This is a tactical element that introduces a process for valuing projects, selecting the right development portfolio, and measuring the value created by the R&D investment.
The business benefits we deliver include:
- Better decision making leading to increased business growth and the creation of greater shareholder value
- A means of closing the loop, from R&D expenditure to R&D output to business value, and measuring performance
- Explicit understanding of the balance of risks and rewards across the R&D portfolio
- Active use and management of intellectual property as a business asset, instead of treating it as a cost
Option modelling
Option modelling is a technique for helping managers make better decisions, especially when they are faced with uncertainty and long timescales. We believe that businesses must embed in their thinking the fundamental uncertainties of the future, because most strategic decisions face these problems. Option modelling is a highly valuable tool for enhancing strategic decision making. We call our technique option modelling for two reasons: most importantly, we are building models that incorporate the value of management’s future decisions (that is their options); secondly, we incorporate—where appropriate—insights from option pricing theory.
Valuation of intellectual property (especially patents)
PA has developed a tool to place a financial value on individual patents, and a client’s portfolio of patents. It is based primarily on market share and margin calculations. It is used to assess and demonstrate the value (not the cost) of:
- The patents held
- Patents proposed for application
- The overall patent portfolio
- The patent management process and function
It is based on the philosophy that it is not possible to provide an accurate prediction of a future number, but that managers will accept and be prepared to use a value which is conservative, and of similar reliability to a market forecast.
Tools for planning/managing portfolios of projects/products
Innovation Portfolio Management (IPM) is a practical technique for increasing the performance of the innovation process quickly, accommodating the pressures inherent in resolving difficult conflicts of priority and interest. IPM does not predict individual winning projects; it enables companies to select a portfolio of viable projects, which must then be managed superbly. At the end of the development period, IPM delivers not only a working process, but a committed and enthusiastic management group who can see substantial benefits from using it to plan their investment in development. These benefits include better strategic alignment of the innovation portfolio, the ability to change the short/long-term investment mix, a reduction in the list of active projects to improve the rate of delivery of results, an improved ability to allocate resources, and an enhanced quality of debate on the portfolio.
For more information telephone +44 1763 267492 or email innovation@paconsulting.com
