prioritizing concepts and creating business plans
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From idea development to prioritization
• Before prioritizing concepts, idea development should have yielded a detailed list of innovative offerings to further develop
• Prioritization screens for the most feasible ideas to advance to later stages of development
Copyright 2013 New Markets Advisors
Source: New Markets analysis
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Concept prioritization and business plan creation – an overview
Initial Screen
Using organized methods to
systematically reduce the
number of ideas flowing through the innovation
funnel
Developing Ideas
Developing a Business
Plan
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Prioritization
Decision to Build Business
Plan
Using clear tools to fairly
evaluate ideas
Organizing & Developing
Ideas
Using consistent frameworks to build out and keep track of
ideas
Managing Risk & Uncertainty
Using a uniform approach for
identifying big risks and
preparing to manage them in the right order
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Copyright 2013 New Markets Advisors
Source: New Markets analysis
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Prioritization step 1 – initial screen
• Practical guidelines– Group concepts into strategic buckets – eliminate redundant ideas and allow those with
similar ideas to collaborate– Start lenient, but become strict – potentially promising ideas can be refined as they flow
through the process– Do what works for you – pay close attention to what fits the business’s culture and
objectives
• Avoid being weighed down by too many ideas- Avoid devoting disproportionate resources to screening ideas at the expense of building
out and testing ideas- Use a range of tools (e.g., employee voting, idea stock markets, grading rubrics) to make
early screening decisions more quickly
• Be open to finding a great idea, from anyone– Worthwhile ideas should be given a fair shot at gaining support– However, keep in mind your mandate as well as the company’s brand image, core
values, and capabilities
Source: New Markets analysis; Karl T. Ulrich and Christian Terwiesch. Innovation Tournaments: Creating and Selecting Exceptional Opportunities, 2009Copyright 2013 New Markets Advisors
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Prioritization step 2 – organizing and developing ideas
Copyright 2013 New Markets Advisors
Headline:
Brief description:
Additional comments:
Problem it solves: -- Select One --
Enable growth
Reduce costs
Better customer experience
-- Select One --
Project team
External customer
Organization (corporate level)
Who it is for:
• Ideas should be submitted and classified with consistent tags, such as in this abridged sample (right)
– This allows the organization to solicit and focus on ideas that align with a particular strategic initiative
– It also allows employees to seek out project teams working on similar initiatives, or to learn from teams who have succeeded in a given area
• Build out ideas with an audience in mind – rather than focusing on every benefit an idea might bring, focus on those that are most important to target customers or stakeholders
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Source: New Markets analysis
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Prioritization step 3 – managing risk and uncertainty
Copyright 2013 New Markets Advisors
• Choose an approach for determining affected areas of the business
- Organizational approach – impact on different: departments, business processes, customer groups, groups of people
- McKinsey’s “7 S’s” approach – strategy, structure, systems, shared values, skills, styles, staff
- Tools-based approach – related tools such as risk analysis, risk-impact probability charts, or stakeholder analyses
• Prepare to tackle the right risks first
– Risk and value are inversely proportional – removing risk increases value
– Not all risks are created equal, so the sequence for removing risk matters
– Categories of risk may overlap. The goal is to identify the most important uncertainty, and address it early
– Types of risk:
Sources: New Markets analysis; Clark G. Gilbert and Matthew J. Eyring. “Beating the Odds When You Launch a New Venture.” Harvard Business Review, 2010; http://www.mindtools.com/pages/article/newTED_96.htm
Path-dependent risks
Deal-killer risks
Easy-win, high-ROI risks
Value
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Prioritization step 4 – decision to build a business plan
• At this stage, a more rigorous screen will need to be applied to fleshed-out ideas to determine whether they should advance
• For example, 3M adopted the Real-Win-Worth It (R-W-W) screen to evaluate the 1,500 projects in its development portfolio. Companies such as GE and Honeywell have followed suit
– Is there a real market and a real product or service (that someone could make or provide)?
– Can we win? Can our product or service be competitive? Can our company be competitive?
– Is it worth doing? Is the return adequate, at an acceptable risk? Are there other strategic considerations?
