Innovationinvestment

Put emphasis on investing in people-centric innovation, build a balanced investment portfolio, enhance the overall economic value of the portfolio.

The business ecosystem is full of complexity and uncertainty, it’s important to understand that there are both opportunities and risks in every investment. The logical investment scenario helps to clarify: Which benefits will be achieved through addressing the key business drivers? Can these business benefits be measured and quantified? What outcomes can the sponsor expect to achieve through investment in the proposed initiative.

Investment justification: It’s about spending the money right, and getting the right results. The logical investment scenario helps an organization assess whether the new business model or initiative is the right investment to be done in the first place, and ensure the expected return on investment. The investment assessment includes things such as resources consumption, growing tendencies, cost-benefit analysis of business capability development; simply compare investment cost to its anticipated financial benefit.

In order to maximize Return on Innovation, businesses have to build cohesive strategy, to consume resources efficiently; make strategic objective alignment by clarifying goals and assessing opportunities to realign resources and investments as appropriate. Analyze total cost, total value, and total impact of portfolio investment, calculate financial & performance indicators wisely. Make sure the venture capitalists or executive team first understands what it needs to drive future business growth and improve cash flow, map the strategic objectives into KPIs and then determine what capital investments will be needed to develop unique business competency to execute strategy.

Investment oversight: Every organization is different, every innovation initiative is also unique, there is no one size fits all formula to invest. Invest in and leverage appropriate technologies and solutions to generate valuable insights to help their businesses open up new channels of revenue and monetization within the enterprise, their ecosystem, and the industry. The objective of innovation investment oversight is to provide visibility of the business innovation initiatives that are supporting the company's strategy and expediting business growth and change. Visibility into each investment is established to provide ongoing reliable investment information as well as enable the management to understand the overall portfolio health and effectiveness.

The management needs to involve more planning, more compromise on budget expenditures, and changing outlooks on profit margins as a result. Evaluate individual and aggregate investments accordingly. Return on Investment tells the business management how well organizational innovation investment repays the company, focus on benefits generation, return on investment and contribution to innovation, even when the business initiatives themselves are primarily justified by cost savings rather than revenue enhancement or innovation. Make sure the # financial investment of the business initiatives are aligned with at least one strategic objective over the total portfolio.

Return on innovation: Compared to other types of business initiatives, innovation performance is more difficult to assess. Goals are the key, but what makes them effective is how they are implemented and measured. It’s important to select the right set of indicators and leverage metrics that include innovation, problem-solving effectiveness & efficiency, and substantiate return on investment. Return On Investment value proposition should be an overall measurement based on the combination of cost, schedule, quality, performance, and satisfaction of the customer, users, and stakeholders. if there was a marketing effort underway for new products/services, all costs incurred in every channel should be included in the final calculation of Net profit and ROI.

In specific, there are idea management indicators or index, implementation process management indicator, innovative culture indicator, or individual’s creativity indicator, capacity (ideation/evaluation) indicators, etc. Even if you have a well-defined set of measurements, it doesn't guarantee you could measure them right. There may be many other factors to include in the 'before and after' measurements, and that was a basic approach. S.M.A.R.T (Specific, Measurable, Attainable, Relevant, and Timely) goals play an important role in assessing the effectiveness and efficiency of innovation.

The digital world moves into a hyper-connected and interdependent relationship under “VUCA” business new normal. People are always the most important capital investment in any organization. Put emphasis on investing in people-centric innovation, build a balanced investment portfolio, enhance the overall economic value of the portfolio in order to get the optimal return on investment to achieve collaborative value or collective advantage and multi-layer ROIs.

Posted in: Innovation,IT Finance,IT Performance Management,IT Transformation