The Innovation Capitalsm System
The Innovation Capital system establishes an empirically-driven, objective, and sustainable method for:
- Discovering and ranking strategic priorities
- Determining which technology and business areas within the firm have the most potential to contribute to advancing those priorities, and identifying the specific gaps and/or opportunities (‘gapportunities’) which have the most potential to impact those priorities
- Concisely articulating potential strategic gains, and screening dealflow relative to those gains
- Establishing specific value-creation thresholds for deals/partnerships and tracking performance over time
- Simply and succinctly reporting to senior management, and articulating the value created by strategic investments
The Innovation Capital system is built around a customizable framework which allows a wide range of disparate innovation opportunities to be compared to one another.
It efficiently encompasses:
- Financial variables (i.e. increased revenue, improved margins, cost savings)
- Key Performance Indicators (i.e. efficiency increase, time-to-market decrease, establishment of a competitive barrier, product differentiators)
- Difficult-to-measure intangible benefits (technological influence, learnings, know-how, market-signaling)
These widely disparate measures are reduced to a single, easy-to-understand
two-part expression which establishes a common language for evaluating opportunities,
no matter how different they may be from one another, and serves as the basis
for a highly efficient, stream-lined process of determining which deals warrant
deeper exploration.
The
simplified expression is as follows:
TiCR = fROI & sROI
Because the expression contains two components, it can be plotted on an x/y
scatter chart (Figure 1). CVC managers can use this chart to easily visualize
the mix of strategic and financial return in any deal or collection of deals.
The system also provides an elegant method for capturing the strategic significance
of each potential improvement and projecting the amount of value that improvement
might yield. Lastly, it provides a means of prioritizing targets and tracking
partnerships with external innovators over time.
Once TiCR targets have been established, the CVC manager is armed with a
simple yet powerful framework for evaluating new opportunities.
For more information, download a White Paper which describes the Innovation Capital system in more detail.