For most innovation projects, business plans are like pieces of fiction, which means investors and stakeholders are more often than not convinced by the best storytellers. We know most of these projects don’t keep their promise. Uncertain and with no data that can be judged through the lens of traditional accounting, innovation projects are notoriously hard to handle. 

Innovation Accounting fills this gap by enabling teams to translate very early ideas into a financial (or mission impact) model that actually assists with decision making. Innovation Accounting draws on actionable metrics like rates and ratios often utilising the Pirates Metric framework. The five cornerstone components of this analytics framework are Acquisition, Activation, Revenue, Retention and Referral. (AARRR, hence the pirate name.)

AAARR metrics create accountability by expressing a specific customer journey as a funnel but they still express each uncertain variable in one number. No matter how uncertain each variable is, decision making can be improved further by utilising a Monte Carlo Analysis on the model. This calculates the most likely outcome as within a range of likelihood.

If you would like to learn more or are interested in how we can help, please feel free to reach out.

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