Weighted Fastest Innovation First

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Weighted Fastest Innovation First, or WFIF, is a method to facilitate objective decision-making during the prioritization of innovations in a portfolio. WFIF is based on the Weighted Shortest Job First (WSJF) method frequently used in Agile portfolio management and first mentioned in Donald G. Reinertsen’s book Principles of Product Development Flow. WFIF helps Portfolio Management to prioritize the work which delivers the highest value in the shortest amount of time.

When striving for continuous innovation, the portfolio of potential innovations is likely to demand greater capacity than the organization has available for development. This means that innovative ideas have to be prioritized for development. Although most organizations rely upon a ‘first come, first serve’ basis, assuming that all innovations have an equal chance of becoming a breakthrough, it is more sensible to take a substantiated economic view. This means prioritizing those innovations that will bring the most business value at the lowest costs in the shortest time. This presents a problem however of objectively assessing both the business value that the innovation will bring, the costs to produce and the time it will take to achieve that.

Assessing the potential business value of an innovation is very difficult to do. Basic questions such as “How much revenue will we be able to generate from this innovation in one year?” assume that we know how large the market will be for the innovation, what the business model will be, what pricepoints we will be able to set, how quickly we expect the market will pick up on the new innovation, what the running costs for logistics and operations will be, what the production costs will be etc. Each individual estimation will be primarily based on guesswork and comparison to existing experiences. Not only is this difficult and time-consuming to do but the outcomes also are also not likely to be reliable. The same is true for the assessment of costs and time-to-market. The solution to this problem is to use the practice of relative estimation.

The power of relative estimation

It may sound counter-intuitive, but for the purpose of prioritization of innovations in a portfolio (which innovation should we spend our time and money on first), it is not necessary to know exactly what the business value of the innovation will be. It is important to know if that value will be more or less than the value of the other innovations in the portfolio. Even when we cannot establish exact business numbers, we may be able to define if one innovation will likely generate more value than another. Or quicker. Or faster. Experience in Agile organizations has shown that business professionals are, in fact, not so good at predicting exact values, but they are very good at relative estimation. When a group of sound reasoning business professionals works together to apply their best business knowledge and experience they will arrive a highly reliable prioritization of the portfolio. What is needed is a clear method of discussion and a strict definition of the potential value of the innovation, the readiness of the market and the effort to produce a Minimum Viable Product (MVP). WFIF provides this clear method and the required definitions.

Weighted Fastest Innovation First

In WFIF, the stakeholders present calculate a score for each innovation. They do so by using the following formula:

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Fibonacci and relative estimation

The scores for each variable in the formula are numbers from the Fibonacci-range. This range exists of numbers that are formed by adding up the previous two numbers in the range, starting from zero: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, etc. The benefit of the Fibonacci-range for relative estimation is that no number in the range is the exact middle between two numbers. Therefore, when we estimate the value of an innovation compared to others we are forced to always define it as explicitly larger or smaller than others and we do not end up with a large group of similar-sized innovations (and thus no prioritization). For reasons of practicality we have limited the range of numbers in WFIF to the following range:

1, 2, 3, 5, 8, 13, 21, 34, 60, 100.

The WFIF score is determined by members of Portfolio Management, who are supported by experts with relevant knowledge or experience where needed. This group determines the scores of each of the variables, for each innovation. The scoring happens by relative estimation, one variable at a time; first, the potential value for all innovations is determined, relative to each other. Then the market receptiveness, then the technology readiness, etc.

The variables are defined as follows:

Potential Value in 5 years

Determine the potential value that the innovation will bring the organization in the next five years, from the moment that the first SWICH starts. The value is defined as a financial value such as profits (margin, not turnover), margin from cross-selling, etc. and non-financial and intangible benefits such as data-collection, goodwill, brand recognition, market development, knowledge acquisition, etc. The five-year timespan is based on the ‘Return on innovation’-metric, a common metric in innovation management, which uses a 5-year time box. This time box reduces the room for error and opportunistic behavior and we should identify the expected business value in relation to the business model.

