Innovative business models facilitate better decision making
We are obsessed with new. Whether it is the latest car or skin cream promising to make us look younger, we are obsessed with new. New services or products are created to accomplish tasks better than they previously could but innovation also carries risk. Robert Merton's article titled “The Big Idea Innovation Risk: How to Make Smarter Decisions”, outlines the need for models and 5 rules of thumb for evaluating innovation. Robert discusses the Black Scholes formula developed in
1970 for valuing stock options used by financial firms systems to purchase and sell stock. "More and more activities that traditionally required human cognition have proved susceptible to formal mathematical modeling" (51). Modeling relationships between related variables has been around since the 15th century spawning the scientific revolution. Humanity can build models to understand our solar system and air travel but we continue to have high levels of project failure and innovation is needed through new models to improve outcomes. According to a Project Navigation study, which collated 26,595 survey participants across 64 published studies, concluded that 83% of projects fail because of schedule, budget or resource assumptions that were not correct.
These 3 variables are related to the scope of the project so a new innovative model is needed to improve project outcomes. Microsoft Project and other portfolio management systems have been around for years although project failure rates remain high. How many of these software systems have you used in strategic planning meetings to make decisions project contracting? By the time the schedule, resources and budget is understood, in most cases, it is too late to recover. The Standish Group International Study in 1994 evaluated thousands of IT projects revealing only 16% finishing on time and within the estimated budget. (Standish Group, 1994)
Robert C. Merton recommends 5 rules of thumb to evaluate new innovative models:
Recognize that you need a model for making judgments about risk and return.
Acknowledge your model’s limitations. Not everything can be included in the model.
Expect the unexpected. No human being can possibly foresee all the consequences.
Understand use and user. Some models are suited only to certain applications where some require sophisticated users to produce good results
Check the infrastructure. The bottom line is that any innovation involves a leap into the unknowable. If society is to progress, however, that’s a fact we need to accept and to manage. (Merton 2013)
These 5 rules provide a baseline for evaluating new innovative models. I encounter healthcare organizations that do not use any type of modeling to plan upgrades, meaningful use programs, evaluate change control, justify staffing needs, and define budgets or other strategic objectives. We will continue to see shifts in leadership throughout healthcare organizations and medical software vendors due to failing projects.
A combination of the Project Navigation Modeling Solution and our Expert Project Managers will improve your project outcomes; we guarantee it. We are so confident in our Modeling Solution we guarantee your return on investment and we will go at risk with a percentage of our revenue to align both organizations to achieve successful outcomes.
Robert C. Merton. “The Big Idea Innovation Risk: How To Make Smarter Decisions” April 2013: 49-56. Harvard Business Review.
(1995). The Chaos Report. The Standish Group International, Inc.