Making decisions is easy when the context is familiar. Throw in some uncertainty, and choices become murky–and as we suggest in chapter 12, the processes for making decisions become less clear as well. Tools that support effective evaluation with existing products might not provide the right guidance when applied to breakthrough–and therefore untested–innovations.
In Chapter 12, we offer an array of tools and show when to use them:
- The Decision Matrix evaluates early concepts against design principles or other attributes you think are valuable, and can help you group concepts into fast track, develop, hold, shop out, or eliminate categories.
- Discount Cash Flow analysis and Net Present Value work with existing offerings and adjacent extensions–but Cumulative Probability and Tornado Charts are better for innovations.
- Real Options Valuation includes ranges of uncertainties in adjusting the potential value of concepts.
- Pilot Testing represents the smallest possible test you can make in-market, while spinning a company out as a Start-up is a bigger bet. Both reveal valuable information for the least familiar and furthest out ideas.
What seems to be working
- The notion of an array of tools, with a way to choose when to use them, is sound.
- Our explanation of the Decision Matrix is the most fully developed of the tools, which is good given its importance.
Areas that need more work or input
- We know more now about how companies evaluate choices—and some of additional factors in play—e.g., beyond customer or financial value, there’s brand value, potential for creating a platform, the insights gained or capabilities developed could be leveraged elsewhere, game theory and ways of outflanking competitors. Our tools and discussion should address them, in addition to further outlining the methods to which we previously referred.
- Although we touched on spinning out pilots or start-ups to understand value, Eric Ries’ book The Lean Startup (2011) has redefined the idea. The integrated build–experiment–adapt–rebuild cycle he outlines needs to be included as part of a portfolio of process which would compliment a portfolio of priority.
- Many readers work in companies that already have decision making approaches—some of which don’t always align with innovation objectives. Might it be useful to suggest alternatives or ways to work within existing systems?
- Are there other decision making issues you’ve faced, or useful approaches, in your work we should know about?