Making the Case to Invest in Your Innovation Pipeline
While ROI and accountability measures are highly important in decision making, increased pressure to produce against them creates tension when making the case for innovation investment. After all, the job of those holding the purse strings is to judiciously manage funds while identifying the bets to place for the future. But to some, bets may seem too theoretical. This delicate balance of “here-and-now” and “then-and-there” is challenging to strike, and as such, many organizations find themselves leaning towards short-term focus as the pressures of today outweigh the concerns of tomorrow.
As a result, innovation leaders and others operating within this organizational tension can find themselves unsure of how to best manage the investment opportunities they do have to move ideas in their pipeline forward with a shoestring budget. As you plan spending relative to your innovation pipeline, consider adopting a process to bolster executive confidence throughout the process, while ensuring you focus on innovations with the greatest promise.
Prioritize spend by assessing investment readiness levels, limiting investment until proof of viability exists.
Steve Blank’s Investment Readiness Level builds a comprehensive assessment incorporating key factors from your innovation process (such as market size, competitive opportunity, and solution validation) as the bare minimum to explore before even considering further minimum viable prototyping. The goal in using Investment Readiness Levels is to minimize the investment in ideas until they are evaluated through the lens of the consumer, market, and organizational lenses, allowing you to be smart about the investment allocation toward ideas in your innovation pipeline.
This framework, however, includes nine unique levels which can be a lot to integrate into your existing workflows. To help drive this thinking intoyour organization without adding too many additional steps to your innovation process, consider the following core levels to evaluate your go/no-go decisions.
These stages were designed to be used with lean innovation processes that incorporate philosophies such as design thinking or human-centered design, combining speed with the rigor and validation needed for success, and should be guiding your efforts to generate innovation opportunities from the start. This ensures you have all of the right inputs to make the case for investment and keep momentum going for launch.
Need help building your innovation process to fuel your pipeline? Explore our recent post “Four Considerations When Optimizing Your Innovation Process.”
Stage 1 Investment: Determine the market opportunity.
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With an innovation idea identified, it can be tempting to hit the ground running on execution and prototyping to begin validating its potential. Not so fast! The Business Model Canvas is one evaluation tool that encompasses key considerations to add robustness to the idea and can serve as a quick gut-check of viability. This canvas, combined with a thorough market assessment and validation of the unmet or under-met need the idea is positioned to solve for, can identify early red flags that determine an idea isn’t right for your organization.
Potential red flags to watch for include:
- The market is heavily saturated and there isn’t a strong competitive play
- Your business doesn’t have the right strategic partners or internal capabilities to bring the solution to market
- There isn’t enough prevalence of consumer need to warrant development
- The idea isn’t congruent with the broader portfolio or brand strategy
- The cost structure and revenue potential aren’t aligned
The output of this step includes the core foundations of a business case, key to gaining buy-in for prioritizing spend to validate the idea in stage 2.
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Stage 2 Investment: Expand consumer and business validation.
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Next, it’s time to move from idea to concept. Creating simple renderings, sketches, or wire frames that begin to illuminate the idea will enable testing and iteration to ensure the concept truly delivers on the need, while continuing to map out the business criteria necessary for its success.
How do you know that your idea is worth advancing to stage 3?
- The concept solves a consumer need… and they are willing to pay money for that
- There is a viable revenue model appropriately aligned to the cost structure
- The concept brings in net-new revenue (doesn’t cannibalize with existing customers and/or attracts new ones)
Coming out of this stage, you will have a clearer picture of consumer, market, and ultimate revenue potential, that can be backed by real data to take to leadership to move from the concepting stage.
Stage 3 Investment: Prepare for launch.
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In the final stage, it’s all about fine tuning your approach and setting metrics that create alignment for others to deliver against. This is often the stage in which the idea begins to transition hands from developers to marketers and sales teams – a critical step that can lead to the success, or failure, of launch.
- Developing workable prototypes for more realistic testing and refinement
- Fine tuning your value proposition
- Establishing your operating model to fulfill on the offering
In conclusion, invest as little as possible until you’ve made it through these stages and keep leadership abreast of your progress to support investment asks in the future. Having purposeful stage gates to assess ideas and secure additional investment dollars for development serves multiple purposes: it not only stretches your investment dollars, but also brings the organization along on your journey from idea to market-ready.