Methods for evaluating innovation projects

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The importance of utilizing the methods of evaluating innovation projects lies with the empowerment it brings to the decision making process. These methods, can either be qualitative or quantitative and they play a critical role in determining which innovations best suit an organizations’ needs at any point in time. In brief, quantitative methods are concerned with evaluating the future benefits of a project in order to justify the intended expenditures (Schilling, 2013). They basically use discounted cash flows that determine the future value of projects at the present time, by establishing the net present value and/or the internal rate of return of the project. In this paper, the case scenario of UNICEF will be used to examine these methods in more detail. In addition, the problems facing the organization will be addressed through technological innovations discussed.

UNICEF refers to the United Nations program whose focus is to bring aid to developing nations and in particular to women and children. Part of the responsibilities include responding to natural disasters by providing emergency assistance as well as medical attention to these vulnerable group. Impediments to such efforts include poor communication infrastructure with accompanying problems of internet access and performance of phone networks. Data and voice communication which is essential to the stated mission of the organization is thus in jeopardy at the moment it is most required. It is critical in such situations to contact the headquarters for assistance and this also relies upon communication infrastructure that is in itself vulnerable in disasters events.

To address these problems, Abuaitah suggests three technological innovations that can be considered namely; the IsatPhone Pro satellite phone, the BGAN portable satellite Internet and the WiMax wireless communications (Abuaitah, 2015). The practicality as well as the suitability of either of these alternatives can only be established by subjecting them to the evaluation methods mentioned.

In implementing the chosen project, the organization has to consider the risks and time required to realize the envisioned benefits. Applying the net present value method, the three options can be evaluated in terms of their worth presently. To achieve this, first, the cash flows expected over the planned period are calculated and these are then compared to the total costs of implantation. UNICEF’s cash flows essentially come in the way of voluntary contributions by governments and NGOs as well as private corporations and individuals. WiMax would probably have an advantage over the others because it enables the establishment of telephone operations that can be used to raise funds. In general, mathematical calculating are employed in determining these values. As a rule of the thumb, the project with the highest net present value is to be considered the best but decision makers must incorporate other aspects before giving a final verdict.

Discount cash flow methods also rely upon the payback period which is the time taken for the project to break even. In our case, the innovation project estimated have a shorter payback period would be preferred due to the nature of emergency responses. Internal rate of return refers to the interest rate from the project considering the cash flows and the time period. Higher Internal rate of returns are preferred as this is indicative of more benefits to the target population.

Qualitative methods do not follow prescribed formula to arrive at figures which are then picked on a given basis. Instead, they look at the wider picture and goals to be accomplished and this may provide choices that are not just based on the financial implications.

An example is the use of real options where in the case of UNICEF, the IsatPhone would allow the staff to communicate effectively and in addition it would enable the building of capacity within communities in developing parts of the world (Abuaitah, 2015).

Screening is another qualitative method which works by developing questions to guide the debate on resource application areas. It provides a guide for the needs of the communities through structured debate and as a result the most pressing matter are prioritized. Unstructured interviews advocated for by Trochim, are also important in assessing the real needs on the ground which helps in determining the right mitigation (Trochim, 2006). Financial considerations are important but they are not the final determiner of objectives.

In conclusion, methods for evaluating innovation projects include the use of both qualitative and quantitative techniques. In the first, discounted cash flows are determined through ascertaining the net present value and the internal rate of return. Qualitative methods such as screening enable the real impact of a chosen alternative to be evaluated without necessary being limited by the implications of cost. For this case study, BGAN portable satellite Internet would be best because of the suitably short period of implementation.

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  1. Abuaitah, M. (2015). Analysis – Methods for Evaluating Innovation Projects.
  2. Schilling, M. A. (2013). Strategic Management of Technological Innovation (4th Ed.). McGraw-Hill. Retrieved from <http://mbsdirect.vitalsource.com/#/books/00 77499204/pages/0 UNICEF
  3. Trochim, W. (2006). Interviews. Retrieved from<http://www.socialresearchmethods.net/kb/intrview.php>
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