 37% of company executives are satisfied with the way they measure it. Compared to other business processes, innovation can seem like an act of faith rather than a strategic investment due to the lack of effective metrics. The article explores the concept of Innovation Value, which is defined as Innovation Benefits/Innovation Costs. The calculation of Innovation Value includes various factors such as new revenue, efficiencies, stock value, increase in knowledge, customer loyalty, brand reputation, price elasticity, product distribution, and attractiveness as an employer. The article also provides some examples of more sophisticated measurement models for innovation, such as Real Options, which treat innovations like a financial option contract, and 3M's method, which predicts the probability of success for new R&D projects. Finally, the article highlights the unique challenges and opportunities for measuring open innovation, such as aligning the metrics of both parties, measuring the health and strength of the relationships, and valuing networks.