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December 17, 2017 By alexjcooper

Justifying Projects When ROI is Unpredictable

Justifying Projects When ROI is Unpredictable

“How do we justify truly innovative projects when hard numbers are lacking?”

By definition, truly innovative projects will have few, if any, ‘hard numbers.’ You might hit it big – or not. But like the lottery, you have to play to win. The challenge is securing resources and having a realistic plan to hang in there until it makes sense not to.  

According to technology and innovation expert Jay Paap, president of Paap Associates, a common mistake companies make is to minimize risk by waiting until unknowns are resolved. Unfortunately, the consequence is missing the window of opportunity while competitors step in.  

There is a better way! 

Manage exposure versus risk

Paap advises product developers to manage exposure to risk rather than worry about risk itself. Exposure, Paap explains, refers to loss of investment (time, money), loss of reputation, and loss of opportunity. Exposure can be managed, even if uncertainty can not.  

Exposure to lost investment can be managed by partnering, spinoffs, and willingness to kill projects when needed. Exposure to lost reputation can be managed by shifting the definition of success. Exposure to missed opportunities can be managed by moving quickly without knowing all the answers.

The main idea is to refocus on exposure – this enables organizations to invest in projects with great potential benefit even when there are significant unknowns.

Project reviews and rational decision-making 

Once this new context has been established, the next stage is reframing project reviews. Innovative project reviews should focus on the opportunity versus ‘the plan.’   Track what you learn about the market, technology, and options (versus ‘targets’) and re-define success as making good decisions  (continue, speed-up, slow down, redirect, kill, spin-off) rather than meeting on-time or budget goals.

As for choosing which opportunities to pursue, Paap offers the following keys to rational decision-making in the absence of hard numbers: 

  • Ask the right questions.
  • Seek the best data possible, which may or may not be quantifiable.
  • Involve a broad cross section of organization – for quality and commitment.
  • Use formal frameworks to guide collection, storage, analysis, and sharing – be systematic in collection.
  • Use ‘informed judgment’ to make the decision – be intuitive.

4 questions to ask – identifying opportunities with landscape maps

He describes how to use landscape maps to identify opportunities. These maps help link together market and technology factors for current and future products and services by asking:

  1. What product or service characteristics affect purchase/usage decisions – what do your customers value and why?
  2. How can technology be used to provide or improve these characteristics – what is the role of technology?
  3. How mature are the needs and technologies – is there leverage?
  4. Profile the competitors’ capabilities – can you gain an advantage?

NOMMAR – a 6-step rational and risk-sensitive approach to choosing opportunities

The overall approach Paap recommends to evaluating projects – without the numbers — is a six-step approach he calls “NOMMAR”:

N:    is there a customer need? (someone will want it)
O:    are their technology options? (someone can meet the need)
M:    is there a potential market? (someone will pay)
M:    is there a business model? (someone could do it)
A:    do we have a realistic approach? (we could do it)
R:    is it relevant? (we should do it)

For each of these steps, he outlines the inputs and data sources to use: 

N: Customer Need.  Look at needs versus wants/requests – customer vs. product — as well as current and future customers and needs.  Data sources and tools: Customer insight: (VOC, MOC, visits, planning, etc), unobtrusive methods (internet, trade shows, ethnography, etc), problem research / context analysis, ‘Lead user,’ technology forecasting.

O: Technology Options. Take stock of existing technologies – your firm or industry, and other industries. Also explore emerging technologies designed as replacements and organizations with similar problems. The key is to focus on problem/need not expected solution. Think broadly. Data sources and tools: standard CTI resources (patents, literature, VCs, grants, etc); Technology Scouting; ‘Customer Focused Technology Planning.’®    

M: Potential Market. Check past innovation adoptions/analogs and customer interactions. Be sure to realistically assess resistance. Data sources and tools: Potential customers, related markets and leading industries.  If incremental, use quantitative tools like conjoint analysis and value/benefit assessment relative to alternatives.

M:  Business Model. Models are ‘rules of game’ – independent of players. Look at past adoption trends for innovation and analogs of approaches used in other industries. Look at both numbers and logic – “I could see this being big.” Data sources and tools: Customer interactions, analogs, imagination.

A:  Realistic Approach. Fit with three Rs: resources, risk, resistance. Consider all development options: traditional, corporate venturing/OI; internal ventures, partnering, acquisition, licensing, spinouts. Data sources and tools: Roadmapping of technical requirements; risk management (alliances, opportunity focused gates, spin-outs and licensing, etc.). Do a mini-business plan only, before relevance review.

