Prioritizing Concepts and Creating Business Plans

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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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


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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Prioritization step 3 – managing risk and uncertainty


• 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


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


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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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


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


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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



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


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


Recent Clients

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Contact


Stephen WunkerManaging DirectorNew Markets Advisors245 First Street, 18th FloorCambridge, MA 02142 USATel. +1 617 337 3060Fax +1 617 337 [email protected]

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Prioritizing Concepts and Creating Business Plans