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Investing in Innovation


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Investing in Innovation
It is a truism of today’s business climate that one must innovate or die. However, success of an innovation development effort always has a significant level of uncertainty.

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Investing in Innovation

  1. 1. Investing in Innovation Murray Cantor, CTO
  2. 2. APTAGE.COM | 2 You have questions For development programs: •How much should we invest? •In what should we invest? •Are we receiving value from progress? •Should we continue to invest?
  3. 3. APTAGE.COM | 3 The key question: “How do you measure the value of an incomplete project?” Some incorrect answers: • Nothing until shipped • Sunk cost (Expense to date)
  4. 4. APTAGE.COM | 4 The economists’ answer … • To determine work, treat the effort as a risky investment • Model the Net Profit over the total program life • The value today of this profit stream is it’s Net Present Value (NPV) • The ROI = NPV / DevCost • This would be trivial if all these numbers were simple and easy… NetProfit(t) = Benefits(t) – DevCosts(t) – AfterDeliveryCosts(t)
  5. 5. APTAGE.COM | 5 Uncertainty makes NPV, ROI much harder to reason about Two views of the NPV Two views of the ROI • Future values are uncertain • Need to reason about the probabilities • Hard for people • Need machine to augment peoples capabilities • Probabilities will change in time, hence the need for AI and machine learning
  6. 6. APTAGE.COM | 6 Uncertain Economic Factors • Costs: • Development – staff costs, work estimates and run rate, tooling/ops costs, vendor costs • After Delivery – operations, maintenance, support (partially dependent on development choices) • Benefits • Revenues based on price, addressable market share, retention • Efficiencies • ….
  7. 7. APTAGE.COM | 7 Using Aptage - Deciding to invest? •Your organization sets a target of 8X ROI from the project •They want to be 60% confident of reaching the target. • Either reject programs that are too risky or replan to get meet target and risk appetite
  8. 8. APTAGE.COM | 8 Aptage Portfolio View
  9. 9. APTAGE.COM | 9 Which investments are closest to target? Aptage Portfolio ViewEvaluate Option: • Buy/Build • Different Strategies • Different Vendors Compare • economic forecasts, timelines, and risk CHOOSE, and execute working off the uncertainty Aptage J-S View
  10. 10. APTAGE.COM | 10 Strategy Decision Support Execution Delivery Support • Make sound economic investment decisions • Digital Transformation, Product Launches, Innovation • Complex Systems, Construction, Hardware/Software • Manage innovation, risk, and uncertainty to success How likely to finish on time? When will work finish?ROI/Confidence Portfolio Probable J-S Curves
  11. 11. APTAGE.COM | 11 We have answers Q: How much should we invest? A: Only as much as has acceptable risk of meeting ROI target. Q: Should we continue to invest? A: Yes, If the likelihood of receiving ROI still high enough. Q: Are we receiving value from progress? A: Yes, if the NPV and ROI are improving.
  12. 12. APTAGE.COM | 12 How Aptage can help • Aptage provides a foundation of economic theory, the mathematics of uncertainty, and the simplicity of small data to: • Provide sound economic and risk data-driven decision making to start, continue, and kill project investments. • Enable stakeholders, SME’s, and vendors to collaborate effectively to make best decisions with all available information • Instrument current models and forecasting tools with uncertainty/probability/confidence • Provide Aptage RBd for measuring schedule uncertainty • Continuously revise projections based on team/vendor/program completion realities
  13. 13. APTAGE.COM | 13 Proprietary AI that integrates the best thinking about managing uncertainty and risk. Elicit ranges, not averages Utilize team beliefs as probabilities Delphi Game theory Leverage intuition & mathematics Aptage Differentiators Our team has a unique combination • Data science (the mathematics of uncertainty) • Deep domain knowledge (econ of development) Our IP is a small data, in-place, learning AI • Continuously learns, predict, advices • Proprietary Algorithm (Trade Secret) • Although data available is small, Aptage can still provide actionable advice for strategy/execution AI Platform for Projects
  14. 14. APTAGE.COM | 14 Thank you! Dr. Murray Cantor CTO & Co-Founder John Gonzalez Vice President, Aptage Sales (248)697-8757