• Go-Kill decisions will ultimately need to be made to narrow down the overwhelming number of potential projects
– The decision to kill a project should be made if a negative on one of the R-W-W branches cannot be neutralized
– That decision should be made only after avenues for improvement have been explored
REAL
WIN
WORTH IT
Copyright 2013 New Markets Advisors
Source: George S. Day. “Closing the Growth Gap: Balancing BIG I and small i Innovation.” Knowledge@Wharton, 2006
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Criteria screen must meld with firm’s strategic and financial goals
Copyright 2013 New Markets Advisors
Use color-coded grading systems to reduce the importance placed on artificial numeric grades
Provide clear definitions to ensure alignment on key criteria
Be wary of red zones. While they might just indicate a need for further exploration, they can be deal killers if they fall in important categories
Agree on the right evaluation criteria, and create a uniform tool for evaluating ideas
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Source: New Markets analysis
Copyright 2013 New Markets Advisors 9
Building business plans for ideas that make it through the criteria screen
• In order to tailor screened ideas to new markets, it is necessary to first consider a different set of dynamics compared to established markets
Established markets New markets
Competitor intellectual property and patents Emerging platform technologies
New sales channels New business systems
Changing pricing Changing customer capabilities
Changing market share Changing customer behavior
Changing sales channel margins Changing business partner incentives
Regulations’ downside Regulations’ upside
Source: Wunker, 2011
Building business plans – company activities should support delivery of the offering
Copyright 2013 New Markets Advisors
StrategyTarget customers and why the
company will win vs. competitors
FinancialsStructure of P&L, balance
sheet, and cash flows produced by the model
PartnersSuppliers, channels, and other
key members of the ecosystem
CompetenciesWhat the business must do well to succeed, overtly and
culturally
The OfferingWhat customers are buying, including any “free” add-ons
and intangibles
Source: Wunker, 2011
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Copyright 2013 New Markets Advisors 11
Example – new business success due to a comprehensive plan
• Riaan Stassen, a banking expert in South Africa, created new banking institution Capitec to capitalize on the sector’s poor service to workers of low to lower-middle economic status (households earning between $1,500 and $10,000)
• Stassen built the business plan from a blank slate, careful not to draw from mainstream banks’ business models
Source: Wunker, 2011
Copyright 2013 New Markets Advisors 12
Comparing business plans
Traditional South African Bank Capitec
The Offering • High-end transaction experience with first-world infrastructure for elite customers
• High interest rates on small savings deposits and low fees on cash withdrawals and debit-card use
Strategy • Lower volume of high-cost, complex transactions that cater to the wealthy consumer
• High volume of quick, easy, low-cost transactions for the average consumer
Competency • Levels of involvement higher in the back-office than on the front lines of customer engagement
• Employees have specified roles• Ability to organize and handle
complexity
• Great customer service – employees explain services to target customers
• Small hub of employees to handle back-office functions, the rest to the front line
• All employees in a branch qualified to sell every service
Financials • Must handle more credit transactions and fewer small transactions than Capitec
• Must handle higher amounts of cash daily
• Focus on cash – most small transactions are in cash in South Africa
• Nearly eliminates cash handling – deposits dropped immediately into safes, accessible to staff in armored vehicles
Partners • Other retail banks worldwide • Retailers – to enable easy withdrawals
Source: Wunker, 2011; New Markets analysis
Copyright 2013 New Markets Advisors 13
Relevant services from New Markets
Light-touch counsel on strategy-shaping process
Business plan creation
Deeper involvement in strategy and solution creation
Structuring of primary research and interpretation of results
Organization and/or facilitation of idea development and prioritization processes
Who is New Markets?
• Experts in reframing market space and generating growth• Senior
experience• Creative and
pragmatic• First-class
consultants, thought leaders, and entrepreneurs
Copyright 2013 New Markets Advisors
Recent Clients
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Contact
Copyright 2013 New Markets Advisors 16
Stephen WunkerManaging DirectorNew Markets Advisors245 First Street, 18th FloorCambridge, MA 02142 USATel. +1 617 337 3060Fax +1 617 337 [email protected]