Enterprise innovation projects are sometimes complex and lengthy efforts; so when it’s time to consider a no-go, it’s a tough call. When innovation works, it can transform companies and put profitable new products and services into the marketplace. Trouble is, innovation projects don’t always work the way companies had hoped. But stopping them, for some, can be almost as complex as getting them started in the first place.
Here are some tips on how to stop innovation the right way:
Three words here: Net. Present. Value. Innovation projects sometimes won’t pay off immediately. A new product or service may take time to catch on with consumers. That’s okay. But it has to catch on eventually; there has to be value. And that value should be, as a rule of thumb, five times the investment — big enough to compensate for the assumptions you’re making about the end market.
That net present value should be recalculated regularly as an innovation project progresses. If market conditions change and the estimated return is lessened, or if the project’s cost begins to balloon, it’s time to stop.
Using financial calculations for this evaluation process is helpful in another way: It keeps personal agendas and egos out of the process. If an innovation project is more important, say, to a senior manager than it is valuable to the end customer, the members of the innovation team may be hesitant to speak out. But the numbers won’t be so shy.
Trust your prototypes
If you’re making a new product, test your prototypes with potential customers. If the first prototype is a flop, try again. If the second is a flop, think about stopping the project. If the third flops, stop thinking and start stopping.
Find the value, even if the project stops
When you kill an innovation project, you can also kill the spirit of the people who have been working on it. But it’s not necessary to leave such scars behind. Each innovation process will bring some value to the company.
So be sure to conduct a “postmortem” on each process to uncover what that value was. Were new materials discovered that could be of use in another product? Were there new insights gained into what the market wants? Were there new concepts uncovered about how different divisions can work together on the next innovation project?
The answers to all those questions have value — a value that makes the project worthwhile even if it didn’t produce something that was brought to market.
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