Market Receptiveness

This variable describes the receptiveness of the market for the solution on offer (not the readiness of the innovation for the introduction into the market). Given the fact that the market for this innovation may not even exist yet, we need to determine whether the market that we aim for consists primarily of ‘innovators or early adopters’ with no potential large target group readily available (such as the when the microwave was introduced), or whether we believe that our solution offers a novel solution to a problem that is already widely recognized and to which a large receptive market already exists (such as the autopilot function introduced by Tesla). Relevant questions to determine this value are: ‘Are we solving an acute problem in the market?’, ‘Has the potential solution been validated in the market?’, ‘Is the market growing or saturated?’, ‘Which competitors are active in the market?’, ‘Are there regulatory or other barriers?’, ‘How likely can we gain market leadership?’, etc.

Technology Readiness

Technology readiness describes the level at which the technology is ready to be implemented in the market. A low Technology Readiness Level (TRL) translates to a higher risk in implementation since the majority of assumptions and hypotheses on what the technology can do and how it behaves in scaled environments still need to be tested. NASA has created a model for the assessment of  Technology Readiness Levels (TRL) that has become widely adopted in business to determine TRL as one of 9 levels, ranging from Level 1 (Basic principles observed and reported) to Level 9 (System proven through successful operation). Remember, TRL does not indicate the required time to develop the technology for release in an MVP!

Effort to MVP

This describes how much works remains to be done to deliver (to real customers in the market) a Minimum Viable Product or Minimum Marketable Feature. We do not distinguish between these two definitions. The work remaining to be done includes all activities to get the MVP used by (a) client/clients, including engineering, technical development, marketing, sales, etc. The effort may include effort in hours of work but also in out-of-pocket investments for the procurement of parts of services. All expenditures should be taken into account.

It is important to distinguish the MVP from a working prototype, which is used to test features. The MVP discussed here is a real working product used by a real client. Questions that we need to ask to determine the job size or effort to MPV: What is the expected effort, uncertainty, and complexity to launch a Minimal Viable Product?

Time to MVP

Apart from the investment and effort required to reach a marketable MVP, we should also include an estimation of the time at which the MVP can be launched. Some innovations require a specific window of opportunity to launch or are in need of particular duration of testing, such as all-weather testing, testing across a monthly or quarterly cycle (for instance in accounting) or a minimum required test set (for example a number of cars passing by a sensor). The default score for this variable is ‘1’, with innovations requiring an exceptional length of time scoring higher.

Prioritizing the portfolio for the first time

In the initial prioritization of the portfolio, the score of the formula is not calculated one innovation at a time, but by comparing the values for each variable across all innovations in the entire portfolio. Only after all scores per variable have been defined, are the final scores calculated. From this calculation, the innovation with the highest-ranking score is prioritized the highest, followed by the second-highest number, etc. To get to this stage perform the following steps:

  • Discuss which innovation in the portfolio has the smallest potential business value in the coming five years of all.
  • Award this innovation ‘1’ for business value
  • Next, not counting the innovation you just scored find the next innovation with the smallest potential business value. Do not rank this a 2 automatically, but rank it the score that you believe it has in the Fibonacci range relative to the first innovation. Keep in mind that the highest possible number in the range is 100! This is for exceptionally large business value.
  • As a team, work your way up the list, from small to large business value. If you find out that you need to adjust the score of previously ranked innovations, please do so.
  • You do not need to give your highest valued innovation a 100. Remember, scores give are always relative to the other innovations in the portfolio.

Note: In principle, no 2 innovations can have the same score per variable (ie. no 2 innovations can have the exact same business value). However, there are 10 numbers in the WFIF-range. If you have more than 10 innovations in your portfolio, you will be forced to assign the same value to multiple innovations. As a rule of thumb, you can have no more same-score innovations as the total number of innovations in your portfolio divided by 10 (rounded up). Hence, if your portfolio consists of 42 innovations, divide 42 by 10 = 4.2. Round this up to 5 and you should not have more than 5 innovations that have the same score for a given variable.

References

  • Reinertsen, D. (2009). The Principles of Product Development Flow. Redondo Beach, Calif.: Celeritas Publishing.
  • Scaledagileframework.com. (2019). WSJF – Scaled Agile Framework. [online] Available at: https://www.scaledagileframework.com/wsjf/ [Accessed Oct. 10, 2018].
  • NASA (2018). Technology Readiness Levels. [online] Available at:  https://www.nasa.gov/directorates/heo/scan/engineering/technology/txt_accordion1.html  [Accessed Sept 17, 2019].