Numbers are Your Friend when Innovating | Driving Eureka! #28

05/02/2019

 

The feature story this week discusses how numbers are helpful when innovating.

The book segment discusses how numbers are the “gas pedal” when it comes to gaining support for your innovation.

The Brain Brew Whiskey Academy is about the challenges and opportunities with MATH with a craft distillery.

Cheers! 
DougSignature 

 

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Numbers are Your Friend when Innovating

Years ago at Procter & Gamble my team and I were trying to sort out what to do after having just gotten some horrible product testing results. Tim Feely, who I believe was a Product Development Director at the time, stopped into the meeting and told us, “Numbers are your friend when innovating.”    

At that moment the numbers on the pages in front of me didn’t seem like a very friendly friend. Tim explained that having a solid failure was a gift to us - as it made it clear that what we were doing was not working. It was time to change and to change significantly.

Tim’s comment has stuck with me for over 40 years :). I remembered it last week when a team was stressing that they didn’t have time to get their innovation idea ready to go out with a test that was scheduled. They were afraid they’d fail. My response was to paraphrase Tim, “Numbers are your friend - win or lose we will be smarter than we are now. My vote is to SHIP.”   Note - the idea shipped - setting a record for uniqueness and for purchase. Well - that was a record high for uniqueness and a record low for purchase interest. And from that the team began to pursue another cycle of learning.

The “Numbers” associated with innovation include:

  1. Customer research results on your idea, product/service or non-profit program
  2. Forecasts for sales, profits, fundraising, cost savings
  3. Forecasts for investment required for production or marketing

As I wrote about last week, these numbers are the key to you being able to generate “pull” for your innovation from investors, management and other stakeholders.  

NUMBERS transform your idea from an “ABSTRACTION” into a TANGIBLE BUSINESS OPPORTUNITY.

If you don’t know how to do the math GET HELP.  Find a numbers person you trust to collaborate with.


 

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Driving Eureka! Book Excerpt
Math Game Plan: The Gas Pedal for Change

Math Game Plan is a first math forecast of what impact the customer concept is estimated to have. It’s what the organization will realize as a result of pursuing the Yellow Card. It can take many forms. Common math game plans include estimates of sales growth, fund raising revenue, or cost savings from a system innovation.

For a nonprofit, the number is often connected to their mission. Examples that Innovation Engineering pioneers have calculated for nonprofits include: the number of endangered birds saved; the number of youth graduating from college in science, technology, or engineering; and the number of inner-city youth getting jobs.

The greatest barrier to innovation at most companies is internal resistance to change. A primary reason for the resistance is that while there is clarity on the costs and difficulties associated with an innovation, there is often little understanding of the value of the innovation. Math Game Plan estimates what the organization could realize as a result of pursuing the innovation.

Math Game Plan brings the customer, problem, promise, and proof to life. It’s a first theory or a “game plan” on how the innovation will become real. This first estimate, just like customer, problem, promise, proof has a high level of variation/error in it. We use it as a starting place for “Plan, Do, Study, Act” cycles of learning to reduce variation/error.

 


 

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Brain Brew Whisk(e)y Academy:
I'll Admit it - Whiskey Math is HARD

In nearly 50 years of innovation work - whiskey is the hardest category to do quality math on.   

  • Every state, province and country has different taxes and rules.
  • Yield in a barrel varies from proof to angels share losses to leak losses.
  • The three tier system in the USA results in variable “dips” into the profitability of products.
  • Marketing & distribution expenses are endless.
  • Capital expenses for production are impacted by high variability in building inspection rules.
  • The “proof” you sell your product offering at - creates variance in product & tax costs.
  • Classic barrel aging of whiskey requires high capitalization to fund the “inventory.”

Without this math it’s nearly impossible to make smart investment decisions on a craft distillery. 

The good news is that when you do sort it out - there are a number of clear pathways for making very good profits.

Profit Pathway 1:  Retail Focused Distillery - here you stay focused on creating an “experience” for your customers. You need to be awesome at cocktails, food and consumer service. With success - if your regulatory environment allows it - you open more of these experiences. 

Profit Pathway 2: Cost Efficiently Create WOW Products / Brands - With this approach you buy an iStill for your vodka and gin - and you work with our Brain Brew Custom Whisk(e)y team to create your very own line of 2 to 4 award winning whisk(e)y brands. Your first couple will be bought more as “souvenirs” then as great products - that’s ok - it gives you cash flow and learning. With rapid cycles of creating, testing and learning you eventually get a winner in your city. Following this success you try another market where you are not a “local legend.” The goal here is to validate that your brand and product has the potential for being scaled up. At this point you have a solid case for investors to provide support for scaling up.

Profit Pathway 3: Millions of Dollars & Decades of Time - If you are blessed with lots of money and time you can do what the big companies do - distill your own whiskey putting it away in barrels for years. Your first couple batches will probably not be world class. But if you stay at it for 10 to 30 years you can create a successful classic whiskey company like the big corporate brands - Jim Beam, Bulleit, etc.

Rum Runner Beach

Ingredients:

2 oz Relativity Whiskey (or rum if you don't have whiskey)
1 oz Coconut Cream
2 oz Pineapple Juice
1 oz Orange Juice
Nutmeg
Ice

Directions:

Step 1: Add first 4 ingredients and ice to a Boston Shaker and shake.
Step 2: Strain into a glass filled with ice.
Step 3: Sprinkle nutmeg on top.
Step 4: Enjoy!


 

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Doug Hall

The Driving Eureka! Newsletter is a compilation of case studies, new techniques, thought provoking insights, an occasional rant, and excerpts from my books 

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