The focus should not just be on products and services when running experiments to test new business ideas. Our focus should be on assessing if we are making progress from our initial idea to a profitable business.
Teams need to show hard evidence that a market exists and customers are interested (i.e. desirability), that the required infrastructure can be built and managed (i.e. feasibility), and evidence that the projected revenues and profits are not a fantasy (i.e. viability).
We developed a tool to assess the progress that innovation teams are making in their quest to find business models that work.
An important part of innovation is testing new business ideas with experiments. However, it is also important to note that the goal is not to simply run experiments, but to make innovation progress. We use experiments as a tool to find answers to key innovation questions and reduce the risk of a new idea. To help with this process, we developed The Innovation Project Scorecard.
This tool can be used by:
The first section of the scorecard focuses on strategic fit, which is a key factor for innovation success within established companies. We have learned that innovation teams often find it difficult to secure ongoing resources and budget if they don’t have support from a key sponsor or if their project is not aligned to their company’s vision and innovation guidance. As such, part of making an innovation project successful is ensuring that innovation teams are thinking about strategic fit upfront.
The second section of the scorecard focuses on risk reduction around the business model that the team is working on. We ask whether there is evidence of desirability (e.g. our critical customer segments have the jobs, pains, and gains relevant for selling our value proposition); feasibility (e.g. we have the right technology and resources to create our value proposition); viability (e.g. we know how much our customers are willing to pay us and how they will pay) and adaptability (e.g. we understand the competitors and emerging players in our markets).
The final section of the scorecard focuses on the potential size of the opportunity. Do we have evidence for the financial value that our new idea will create? At the beginning of an innovation project, the financial value may not be clear. However, as the project progresses, teams should start to gather evidence around the financial value of their idea. The more leaders and teams know about the value of an idea, the better decisions they can make about whether to scale or stop work on an idea.
How To Use It
A closer look at the questions within the risk reduction section of the scorecard reveals that they are fully aligned with the nine building blocks of the business model canvas and the four sections of the business environment canvas. Our goal was to make sure that the scorecard can help leaders and teams to track progress against the key elements for innovation success (i.e. a profitable business model that fits into its business environment).
The evaluation criteria for progress are based on the how much evidence the teams have gathered, not opinion or conjecture. We score teams on whether they have no evidence, evidence from one experiment or evidence from multiple experiments. We have learned that teams with evidence from more than one experiment make a more compelling case for investment as they are likely to be picking up a strong signal rather than noise.
We have found the scorecard to be useful when teams are pitching their innovation projects to leaders for investment. We believe that decisions to invest should not be based on whether leaders like or dislike the team’s innovative idea. Rather investment decisions should be based on evidence of progress towards a profitable business model (i.e. desirability, feasibility, viability and adaptability).
We have used an adapted version of the scorecard in our work with Bayer’s innovation sprint teams. We trained leaders to evaluate team pitches based on evidence. Since then, we have been iterating on the tool for use during our innovation sprints and we recently used it to evaluate progress within our own app cell’s innovation sprint.
The scorecard is not only useful for evaluating pitches for investment. Leaders, coaches and teams can also use the tool to benchmark an innovation project at any time. For example, we recently used to the scorecard with the corporate innovation team working on multiple projects. For each of their projects, we were able to show how much evidence they had for desirability, feasibility, viability and adaptability. Each project had a unique pattern showing different levels of evidence for each element. This helped the team to decide what to do next.
The scorecard can also be used after each sprint or set of activities. Teams can return to the scorecard and evaluate for themselves whether they are moving the needle on their project. Are they gathering enough evidence in support of their value proposition and business model? This can help focus a team on testing the right things at the right time.
Running experiments is an important part of innovation. The Innovation Project Scorecard helps teams to continuously evaluate whether the experiments they are running are helping them to make progress towards finding a profitable business model.