By Don Creswell, SmartOrg
You have developed a number of great, innovative ideas for new products. The team is clamoring for support and funding, but resources are limited. How do you go about presenting your case? And, if you are “the boss,” how do you cut through the smoke and mirrors to determine who gets the green light?
When building your business case, consider the following:
- Does anyone care? What is your evidence that there is a market or need for the product? You may not have hard numbers given this is something very new, but you need to have some rationale and passion to support your position.
- Can we do it? Do we have the technology, production capability and access to a market?
- Should we do it? Given positive answers to the above questions, can we make sufficient money to justify the investment?
Product innovation is a risky business — the success rate of new products is often less than 20 to 25%. Failure to consider uncertainty when developing business plans is a common reason for the low rate of success. While you cannot guarantee 100% success, you can improve your batting average by identifying and dealing with technical, development and commercial uncertainties.
Given uncertainty and the high failure rate of new products, a strategic innovation portfolio enables you to hedge your bets. A strategic portfolio focuses on the “What” of portfolio management rather than the “Who” or “How.”
“What” provides the rationale for determining whether or not to invest resources (money and people) in the project. “What” addresses strategic, uncertainty and economic issues, providing answers to the question “should we do it?” Addressing these factors will help you make an objective, and more believable case, when making proposals upward. If you are the decision maker, such a plan will help you vet the proposals by having your staff defend their positions with objectivity rather than through opaque spreadsheets and PowerPoint presentations.
When the “What” question is resolved and the project is approved for development, project management, phase gate and other operational/tactical decisions come into play. Typically, this is managed within the operational or tactical portfolio, where real data is available to support decision making.
Managing Portfolios to Optimize Value
To improve the success ratio of your innovation investment, you will benefit from managing both types of portfolios. At the strategic level, decisions need to be made about which projects to include in the portfolio based on the “What” factors described above. At the operational level, decisions need to be made about the “Who and How” factors.
Throughout development, projects in both portfolios need to be updated and reviewed at gate meetings to assure that changes that affect the business portfolio are reflected in the operational/tactical portfolio. For instance, an unanticipated move by a competitor may require a major change in the development cycle.
References: See “Assessing the State of Innovation” article and “Forecasting under Uncertainty” white paper below.