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  • Writer's pictureDavid Kraft

News: Measuring Open Innovation on Financial Performance

As practitioners of open innovation, we have long tried to correlate the work we do with companies to their overall financial performance. Success - when measured by product launches, time to market, return on investment or cost savings - can be straightforward to calculate. But, there are several challenges we run into when the outcomes do not fit neatly into quarterly results. For instance, not every innovation project reaches market, killing bad ideas early saves money but knowledge is gained, and not every company practices open innovation the same. These outcomes tend to emerge over longer time horizons.

Enter into this dialogue - Dr. Henry Chesbrourg and Dr. Qinli Lu - offering their most recent research, "Measuring open innovation practices through topic modelling: Revisiting their impact on firm financial performance".

A few quotes we find particularly interesting from their research:

"The results show that a firm’s overall openness level is associated with improved financial performance. More granular practices developed from our approach, however, show variations."

While going on to say, "the complementarity between internal R&D and individual open innovation practices also varies by practice. Further, the influence of these open innovation practices also varies by sector. Our findings prompt us to conclude that open innovation’s impact on financial performance is nuanced, and that there is no uniform set of best practices to practice open innovation effectively."

Utilizing Natural Language Processing (NLP) to uncover connections between innovation and financial performance is promising. This project, and many more, are helping us take steps to building better tools, systems, and practices for innovation that drives measurable success!

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