In Focus: HP Improves the Odds of New Business Success - InformationWeek

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2/21/2006
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In Focus: HP Improves the Odds of New Business Success

You can't know the unknown, but technology can organize what is known and point to the most likely path to success.

"If only we knew what we know." These words from Lew Platt, former CEO of Hewlett-Packard, were often invoked in the late 1990s as a sort of rallying cry for knowledge management.

Flash forward to 2002, when a new-business creation group at HP was trying to capitalize on the technology developed for its digital projectors. "We had a lot of great ideas from our engineering community," says Ralph Morales, a finance leader in the Imaging and Printing Group, "but when you're making a new-business decision, it's not that the facts — the feasibility or the market size — are inaccessible, it's that they're unknown or unclear."

You can't know the unknown, but technology can organize what is known and point to the most likely path to success. To choose and prioritize a number of possible adjacent market plays for projection technology, HP relied on Decision Advisor software from SmartOrg. The result was the launch of a line of jumbo-sized rear-projection TVs in 2004.

Billed as "value-management" software, Decision Advisor lets planners visually map and correlate multiple unknown variables. In HP's case, the new-business group organized a series of workshops in which product development, engineering and other experts used SmartOrg's software to visually map, on X and Y axes, forecast ranges for development time, price, volume, revenue, cost structure, market penetration, competitive threats and variables such as large-screen versus small-screen products.

"Once you have good ranges and reasoning, Decision Advisor runs a simulation correlating the highs and lows for both the commercialization factors and the probability of success," Morales says.

The resulting "success matrix" not only provides a clearer idea of whether the new product/business will succeed or fail, it points to the variables that will make the biggest difference between making and losing money. "People might argue about whether the price should be $1,500 or $1,700, but that really won't matter if price is one of the least sensitive variables," Morales says. "The software helped us focus our resources on the most important factors in the overall success of the project."

HP implemented Decision Advisor in early 2002, and Morales says the initial workshops and success matrix took less than a month to complete. The business plan was completed that spring, and HP introduced its first jumbo (50-inch-plus) rear-projection TVs at the Consumer Electronics Show (CES) in January 2005. Despite the fact that HP was new to the TV business and had to develop an all-new channel, Morales says the company has broken into the top five in projection televisions against formidable electronics manufacturers including Panasonic, Samsung and Sony. He credits Decision Advisor with speeding the decision and improving the changes of success.

"We got plenty of feedback from management that the tool and the process led us in the right direction," he says. "The tool also helped us start a dialog and quickly turn a lot of variables into something quantifiable."

To make the most of intellectual property, some companies are turning to "idea management" or "innovation management" systems from vendors including Imaginatik, Bright Idea and General Ideas. There's also SAP's XRPM and other portfolio management applications. Most of these products catalog assets, create decision workflows and support collaboration and tracking for product and technology investment decisions. SmartOrg's software differs in that it provides a decision engine that models the value and critical variables behind different decisions, says company CEO David Matheson.

"Our software assesses the uncertainty in forecasts at the high and low range so you get a total picture of the economics," Matheson says. "The engine also shows that some variables matter a lot more than others; you can be way off on an inconsequential variable, but if you're a little bit off on a crucial assumption, it can make or break a new product."

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