R: Relevance.  Fit with strategy, fit with image. The key is to look at both what an opportunity does and what it prevents you from doing. Data Sources and tools: Strategic vision, clear portfolio management and balancing guidelines.

Bottom Line

Paap reminds us that “innovation cannot be ordered, but orderly processes can increase the level of innovation.”   Often the best opportunities are the least quantifiable. While risk may seem higher without numbers, this should not be a deterrent when it comes to innovation. The key is to think of risk exposure rather than the unknowns, and to ask the right questions (NOMMAR). By applying this framework to new ideas, your decisions will be sound. 

For further insight:

Jay Paap’s acclaimed two-day course Product & Technology Roadmapping for Future Growth will be held November 14-16, 2o18 in Cambridge, MA. Participants receive templates, examples, and individualized action steps as well as access to Jay for implementation questions after the class has ended. Seats are limited, reserve online or call 781-801-8080.

Filed Under: General, Roadmapping Tagged With: JayPaap

September 29, 2016 By alexjcooper

Dr. Robert Cooper on Agile-Stage-Gate Methods

Dr. Robert Cooper on Agile-Stage-Gate Methods

Recently published research by Dr. Robert Cooper in Research-Technology Management and the Journal of Product Innovation Management documents how leading organizations are blending Agile techniques within their Stage Gate systems for all kinds of products, not just software. This emerging approach allows organizations to gain the speed and rapid customer feedback of Agile methods along with the control systems and longer-term planning capabilities offered by Stage Gate systems. 

Dr. Cooper offers public and inhouse workshops on how leading organizations are combining Agile methods with their stage-gate systems and achieving superb results. This is a great opportunity to get expert guidance on how to update your innovation process for faster development and greater customer satisfaction. For more information, call Alex Cooper at 781-891-8080 or email alex@roundtable.com.

Filed Under: Agile Development, news

May 21, 2015 By alexjcooper

Gene Slowinski

Gene Slowinski

Gene Slowinski is the Director of Strategic Alliance Research at the Graduate School of Management, Rutgers University and Managing Partner of the Alliance Management Group, a consulting firm devoted to the formation and management of strategic alliances, mergers and acquisitions. Prior to forming the Alliance Management Group, he held management positions at AT&T Bell Laboratories, and Novartis Corporation. In addition to a Ph.D. in Management, Gene holds an MBA, and a Masters Degree in the sciences. He is a member of Los Alamos National Laboratory’s Technology Commercialization Advisory Board

For the last 25 years Dr. Slowinski has consulted and conducted research on the formation and management of strategic alliances, joint ventures, mergers, and acquisitions. His clients include GlaxoSmithKline, Merck, Lucent Technologies, Motorola, Johnson & Johnson, Ethicon, ExxonMobil, General Mills, Eastman Chemical, Kraft, Becton Dickinson, and many other Fortune 500 firms. An author and lecturer, Gene has presented his work to The Conference Board, the Licensing Executives Society, The Industrial Research Institute, and The American Electronics Association. His articles on managing strategic alliances can be found in Business Horizons, Research*Technology Management, Mergers and Acquisitions, Economic Development Quarterly, Les Nouvelles, Cooperative Strategies in International Business, The Journal of Advanced Management, and Managing the High Technology Firm. With Matt Sagal, he co-authored the book The Strongest Link. His newest book, Reinventing Corporate Growth is the leading book on growing the corporation.

Gene is active in the technology management community. He is a member of the Industrial Research Institute’s Research-on-Research Committee, and the Technology Management Research Center at Rutgers University. In addition, he is on the Board of Directors of Advanced Adjuvants LLC.

Highlights

Gene brings senior level executive experience yet is unafraid to ‘get his hands dirty.’ He has seen it all – the good, bad and ugly – and can help you deal with tough alliance, acquisition, and technology management issues. Whether you’re looking to form new partnerships, fix current ones, exit altogether, or integrate processes and people post-merger/acquisition, Gene is your guy. His humility and sense of humor don’t hurt either!

Expertise  

Articles/Videos/Free Downloads

  • Allocating Risks And Rewards In Collaborative Agreements Using The Financial Structure 
  • Good Practices in Open Innovation   
  • Making Open Innovation Alliances Pay Off: 5 Keys to Success

Resources

  • Quick Start Kit
  • Reports
  • Self-Assessment Tools

Services offered:

  • Phone consultations
  • Assessments
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Filed Under: Workshop Leader Tagged With: Open Innovation

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