Drafting a Business Case for Innovation

by Gijs van Wulfen

You can only present an idea for the first time, once! So when you have the chance to present it to your board, be aware of the fact that a new product idea is not only ‘a creative product’ but also must comply to all the regular business criteria of your organisation too.  Does it have (extra) turnover potential? Does it have profit potential? Does it fit into the company’s strategy? And of course, the ‘Bob the builder’ question: Can we make it? These questions must all be answered, as far as possible, during the ideation phase of the innovation process. A common way, in management practice is the business case, where I then choose a mini variant, which complies with all uncertainties in the earliest phase of the innovation pipeline: the mini new business case.

The innovative product or service concept plays the leading role in the mini new business case, of course. The purpose of this case is to substantiate, in a businesslike and convincing manner, to what degree and for what reason the product concept can meet the set criteria.

A good mini new business case consists of six elements:

1. The customer friction (1 slide).

  • The customer situation
  • The customer need
  • The customer friction

2. Our new product concept (1 slide).

  • The customer target group (qualitative and quantitative)
  • The marketing mix of the new product, service or business model
  • New for…. (the world, the market, our company)

3. This makes the concept unique (1 slide).

  • Buying arguments for the customer
  • Current solutions and competitors.
  • Our positioning.

4. It will be feasible (1 slide).

  • We are able to develop it.
  • We are able to produce it.
  • The development process.

5. What’s in it for us (1 slide).

  • The number of customers (in year three).
  • The estimated turnover (in year three).
  • The estimated profits (in year three).

6. Why now? (1 slide).

  • Why develop it now.
  • If we don’t do it, then….

7. Decision (1 slide).

  • Why further.
  • Uncertainties.
  • The follow-up team and process.

Two Practical tips

Tip 1. Don’t count every penny in calculating the turnover, cost price and profit margin. Because you can count on only one thing at this early stage: your calculation will be wrong. You just need to control the expectations from line management. In the first few years following the launch, will this product generate an annual turnover of € 100,000, € 5 million, € 25 million or € 100 million? Make a clear choice. And try to substantiate as to why one of the above options will be the likely outcome.

Tip 2. Make use of the specific expertise of all the participants in your innovation team and others from within the organisation as much as you can.

I wish you lot’s of success drafting mini new business cases in practice. The fuzzy front end of innovation confronts you with a lot of questions. In my new book ‘Creating innovative Products and Services’ I try to solve them with the FORTH innovation method.   If you’d like more tips, formats and checklists you can download thirteen free checklists of the FORTH innovation method here.  Do you have other personal tips for drafting mini new business cases?  Please add them!
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Gijs van WulfenGijs van Wulfen leads ideation processes and is the founder of the FORTH innovation method. He is the author of Creating Innovative Products & Services, published by Gower.

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  1. Element number five is very important. A lot of business don’t succeed just for that reason alone. If owners don’t have this in mind beforehand the business will very likely fall through.

  2. It’s more or less the Elevator-Pitch/NABC-Approach: [Hook] – [Core: Need-Approach-Benefit-Competition] – [Close]

  3. The conceptualization of business case models always start with identifying the questions that must be asked to 1) deliver and 2) mitigate risk.

    Innovation is not always based on a “customer need.” Apple’s products are a great example of this. Consider adding a “Customer Impact” criteria, e.g. does the innovation enable the customer to do something better and/or faster?

    The business case model has a good external/customer focus but there are always internal challenges to innovation that should not be under-estimated. Two categories not explicitly called out in this business case model are “Challenges” and “Risks.” .

    In this case, challenges should be viewed as internal accomodation and adaptation challenges. Will the innovation require the accomodation of new ideas or a change in the organization’s perspective in terms of its internal operations or its customer, partner, and stakeholder relationships? If so, what are those ideas and/or changes? How do these changes mesh with the organization’s current perspective? Are there potential conflicts? What can be done to mitigate those conflicts?

    Adaptation may require a change to the organization’s infrastructure, processes, products and/or services. There are usually links between accomodation and adaptation challenges. Are there going to be any systemic changes? Again, what are those systemic infrastructure, process, product and/or service changes? How do these changes mesh with the organization’s current environment? Are there potential conflicts? What can be done to mitigate those conflicts?

    One of the reasons cited for Google’s failure to get any momentum for its Nexus One mobile phone is that it did not have any customer service channels established to assist Nexus One customers. This was an adaptation failure that was driven by an accomodation failure. The accomodation failure did not recognize Google’s cultural emphasis on hiring people for their engineering knowledge and skills vs. customer interaction skills.

    Risks should be viewed as external risks. Are there any supply or value chain dependencies that need to be addressed? Are there any potential weak links in that chain (a chain is only as strong as its weakest link)? If so, what’s the potential weakness and how can that risk be mitigated? Are there any current or potential regulatory issues that need to be addressed? Are there customer education and/or service challenges that should be addressed? If so, how are those to be addressed? Failure to address external risks can derail the adoption of an innovative product or service and it is the adoption that defines innovation.

    The implementation of smart meters is an example of a failure to address external risks posed by an innovative product and service. The record for smart meter adoption is mixed. One of the reasons for this mixed adoption record is that educating consumers/customers on how utilities, e.g. electricity, are priced, and how smart meters work, was not done before the smart meters were implemented.

    “Challenges” and “Risks” criteria should come after the “The Customer.” Answers to the questions driven by these criteria will provide information to address the other criteria.

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