IMPACT:  Competencies  SM 

While the scope of this piece is specific to the intersections between innovation and competencies, I confess the financial analyst in me still can't resist a good spreadsheet.  Financial institutions often require detailed and sophisticated financial models and projections as they consider funding new ventures.  Even if your innovation does not result in such a requirement, I maintain some level of financial modeling is worthwhile for several reasons:

• It's a little bit "about the journey."  The process of translating new ideas into dollars and cents requires us to develop assumptions - some of which we may not have otherwise considered.  Ultimately, we don't manage what we don't consider.  In other words, financial modeling "forces" us to comprehensively consider almost everything in a disciplined and methodical manner with structure.
  

• Pricing new products or services can be challenging.  There may not be benchmarks or other data points available to consult in ascertaining "what the market will bear."  Consumers may not yet fully appreciate or understand the value of something new.  Price/volume sensitivity analysis can help calibrate ranges linked to break-even thresholds and profit margin targets.
  

• "Selling" something new to the outside world is of course different from selling a new idea internally within an organization.  "How much additional revenue will this generate?" or "How much will this save us?" are usually among the first questions posed.  Return-on-investment and payback periods are even hotter topics in today's economic environment.
  

• Modeling best/worst-case and expected scenarios can help us calibrate the risk associated with something new.  The relationships among those outcomes provide us one way of thinking about risk in quantifiable terms.  Of course there are other dimensions of risk to consider as well - e.g. legal/liability and brand preservation.
  

• Back to competencies, executing innovation usually requires incremental effort in some way, shape, or form.  Maybe the relevant competencies already exist - perhaps they were previously "hidden" competencies?  Quantifying and comparing the costs of redeployment, recruiting, development, contracting, and outsourcing options are integral to responsible talent management decision-making.