How to value innovation and make strategic steps to leap ahead of others

Businesses must continue to innovate to stay afloat and create a future. Here are some of the various types of innovation:

??¤ ?Complementary functions

??¤ Combine two into one

??¤ Substitute materials

??¤ Add feature

??¤ Remove feature

??¤ Embed feature

??¤ Separate feature

??¤ Reduce size

??¤ Enhance feel

?Each of this innovation has proven to be a game changer that transform businesses.

?But how to evaluate and estimate the worth of such innovation?

?1.??????Translate the innovation into financial terms. Innovation on its own can be subjective and abstract. Each person could look at it differently and have a different value perspective. Businesses cannot make sound decision based on personal perspective. It has to be crystalized into financial numbers. The financial exercise includes the consideration of both the internal (the organization’s skills, capacity, leverage power, financial standing and relationships) and external drivers (interest rates, employment status, political condition and economic outlook). These factors drive the understanding and determinant of the financial outcome that will decide whether that innovative idea is a GO or NO GO.

?2.?????Make comparable to fairly justify the financial outcome. In order to avoid biasness, comparable should be made to justify the expected outcome that it falls within the range of acceptance. Comparable, if can be obtained must undergo adjustments before use as it is quite unlikely that you will get a similar comparable to fit into the modelling. Failure to make those adjustments will grossly swing the data to the wrong side and therefore create wrong expectation.

?3.?????Determine the business intrinsic economic valuation. This valuation reflects the future business plans related to the innovative assets and its value is assessed using different methods e.g., discounted cash flow. The valuation may include both tangible and intangible value depending on the innovative asset. This gives a fair value of the business for comparison.

?4.?????Create scenario planning to cater for changes. Innovation is about creating something new that can be subject to a number of changes. The business must consider multiple scenarios and probabilities in order to determine its impact should any of those scenarios happen. This aids the decision-making process and timeliness to make alterations as needed. This is a dynamic exercise to cater for changes in ?variables that can be assessed through simulations.?

?5.?????Post-launch tracking for success. A vast majority of all innovation work are not track for comparison-to-plan after their launch. There is no post-launch comparison on its financial progress and picking up of valuable lessons to adjust, fine-tune and make it to plan. This missing out is a very costly financial affair (not to mention there is no accountability should the innovation fail). But successful companies that bank on innovation as a critical success factor, develop post-launch tracking to monitor and bring the innovation to be on the course to success.

?★·.·′ˉ`·.·★ As a whole, innovation that goes through strategic mapping-out on its implementation is always on a better footing to be successful.?