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 The organizational innovation experts - at your service! |
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COST OF IDEA MANAGEMENTArticle originally used Euro - but you can get approximate amounts in these currencies... From time to time, when demonstrating our idea management virtual software to prospective clients we are asked about how many ideas the client can expect. We answer: “a highly effective idea management solution can be expected to generate an average of one idea per user per month or 10-12 ideas per user per year.” This sometimes shocks prospects: “But we have 7,000 employees! How will I ever handle so many ideas!?!” Implementing an innovation culture together with an idea management solution requires a significant investment – and the software costs are but a small part of the investment. The greatest cost is staff time. In a worst case scenario, a company will need to undergo a complete culture change from a hierarchically managed company where all decisions come from the top and must be obeyed (or else!) to an innovation culture in which the active sharing of ideas and knowledge is the norm. This is an expensive transition. But, truth be told, such companies rarely make such a big jump. Companies getting serious about idea management generally have a culture which encourages the sharing of knowledge. They usually have some kind of suggestion box system in operation and have discovered the value good ideas offer their firms. Hence, the initial investment is in promoting a new innovation programme based on a comprehensive idea management solution. The cost of an internal promotional campaign such as this will be around €10 per employee per year. The cost of an idea management solution varies greatly. If you purchase a software package, you will also be faced with the costs of servers; licenses (for databases, web server software, etc); IT staff for maintenance of the server; and on-going support. These costs can add up quickly. We offer Jenni idea management, a “virtual software” solution in that we install and maintain the software on our own secure servers and charge clients a per user subscription fee. So there is no issue of additional hardware or IT management costs. Jenni starts at €30 per user per year inclusive of software access (via a web browser), maintenance, regular upgrades, technical support and innovative support. Every idea submitted to an idea management system requires time on the part of the submitter – anywhere from 10-30 minutes, not including time spent thinking about the idea. Let us assume an average of 20 minutes. IdeaMasters (the term we use for people who oversee idea management systems and perform initial screening of ideas, rejecting poor ideas and sending interesting ideas to experts for evaluation) spend anywhere from one to 20 minutes on screening ideas. Clearly undoable ideas can be rejected in a minute or two. Interesting ideas take more time and must be routed to evaluators for expert opinion. Expert evaluators will normally need about 15-20 minutes to perform an evaluation using a tool like our 5x5 criteria based evaluation tool. Of course highly complex ideas can take longer to evaluate – but we are looking at averages here. So, let us consider a company with 5000 employees, generating an average of 10 ideas per employee per year. We'll assume an hourly cost of Euro 30 for employees and Euro 60 for IdeaMasters and experts. Promoting idea management: €50,000 Yikes!!! I hear you say. That's a lot of money. What can you look forward to in exchange for such an investment? There are number of calculations for determining the RoI (return on ideas) of an idea management solution. For this article, we'll consider the value per idea. DaimlerChrysler likes to brag that in 2001, their idea management solution netted 69,000 ideas which generated a savings of €62 million. This works out to about €899/idea – and this fits in with our own observation that a well implemented innovation programme centred around an idea management solution nets an average of €500 to €1,000 per idea (in new income or cost savings). So, in our example 50,000 ideas would mean a revenue increase of between €2.5 and €5 million – certainly a handsome return on your innovation investment. Indeed, Giga Research (a subsidiary of Forrester Research) also found that a “positive total economic impact within one year is reasonable” for the implementation of an idea management solution. As the saying goes: It takes money to make money. And while there is
clearly a significant risk involved, a well implemented innovation programme
centred around an idea management solution can bring an excellent return
on investment. Want to know more about what an innovation programme can
do you for you? Contact us today!. Based on an article (by Jeffrey Baumgartner) published in Report103, 19 October 2004 issue © 2004 Jeffrey Baumgartner
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