Make no mistake, open innovation engagements are not single-sided deals; they have to work for both partners if they are to be effective. It is vital therefore that chief executive officers of both the corporate and the start-up share common strategic goals of delivering innovation whilst at the same time growing their respective companies, improving their competitive positioning, and generating revenue.
In this series of articles we are going to look at the four most popular open innovation types and how they can be measured. We are going to look at how can you measure a collaboration with a startup around a free or a paid pilot, a joint venture with a startup or any other entity, an acquisition and lastly a venturing deal where your company buys stake in another comapny or in a startup.
In order to better manage and measure your open innovation initiatives, it is important firstly to understand what needs to be measured at program level before adapting those parameters to fit the specific open innovation types. From experience, we encourage you to have a funnel view when analyzing your open innovation program(s). There are many ways to segment a funnel but let’s, for now, consider the following generic stages:
• Demand. In the Demand phase of the funnel, a company can analyze the extent to which the startup is actively looking to collaborate with the company and vice-versa.
• Live. The Live phase of the funnel measures ongoing collaborations. This gives organizations on both sides a snapshot of ongoing progress as well as an indication of future outcomes.
• Outcome. The Outcome phase of the funnel consists of tracking the impact completed collaborations had on the company.
Now let’s look in detail at how your organization can measure collaborations centered around free and paid pilots following the logic of the funnel.
Measuring the Demand phase for Free and Paid Pilots:
For this type of open innovation imitative and this phase of the collaboration funnel, it is advisable for the company to track the following performance indicators:
- Number of requests received for either of these two types of collaborations per unit of time.
- Number of requests sent for either of these two types of collaborations per unit of time.
- Average cost of attracting one demo; this might include the travel budget of the startup collaboration team or certain event sponsorships.
Measuring the Live phase for Free and Paid Pilots:
For this type of collaboration and this phase of the collaboration funnel, it is advisable for the company to track the following performance indicators:
- Percentage of initiated demos from total proposed (for added clarity this should be ideally computed separately for each type of demo).
- Invested capital per unit of time (for paid demos).
- Average invested capital per unit of time (for paid demos).
- Invested resources in a unit of time for either of these two types of collaborations (e.g. time investments).
- Average invested resources per unit of time for either of these two types of collaborations.
- Progress in accordance with a pre-agreed roadmap.
- Progress towards pre-defined goals.
Measuring the Outcome phase for Free and Paid Pilots:
For this type of collaboration and this phase of the collaboration funnel, it is advisable for the company to track the following result indicators:
- Percentage of completed pilots from the total initiated.
- Average cost of completing one demo, including both the Demand phase cost and the Live phase cost per unit of time.
- Collaboration specific outcome which will most likely vary from demo to demo but they should be mutually agreed upon at the beginning of each demo. (e.g. if the collaboration was geared towards lowering the on-boarding of new clients on a certain corporate developed solution through the deployment of a startup owned technology, then the result indicator that needs to be tracked is on-boarding time reduction; other examples might include cost savings, or new revenue).
- Average time to outcome.
In a next post we will be looking at the indicators for another one of the remaining three open innovation initiatives types.