Innovation evaluation framework using state transition probability of the product

Abstract

In the age of digital disruption, coming up with continuous innovation has become a major challenge. The first step to overcoming this challenge is to understand the current state of the innovation activities with reference to customer value. We propose an innovation evaluation framework using the state transition probability of a product. This framework not only provides cost and delivery efficiency in terms of customer contribution, but also provides the innovation characteristics of the enterprise. We applied the proposed framework to software products of FY 2018 and found that the average product had a 14% probability of being added to a service within one year of starting development and that 28% of the development costs contributed to customer value. We also uncovered various structural issues in the innovation process. These findings are consistent with our intuitive impressions, thus demonstrating the effectiveness of the proposed framework as a means of grasping the status quo.