Scoring Models

Quantitative financial metrics such as NPV and ECV often result in to Harch Go/Kill decisions. Success requires going beyond financial methods. As quantitative metrics are often based on strong assumptions, they need to be complemented with highly reliable qualitative information. Market information is of the utmost importance. Therefore, Scoring Models have been introduced as a way to incorporate such qualitative factors. This enables companies to rate and rank new product projects.

As an example, the following model was introduced by the pharmaceutical company Hoechst in the 1980’s.

The Hoechst Scoring Model

This model takes into consideration 5 factors:

1.       Business Strategy Fit
2.      Strategic Leverage
3.       Probability of Technical Success
4.       Probability of commercial Success
5.        Reward to the company

    The final score is used for 2 purposes:

1.       Go/Kill decisions Gates
2.      Prioritization

Drawbacks:

·         Imaginary precision: “Scoring models try to measure of soft banana with a micro-meter” (Cooper et al., 2001, p. 69).

·         Halo effect: If a project scores high on a criterion, it tends to score high on all of them.

·          Efficiency in allocation of scarce resources: Scoring models fail to ensure that accepted projects will achieve the highest possible score for the resources used.