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Open Innovators Outperform the Market by 16.9%

At the Open Innovation Summit last week in Orlando, there were a number of companies there discussing their various initiatives for open innovation. What is open innovation? UC Berkeley professor Henry Chesbrough, perhaps the father of the movement, formulated this definition several years ago:

Open innovation is a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology.

At the Summit, several companies expressed their growth related to and/or impact of open innovation:

Cisco: Cisco’s internally generated growth is at 5%. Its partner-based growth is 10%. #ois09

Clorox: Clorox target for growth from innovation is 4%. Last few years around 2.5% to 3.5% = significant portion of growth. #ois09

Royal Dutch Shell: Conser: About 40% of projects in Shell’s R&D program come from GameChanger. #ois09 [GameChanger is its open innovation program]

Rockwell Collins: Aggarwal: 75% of firms expect 40% of innovation to come from external sources by 2012. #ois09

Hewlett Packard: McKinney: 60% of ideas generated internally. Via HP Garage. Use employee crowdsourcing to filter and refine these. #ois09

Given the way these companies described their open innovation efforts, I decided to check out their stock performance. Hat tip to Jackie Hutter for suggesting this idea.

The table below compares the 5-year performance of the companies presenting at the Open Innovation Summit against the S&P 500:

It’s not a clean sweep, but most of the companies have outperformed the S&P 500 handily the past five years. While it’s not all due to initiating open innovation, it appears that you can’t rule out its influence on company performance.

Here’s how industry consultant Stefan Lindegaard describes the open innovation landscape:

I also argued that only about 10% of all companies are adept enough at open innovation to get significant benefits today. Another 30% have seen the light and are scrambling to make open innovation work and provide results that are worth the bother. I call them contenders.

The other 60% are pretenders—companies that don’t really know what open innovation is and why or how it could be relevant for them.

Looking for growth ideas? See what the firms in this open innovators stock index are doing right.

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My Ten Favorite Tweets – Week Ending 120409

From the home office in the middle of the road by my smashed up SUV with a nine-iron imprint on my face…

#1: RT @parkerlsmith Foursquare: Democratizing the Loyalty Program http://post.ly/Dpfx > SMBs can use @fourquare as a loyalty program

#2: FT.com – We’re all selling now: the evolution of online reputations http://ow.ly/Izba #socialmedia #e20 #reputation

#3: What can email interfaces learn from Twitter clients (e.g. Tweetdeck) to manage the overload? http://post.ly/Dlww

#4: Collaboration Is Hot: Why Now? > Forrester survey shows idea mgt tools are a top 2 #e20 priority http://post.ly/DuBB

#5: IT@Intel Blog: All I Want For Christmas is my #E20 > ideation was the one measurable ROI #innovation http://post.ly/E8Nt

#6: Fox: Cisco has a product ideas wiki for employees. Dedicated VC funding for ideas. Similar to what AT&T is doing w/ Spigit. #ois09

#7: Lasher: Innovation lever = do small thing w/ big result. Avoid going right for big bang. Otherwise corp antibodies kill you #ois09

#8: McKinney: 60% of ideas generated internally. Via HP Garage. Use employee crowdsourcing to filter and refine these. #ois09

#9: RT @AndreaMeyer: HP Labs saved $2 bln $ from its supply chain through internal innovations #ois09

#10: Just started a posterous account: http://bhc3.posterous.com/ Collect stuff I find along the way. FriendFeed meets Evernote meets blogging.