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It is real? We can win? Is it worth doing? Managing risk and reward in an…
It is real? We can win? Is it worth doing? Managing risk and reward in an innovation portfolio
At a time when companies should take bigger, but smarter innovation risks, their bias is in the other direction
The result is internal bottlenecks of safe incremental innovations that delay all projects, stress organizations and fail to meet revenue targets.
After determining that the market and the product are real, the project team must assess the company's ability to gain and maintain adequate market share.
Simply finding a real opportunity doesn't guarantee success - the more real the opportunity, the more likely hungry competitors are looking at it.
Most companies will find that the majority of their projects are grouped in the lower left quadrant of the matrix and a minority lean towards the upper right.
This imbalance is not healthy if not surprising.
The risk matrix employs a unique scoring system and risk calibration to help estimate the probability of success or failure of each project.
A project's position on the matrix is determined by its score on a variety of factors, such as how closely the behavior of customers.
The risk matrix creates a visual starting point for an ongoing dialogue about the company's mix of projects and their fit with strategy and risk tolerance.
To balance its innovation portfolio, a company needs a clear picture of how its projects fall on the risk spectrum.
Certainly, the probability of failure increases dramatically when a company ventures beyond incremental initiatives into familiar markets. But avoiding risky projects altogether can throttle growth.
Customers will choose a product over alternatives if it is perceived to offer superior value with some combination of benefits, such as better features, lower lifecycle cost, and lower risk.
The team must evaluate all sources of perceived value for a given product and consider the question Does it have a competitive advantage?
The first line of defense is patents. The project team must assess the relevance of its existing patents to the product under development and decide what additional patents may be necessary to protect related intellectual property.
After establishing that the bid can win, the team must determine if the company's resources, management, and market knowledge are better than the competition.
Otherwise, it may be impossible to maintain the edge, no matter how good the product is.
the strength of a market is almost always less certain than the technological capacity to do something; shows that the probability of failure of a product becomes greater when the market is unfamiliar to the company than when the product or technology is unknown.
In fact, research by Procter & Gamble suggests that 70% of product failures across most categories occur because companies misconstrue the market.
The RWW screen is a simple but powerful tool built on a series of questions about the innovation concept or product, its potential market, and the company's capabilities and competition (see the exhibit “Screening for Success”).
It is not an algorithm for making go / no-go decisions, but rather a disciplined process that can be used at multiple stages of product development to expose faulty assumptions.
The RWW screen can be used to identify and help fix problems that are miring a project, to contain risk, and to expose problems that can't be fixed and therefore should lead to termination.
The development team answers these queries by exploring an even deeper set of supporting questions. The team determines where the answer to each question falls on a continuum from definitely yes to definitely no.
This article will outline the selection process and demonstrate the depth of probing required to arrive at valid answers.
Development teams can probe more or less deeply, as needed, at each decision point.
Second, establishing the nature of the market can avoid a costly "tech boost." This syndrome often affects companies that emphasize how to solve a problem rather than what problem needs to be solved or what customer wishes need to be satisfied.
A market opportunity is real only when four conditions are met
the proposed product will clearly meet a need or solve a problem better than the available alternatives
customers can buy it
the potential market is large enough to be worth pursuing
customers are willing to buy the product.
Even when customers have a clear need or desire, old habits, the perception that a change is too troublesome or the belief that the purchase is risky can inhibit them.
Once a company has established the reality of the market, it must take a close look at the product concept and expand its examination of the intended market.
Successful product development requires mastery of market research tools
Even when a market and a concept are real, the product and the company could win, and the project would be profitable, it may not make strategic sense to launch it. To assess the strategic rationale for the development, the project team must ask two more questions.
It is certainly encouraging for a development team when management commits to the initial concept. But the ultimate success of a project is better assured if management signs because project assumptions can withstand the rigorous challenges of the RWW display.