The next common misunderstanding is that the VOD doesn’t just apply to startups…it more than equally applies to every business undertaking any kind of innovation. The challenge with innovation in an existing business is that it is very rare to find a business that correctly allocates all of the costs of the VOD to an innovation project when it is budgeting and as the project progresses it slowly starts to understand that the costs of the innovation project are much more than just the direct R&D costs. Innovation projects require substantial time input from leaders and experts across an organisation, which are rarely included in the initial budget. And as the project progresses, the commercialisation costs start to increase before a substantial return is achieved, again this is not normally part of the initial budget. Even if the project manages to make the financial returns it estimated, because the costs were not correctly budgeted from the beginning, the profit return will be greatly diminished for the project, which will obviously negatively impact the overall profit for the company. This can have disastrous impacts on a previously successful business when the innovation project drains financial resources before the leaders realise that the innovation is costing them much more than the budget contains.
Are you making the RIGHT decisions? It is not a question of whether an innovation project will go through the VOD, the question is will it get out? And getting out of the VOD is about making continuous good decisions. As we have found when assessing what successful and unsuccessful innovation looks like, the similarity is always around what decisions were made from beginning to the end. At The Unleashed Zone we have created a unique Diagnostic framework that businesses use to continue to analyse and assess where they are, where they want to be and what they need to do next in order to get there in the most optimal way. The optimal innovation journey is the path of least resistance through the Valley of Death.
Will the benefit be worth the effort? For an Innovation project to be worth the effort, it needs to generate substantially more cash over time, than the total cash spent in bringing the project to market. An innovation project’s total cash spend is not recovered until it has past the point where the cash recovered is greater than the cash spent. This is important to understand, it’s not a one off “break even” status where income in a period is greater than costs for the same period, its the point at which the total cash recovered is greater than the cash that has been spent on the entire project to date. This is commonly misunderstood and what many founders and innovation managers don’t realise until they look back on their project, rather than budget and look forward when they start or at regular stages of the project. The whole point of undertaking any business activity is to achieve a greater cash return than the cash spent, effectively this is the return on investment ratio of a project. Therefore, what a business owner and innovation manager must do at the beginning and throughout the innovation journey is to have a cost versus return budget and revisit it constantly to ensure that there is an appropriate cost versus benefit ratio for the project.
NOVEMBER 16th Bio Connections Australia ONLINE 24th AusBiotech Industry Update SA ONLINE 25th AusBiotech Industry Update QLD ONLINE 26th AusBiotech Industry Update WA ONLINE 26th SICA (Subsea Innovation Cluster Australia) Member event. 30th Agristart: Regional Innovation Showcase PERTH
DECEMBER 30th - 6th West Tech Fest PERTH 2nd AusBiotech Industry Update VIC 3rd Freo Startup Fest FREMANTLE 4th Rotto Tech Fest 2020 ROTTNEST ISLAND
15th BioBusiness Insights: Opportunities in Regenerative Medicine, from BioMelbourneNetwork ONLINE 26th - 30th WiTWA Conference on demand until 30 November 2020 ONLINE 30th WiTWA Awards Night PERTH
STEVE CARROLL Founder of The Unleashed Zone firstname.lastname@example.org