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Prioritizing Concepts and Creating Business Plans.

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Presentation on theme: "Prioritizing Concepts and Creating Business Plans."— Presentation transcript:

1 Prioritizing Concepts and Creating Business Plans

2 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 Advisors2 Source: New Markets analysis

3 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 Initial Screen Using organized methods to systematically reduce the number of ideas flowing through the innovation funnel Developing Ideas Developing a Business Plan 1 23 Prioritization Decision to Build Business Plan Using clear tools to fairly evaluate ideas 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 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 Managing Risk & Uncertainty Using a uniform approach for identifying big risks and preparing to manage them in the right order 4 Copyright 2013 New Markets Advisors3 Source: New Markets analysis

4 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, 2009 Copyright 2013 New Markets Advisors 1234 4

5 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 1234 5 Source: New Markets analysis

6 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; Path-dependent risks Deal-killer risks Easy-win, high-ROI risks Value 1234 6

7 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 1234 7

8 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 8 1234 Source: New Markets analysis

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 Copyright 2013 New Markets Advisors9 Established marketsNew markets Competitor intellectual property and patentsEmerging platform technologies New sales channelsNew business systems Changing pricingChanging customer capabilities Changing market shareChanging customer behavior Changing sales channel marginsChanging business partner incentives Regulations’ downsideRegulations’ upside Source: Wunker, 2011

10 Building business plans – company activities should support delivery of the offering Copyright 2013 New Markets Advisors Strategy Target customers and why the company will win vs. competitors Financials Structure of P&L, balance sheet, and cash flows produced by the model Partners Suppliers, channels, and other key members of the ecosystem Competencies What the business must do well to succeed, overtly and culturally The Offering What customers are buying, including any “free” add-ons and intangibles Source: Wunker, 2011 10

11 Example – new business success due to a comprehensive plan Copyright 2013 New Markets Advisors11 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

12 Comparing business plans Traditional South African BankCapitec 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 Copyright 2013 New Markets Advisors12 Source: Wunker, 2011; New Markets analysis

13 Relevant services from New Markets 13Copyright 2013 New Markets Advisors 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

14 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 14

15 Our team’s publications have appeared in: Copyright 2013 New Markets Advisors15

16 Contact Copyright 2013 New Markets Advisors16 Stephen Wunker Managing Director New Markets Advisors 245 First Street, 18 th Floor Cambridge, MA 02142 USA Tel. +1 617 337 3060 Fax +1 617 337 3070

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