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Risky Business

Assessing the likelihood of success for major innovations

In the last issue of 5MI, we took a look at the management of risk and reward in relation to new ideas. This was based on an article called ‘Is it real? Can we win? Is it worth doing?’ by George S Day in the Harvard Business Review in December 2007 (Reprint R0712J).

In this issue, we’ll take a closer look at the special tool that Day uses to screen new ideas for their potential for success. It’s based on three key ‘R-W-W’ questions:
 
Is it real? (R)
Is the market real?
Is the product real?
 
Can we win? (W)
Can the product be competitive?
Can our company be competitive?
 
Is it worth doing? (W)
Will the product be profitable at an acceptable risk?
Does launching the product make strategic sense?
 
This provides an excellent framework for assessing an innovative product or service. Many companies fail to ask all three questions when looking at a new idea – and therefore often make the wrong decisions.
 
Digging deeper
Day breaks the above questions down even further in his article. This depth of exploration can help Insight teams to really dig down so that they can then give more well-informed answers to the initial three questions. If your team isn’t sure about the answer to the second or third level questions, you may need to investigate all of the possible avenues in more depth to see if a ‘Yes’ answer can be achieved.
 
Put simply, if the answers to all of the questions on all three levels come up as ‘Yes’, the proposition looks as if it could be well worth developing further. However, a definite ‘No’ to any of the six sub-questions above should typically lead to the termination of the project, as it is unlikely to be a viable proposition. Similarly, a definite ‘No’ at the next level down should also start to make the warning bells ring.
 
Reducing risk
Both the risk matrix featured in last month’s 5MI and the R-W-W screening process described above are highly useful tools that can reduce the risk involved in developing a proposition. They can help you to ensure that your attention is focused on issues that are likely to bring tangible results, rather than those that could end up being a red herring in disguise.
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