This piece is excerpted from the new book KISS: Problems & Passion (Keeping Innovation Super Simple), by Wim Vandenhouweele. Out this week, the book discusses how innovation can be kept simple by focusing on two priorities: addressing specific problems, and working with passionate people.
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When we create a tool to help innovators, we should keep this tool as simple and directional as possible. Simple: to avoid to discourage innovators and to allow them to do multiple experiments if needed. Directional: because in this stage we want to increase the confidence to pursue a full quantitative pilot later. Our objective in this stage is to find out if the innovative idea is good as-is or needs to be adapted (“learn fast”) or if the idea has to be declared a no-go (“fail fast”).
The following tool I designed is a simplified version of what is called a Reverse Income Statement, an easy-to-use tool to define and value the experiment’s key assumption(s). The tool is a no-frills spreadsheet with two sets of assumptions. (See download below.)
a. One set lists the high-level drivers that might generate outcomes.
b. The other set lists the high-level, assumed drivers for the cost to operationalize the innovation.
The innovator then selects the assumptions that have both the most significant impact on revenue/cost and the highest level of uncertainty. These are the ones that need to be validated with stakeholders at this point. To validate them, the innovator creates a prototype. This can be as bare as a drawing of the innovative Idea.
Then this prototype is demonstrated to a few stakeholders: externally (e.g. patients, doctors) and/or internally (e.g. compliance, manufacturing). Their reaction is noted.
This kind of qualitative test is faster and cheaper than a full-blown quantitative study. The list of assumptions can be kept small and at a high level. There is no need to go in detail as the objective is to guide a high-level decision. The decision is whether to proceed with a full, quantitative pilot because the expected value is higher than the cost or to stop the innovation because the cost significantly exceeds the expected value.
If the Reverse Income Statement, before and/or after the quantitative test, shows that the costs are in the same range as the revenue, the innovator can try to modify the innovation to make the revenue higher or the costs lower. If this is not possible, the innovation should be considered not viable and stopped.
This experimentation phase can typically be completed in a few days and in an inexpensive way. Therefore, a substantial number of innovative Ideas can be evaluated. Also, innovators are not discouraged as they do not need to spend a lot of time in preparations. Another advantage is that the company doesn’t need to invest a lot, sometimes defined by non-innovators as “waste,” in the early stages of the innovation framework. This early evaluation engenders information for the innovators and a positive Reverse Income Statement makes them more confident to ask for resources to do a full pilot.
KISS approach: use the Reverse Income Statement to focus on qualitative assessments during early-stage innovations.
Wim Vandenhouweele is a coach for corporate innovation leaders, and a former Commercial Innovation Leader for Emerging Markets at Merck.
(Featured image by Girl with red hat on Unsplash.)
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