How to make sure financial part of innovative projects is in the right place?
Large companies may assume that innovation needs a different approach in control of finances than old fashioned projects where the budget was clearly defined. Innovative projects are usually lean focused, free task flow focused and creative space driven. It might build an impression that financials should be looser and more flexible. Here are few thoughts of mine that regime of financial planning is important in disruptive projects:
- Make sure you have a right person in charge of the financials and business modelling. I have found it extremely useful when one of the team members of innovative projects represented old school financial modelling. What do I mean by old school? It is traditional approach to metrics and KPIs tracking. Carefully tracking costs of project development, tracking metrics like conversions, churn etc. Also asking constantly WHY? Why did we decrease churn? How did we manage to increase referrals? What is the level of retention in last quarter? It helps to shape a product and a project not only from a customer point of view but also from business model and financials side.
- Brainstorm with financial guys as well. Usually, brainstorming sessions welcome business people, sales people and marketing people. I have learned that when business modelling specialist participates new ventures workshop, a conversation is more demanding but at the end more useful. Questions about a number of customers we want to land, which markets present what level of margin and other related are useful in making sure all puzzles are in the right place.
- Tracking and reinventing business model requires being IN from the beginning. Most innovative projects use customer feedback as the fuel for change. Feedback helps to define which features are important, which should be eliminated and which are unicorns of a product / service. Iterations with customers are very useful in process of product building and requirements defining as they help clarify priorities of product development. Feedback from early adopters helps define project milestones as well as budget. So financials are in the game as well. Going through product iterations influence budgeting and business modelling. It is helpful to have that part under control. I like when designing guys, scrum masters and product owners have somebody in the team to help them understand and track financial part.
I recommend to get financial people involved in the project, so if you start your next innovative venture, please think about it. Arek Skuza – coFounder of K2 Digital Ventures which helps large companies design and scale innovative ventures with audacity and speed of startups.