How Innovation in Companies Succeed: Innovator creates the product of the future in just two days during probationary employment
Or: From Probationary Innovator to Proven Innovator Jakob Jessen* is an industrial engineer. Throughout his…
Innovation should pay off. Whether it does depends on the business case. More precisely, the “Innovation Business Case“. If there is no foreseeable prospect that the idea will pay off, then you say “There is no business case for that!”. That’s why you often hear in companies:
Innovation? First show me the business case.
That’s what some people say.
Lean back and relax. TOM SPIKE will take care of any Business Case you require.
Innovation doesn’t need a business case: Just do it!
So, who is right? Actually, the business case is clear. Innovative companies have:
But “Show me the business case” of course means something else:
Show me that your idea works – economically, commercially – before we invest in it.
But can you really know everything?
For a raw, unpolished idea, answers are completely uncertain.
That’s not easy to accept – especially for innovators and developers whose strengths lie in technology.
Who will fund it when everything is so uncertain?
We need a business case!
In maximum 20 minutes we will get it straightened out. If it helps you or not. How we could approach your business cases for innovation.
For all those who want to create business cases themselves, here are 7 practical tips for developing an innovation business case:
Roughly speaking, there are three different business cases for innovation. Firstly, they differ as to the point in the process when they can be formulated. At the very beginning, or only after a solution concept exists. The second difference is the degree of detail of the content. The nature of target groups comprises the third difference.
A problem case is suitable for ideas. Neither a solution to the problem nor detailed financial calculations are necessary here. The problem case proves that it is basically worthwhile to think more seriously about a topic. Whether it would be worthwhile for the company in the end, is not yet an issue.
in addition to “A) Problem Case“:
The ZDF Business Case demonstrates rough feasibility. It primarily serves the purpose of convincing the innovation team that others can also be convinced.
in addition to “B) ZDF Business Case”
The full “Innovation Business Case” is what executives and investors want to see in order to be able to make decisions easily. Problem cases and ZDF business cases can created day in, day out. But the innovation business case needs to show clear value. Sure, maybe you can rework it and have another go. But this kind of approach will quickly cause others to lose faith and torpedo the desired innovation at issue.
In one sentence: Don’t just say, “Business Case“. Be clear about what you really mean by it.
Sounds trivial, but it’s also true. The business case should achieve its goal – that is to say, it must appeal to its audience. To do this, it must be clear who the audience is and what they want or don’t want. So pick up your phone and call. Typical points to clarify could be:
Sounds abstract at first. Here is a short pitch to really get the necessary answers:
We are currently working on the business case for our innovation. The business case is aimed at convincing you to invest a 7-figure sum in our project and place 4 people at our disposal for 6 months. What information do we need to provide to get a positive response from you?
In one sentence: Understand your audience before you start “selling” them.
Write down what you think. The first number you put on paper is the most difficult. “Yes, but isn’t it all just made up?” Sure it is. In the view of experts, it’s fiction. But that’s not so bad. Americans call this kind of estimate an “educated guess”. But in Europe, thinking this way can be difficult. Perhaps one reason why business cases are so rare in Europe.
Making good guesses is a skill that can be learned. This works best when sparring. In pairs or groups of three, and with the Internet at your disposal, surprisingly good estimates can be formulated. Here are a few methods:
In one sentence: When estimation is difficult, drum up a few colleagues and put up with the initial pain; it will pass.
If you need to shoot for the moon, set the market potential as a target value:
This is needed everywhere. Everyone will use it. Our target group? Everyone is our target group!
This premise can produce astronomical figures. But the reality is different. The limit is rarely defined by market potential. The limit actually consists of the number of target customers you reach and convince. Plan your sales bottom-up. How many calls are needed for a sale? How many website visitors lead to a sale? What percentage of “interested persons” actually conclude a contract? And how much customer acquisition can really be achieved given the available resources and budgets?
In one sentence: In the business case, provide solid sales volume estimates bottom-up instead of dazzling people with top-down market potential.
First estimate the sales, then the costs. The easiest way to estimate revenue is, of course, cost-plus pricing. I take the costs and then add 10%, 20% or 400%. Simple, but not very helpful. Because it leads you right into the price trap that you actually want your innovation to free you from. Another effect of this thinking: “The sales department has to sell the price somehow.” As a result, you have an “innovation” that no one will buy. The sales department says it’s too expensive, the developers say the sales department isn’t doing its job right and the customer says “I can’t use what they’ve come up with. I’ll spend my money somewhere else.” This kind of finger-pointing can be avoided.
In one sentence: The value (for the customer) determines the price, not the cost.
Reality check: Put each number to the test. Not always easy, but valuable. And in case of doubt, someone else can check them as well. What do you need to validate?
In one sentence… okay, in two: Forget about market studies and market analyses and talk to people. Put every assumption to the test, then assumptions are no longer “just assumptions”, but a “valid forecast”.
Uncomplicated numbers. Omit taxes. Maximum of 3 product options. Most business cases fail to convince because of too much complexity. Calculated estimates must be clear and solid. But the business case is much more than a set of figures. A business case is a communication tool. And communication often fails before it even proceeds into the thicket of numbers and data. Simplicity is therefore the motto. If it’s not easy to understand the value, then you haven’t really thought it through it yet.
In one sentence: The business case must be able to convince an audience in 3 minutes; better still – in one minute.
Free initial consultation: Find out how your company can innovate. Without any innovation management overhead.
TOM SPIKE supports world firsts even before they exist. As innovation consultants, we have been supporting established companies and start-ups for years now. Our most important focus is on B2B and technology companies. As experienced entrepreneurs and consultants, we know the pain of financial calculation from all perspectives. And as technicians and engineers, we know where the hurdles lie for developers when they have to generate numbers for business cases.