Fast & Relative Innovation Prioritization

October 1, 2019 Focus area: Continuous Innovation

"The key is not to prioritize your schedule but to schedule your priorities." - S. R. Covey

Prioritizing is one of the most difficult tasks in life. Whether you are deciding to go out with friends or watch your son’s soccer game (which he is going to win anyway) or it might be introducing wearables to your employees versus investing in this lifecycle management project that IT is screaming about - the goal remains the same. The goal of prioritization is to decide what needs to be done first and foremost (and then second, and the third, and so on). However, the problem with prioritization is that it is a decision to execute one project while delaying another, which is socially hard and sometimes even highly unfavorable. So, whether it is your significant other, your colleague or your boss, you might need say: you are first, and sorry honey, you are second in line today.

While helping clients to make better decisions based on objective and data driven way, I often use Agile prioritization mechanisms such as WSJF. This enables people to make fast and objective decisions based on economic principles such as quantifying cost of delay and avoiding incorporating politics. While applying these mechanisms into innovation management the COIN-Team[1] and I experienced that basic estimations about business value, costs and lead time were really time consuming, prone to opportunistic behavior from the innovator and basically looking into a crystal ball.

In order to solve this issue, me and the rest of the COIN-Team designed a prioritization mechanism that enables you to evaluate the innovation potential in both a technological as well as a commercial perspective while balancing it with the effort and time it requires to validate your concept in the market. We call this mechanism: Weighted Fastest Innovation First.

Weighted Fastest Innovation First (WFIF) is a measurement to facilitate objective decision making in an innovation process is based on Weighted Shortest Job First(WSJF)[2], NASA’s Technology Readiness model[3,4] and Demand Readiness level[5]. It helps Innovation Managers, Product Owners, and Portfolio Management prioritize the innovation and execute on the innovation with the highest capitalization potential in the shortest amount of time. The formula is as follows:

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Potential Value in 5 Years (PV5)

Determine the potential value that the innovation will bring the organization in the next five years, from the moment the innovation enters the experimentation phase. The value is defined as financial value e.g. profits, non-financial value and intangible benefits such as data-collection, goodwill and brand recognition. The five-year timespan is based on the 'Return on innovation’-metric, a common metric in innovation management, which uses a 5-year time box. This time box reduces the room for error, as well as opportunistic behavior, and ensures that one identifies the expected business value in relation to the business model.

Market Receptiveness (MR)

Market receptiveness is based on the Demand Readiness Level [5] which is explained by the maturity of the ability of the intended customer in terms of expressing a need (see attachment). However, since this implies a static situation and excludes the expected impact in 5 years, I define MR as: the openness of the intended market and the expected impact to the market when introducing the innovation. Given the fact that the market for this innovation may not yet exist, we need to determine whether the market is already saturated or does the market consist of primarily ‘early adopters’ with no potential large target group readily available (e.g. when the microwave was introduced). This offers a completely different market response in comparison to a situation where our solution offers a novel solution to a problem that is already widely recognized and to which a large receptive market already exists (such as the autopilot function introduced by Tesla). Relevant questions to determine the market receptiveness are: ‘Are we solving an acute problem in the market?’ , ‘Is the market growing or saturated?’ ‘Are there regulatory or other barriers?’, ‘How likely can we gain market leadership?’, etc.

Technology Readiness (TR)

Technology Readiness describes to what degree the innovation is technically ready to be implemented in the market. A low Technology Readiness Level (TRL) translates to a higher risk in implementation since the majority of assumptions and hypotheses still need to be tested: what is our innovation capable of and how does it behave in an operational environment. NASA has created a model for the assessment of Technology Readiness Levels (TRL) that has become widely adopted in business to determine TRL as one of 9 levels, ranging from Level 1 (Basic principles observed and reported) to Level 9 (System proven through successful operation). So, the TR interrogates the technical feasibility but does not indicate the required time to develop the Minimum Viable Product MVP!

Effort to MVP

This is the job size of the innovation. Since we are talking about innovations and thus new products and services, we need to lower the batch size and validate as soon as possible. Therefore, instead of estimating full integration: we estimate effort to MVP as this is a vital point in the innovation process. If there is already a prototype, the effort to MVP is lower. However, if there is no prototype, nor functional nor digital the effort to MVP is high. Questions that we need to ask to determine the job size or effort to MPV: What is the expected time, effort, uncertainty and complexity to launch a minimal viable product?

The power of relative estimation

It may sound counter-intuitive, but for the purpose of prioritization of innovations in a portfolio (which innovation should we spend our time and money on first), it is not necessary to know exactly what the business value of the innovation will be. Again, the goal of prioritization is to define the first thing we need to do, and, in this case, what is the first idea we need to start experimenting with based on which innovation is expected to capitalize in the shortest amount of time. Relative estimating on the other hand, is less time consuming, easier because most people are visually orientation, and it stimulates knowledge transferring by using the collective knowledge of the group which enables us to make more reliable estimations.

Conclusion

Where innovation prioritization is a difficult and time-consuming job for many, WFIF offers an easy tool to answer your key question: what should we do next? By identifying 5 key variables: Potential value in 5 years, technology readiness, market receptiveness and effort to MVP using relative estimations, MVP thinking and only tailoring the decision making to the innovation process you will be able to make better decisions and increase your innovation capitalization.

References

  1. COIN - Continuous Innovation Framework (2018), Online Available at https://continuousinnovation.net/
  2. Reinertsen, D. (2012) Principles of product development flow
  3. Heslop, L. A., McGregor, E., & Griffith, M. (2001). Development of a technology readiness assessment measure: The cloverleaf model of technology transfer. The Journal of Technology Transfer, 26(4), 369-384.
  4. NASA.com (2018). Technology Readiness Level. Online available at: https://www.nasa.gov/directorates/heo/scan/engineering/technology/txt_accordion1.html
  5. Paun, F. (2011). Demand Readiness Level (DRL), a new tool to hybridize Market Pull and Technology Push approaches: Evolution of practices and actors of eco-innovation.