By Filippo Frangi
In a world of continuous challenges, Open Innovation has become essential for companies, driving significant transformations and providing support during a period of crisis. It promotes Corporate Venturing and innovation, creating diverse value and stimulating new ventures. Effective KPIs are crucial to measure Open Innovation’s impact on corporate culture, skills, and strategic alignment, ensuring meaningful business outcomes.
Companies and startups cohabit in an environment constantly animated by new challenges, from fluctuating economies to geopolitical uncertainty, from ecological transition to demographic issues. In this context of “permanent crisis”, the adoption of digital and truly open innovation seems to be an important critical success factor. Digital and Open Innovation are in fact the paradigms on which the development of the last few years has been driven, particularly from 2020 onwards.
In a world of constant change, Open Innovation1 has proven to be a catalyst for transformation. The experience gained in recent years has accelerated the adoption of this approach, becoming a common practice for most large companies. According to data from the Startup Thinking Observatory of the Politecnico of Milan2, 86 per cent of large companies in Italy currently embrace Open Innovation, demonstrating a steady growth in recent years. The level of adoption is in line with the benchmark of comparable European economies. This is mainly done through “inbound” approaches, allowing companies to absorb external opportunities to enrich their internal innovation. However, “outbound” initiatives are also growing, representing an emerging and experimental phenomenon to which attention should be paid.
Companies have a strong need to rely on Open Innovation to quickly identify new solutions and opportunities that bring real business impact.
The Open Innovation phenomenon is giving rise to many forms of value creation and, in particular, is stimulating Corporate Venturing, that is the development of corporate mechanisms designed to accelerate innovation and the creation of new ventures originating within or outside the boundaries of a company. Corporate Venturing has undergone rapid evolution in recent years with an increasing heterogeneity of inbound and outbound models, such as Venture Clienting, Venture Building, corporate accelerators and incubators, Corporate Venture Capital, and partnerships with startups.3
Corporate Venturing is a strategic tool to enable companies to create, capture, and deliver innovation consistently, efficiently, and repeatably. It is also a relevant resource for the economy as a whole, because it can help, through the resources of large and medium-sized companies, to support new entrepreneurship such as that of the startup ecosystem. It is a positive stimulus to entrepreneurial culture that can reinvigorate the innovative capacity of more structured companies and facilitate technology transfer.
The level of maturity of companies in adopting Open Innovation approaches is thus growing, with a greater consistency with the companies’ strategic direction, and the ability to exploit different models and methodologies to respond to specific needs. If, until a few years ago, innovation in companies was aimed at exploring, experimenting, and opening up to external opportunities, today more and more companies feel the need to consolidate approaches and structure innovation, operating models that are able to bring concrete results. Companies have a strong need to rely on Open Innovation to quickly identify new solutions and opportunities that bring real business impact.
When it comes to measuring and monitoring the results and impacts that Open Innovation can have in a company, it is not an easy problem to solve. Firstly, because innovation projects are characterized by a highly uncertain outcome and, even in the event that this outcome is negative, they are able to generate useful contributions in the organization throughout all phases of development. For this reason, it is necessary to combine a set of indicators at both qualitative and quantitative levels, capable of capturing all the impacts of innovation, even those more difficult to quantify. Restraining the use to traditional indicators is not enough, because criteria such as ROI, which maximizes revenues and reduces costs, typically reward projects that use existing assets and models, thus limiting innovativeness.
KPIs must be able to support operational decisions, not limiting the development of innovation.
Large companies go through an initial phase in which Open Innovation is mainly a marketing and communication tool, with result indicators measuring, for example, the number of Call4Ideas or challenges held, the number of hackathons organised, the number of startups seen. This is followed by a phase of greater complexity, in which there is a perceived need to start an internal cultural journey and ecosystem creation, beginning to measure the advantages and disadvantages or the number of initiatives grounded. Companies are going through a phase of greater maturity where they begin to measure the business value generated.
It is therefore necessary to introduce KPIs to measure the impact that innovation, and especially Open Innovation, has on aspects such as corporate culture, people skills and engagement, and the know-how of corporate functions. KPIs must be able to support operational decisions, not limiting the development of innovation but rather acting as a push and a guide towards the strategic direction taken by the company.
As for any other process, having a scheme of indicators to measure results is necessary to take decisions, to verify that the defined objectives are achieved, to ensure that investments are deployed consistently, to identify possible areas for improvement, or to gather the information needed to implement the right corrective actions.
This logic can also support Innovation Managers in providing evidence, both internally and externally, of the results they are able to achieve thanks to Open Innovation, reinforcing its value and fostering greater investment. The combination of the terms “open” and “innovation” can thus be shown as a positive possibility to embrace the uncertain and scary future with boldness and vision, in a choral revolution that may change the world.
