Innovation Financial Management Technique

Most business endeavors evolve from a series of assumptions related to functionality, outcomes, value, process, price, and so on. To identify which key assumptions need to be tested for your innovation, start by creating a comprehensive list of assumptions that are built into your idea. You can use the approach of Innovation Financial Management (Technique 11) to help with this task. Once you have a comprehensive list, prioritize your assumptions and select ones that will have the greatest impact on the success of the innovation. List these on the Project Charter. 

Financial projections are often one of the most scrutinized aspects of an innovation Project Charter, especially when executives are trying to select which few innovation projects to fund. Almost all financial projections include estimates of revenue. Or, you can estimate profitability using Innovation Financial Management (Technique 11). Either way, the financial projections listed on the Project Charter should be estimated from the point your innovation will be available to customers, and should align with the company s current accounting periodicity (monthly, quarterly, annually). 

To complete the initial project investment estimates, identify the cost of raw materials, people, training, time, capital expenditures, and other costs that will be required to bring your innovation to market. You can use Innovation Financial Management (Technique 11) to help you identify investment costs relative to your assumptions. 

The Project Charter and Innovation Financial Management are two of the most important techniques in this book. After all, you can generate thousands of clever ideas, but if no one needs or wants what you have to offer then your time and money is wasted. Therefore, don t overlook the value of spending time up front, and throughout the project, continually verifying that your innovation is marketable, feasible, and able to bring your organization a profit. 

Scenario To demonstrate the basics of innovation financial management, we ll continue the Pikes Peak Coffee example from the Project Charter technique (Technique 10). The company can use this approach to determine the profitability of adding a healthy, portable breakfast offering to its menu. 

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