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CHAPTER 5 : Decision-making under uncertainty - Coggle Diagram
CHAPTER 5 :
Decision-making under uncertainty
The problems dealing with planning
‘Life is what happens while you’re busy making plans …’ (John Lennon)
Inherent uncertainty in innovation so need for dynamic approach to selection
Stage gate model of continuous review
Assessing innovation projects
'gut feel'
Simple financial measures – e.g. return on investment
Complex financial measures – e.g. NPV
Decision matrix – multi-criteria
The problem of multiple projects – portfolio management
Portfolio Management
No limit to projects taken on
Resources spread too thinly
Reluctance to kill-off or 'de-select' projects
Resources starvation and impacts on time and cost -overruns
Lack of strategic focus in project mix
High failure rates, or success of unimportant projects and opportunity cost against more important projects
Weak or ambiguous selection criteria
Projects find their into the mix because of politics or emotion or other factors- downstream failure rates high and resource diversion from other projects
Weak decision criteria
Too many 'average' projects selected, little impact downstream in market.
Risk Averse mentality diffuses innovativeness
It’s a great idea but-
A risk averse person prefers lower returns with known risks rather than higher returns with unknown risks.
It’s not our business
It’s not a business
It’s not big enough
Not invented here
Nice idea but doesn’t fit
We’re doing OK
It’s not broken….
Great minds think alike
(existing) customers don’t want it
We’ve never done it before
Uncertainty and innovation
The innovation funnel