7 questions to test innovations for big and unreasonable profit potential

How to appraise innovation

7 questions to test ideas for big and unreasonable profit potentialsimon kirby | opine consulting | www.opineconsulting.com | © Opine Consulting Limited, 2010

http://www.opineconsulting.com/

simon kirby | opine consulting | www.opineconsulting.com | © Opine Consulting Limited, 2010

First, an important nuance“Irrational passion is the key change agent of our economy."

- Seth Godin

"Great ideas can't be tested. Only mediocre ideas can be tested."

- George Lois

Logical frameworks only get you so far. But they do help to shape ideas and explain them to corporate sponsors, venture capitalists, bank managers and spouses.



Seven key questions

1

•Is the market attractive?

2

•What customer needs does the idea meet?

3

•Does the proposition meet customer needs?

4

•Can I lock out competitors?

5•Is

it do-able?

6•Is

it profitable?

7

•Is it a strategic fit?

“The toughest question has always been, ‘How do you get your ideas?’ How do you answer that? It's like asking runners how they run, or singers how they sing. They just do it!”

-Lynn Johnston



Is the market attractive?

“I have determined that there is no market for talking pictures.”

-Thomas Edison, 1926

Key questions1. What’s the size and value

of the market? 2. How much of it is

realistically available ? 3. Is the market changing,

growing, shrinking or consolidating?

4. Are there any changes or discontinuities that could transform the market in your favour?



What customer needs does the idea meet?

•

“If I had asked people what they wanted, they would have said faster horses.”

-Henry Ford

Key questions1. Are my customer needs

clearly defined, strong and unmet?

2. Are there unvoiced customer needs?

3. What’s it worth to the customer to meet those needs?



What’s the proposition?

“One thousand songs in your pocket.”

- Apple

[A proposition is the sum total of benefits that a customer gets from a product or service. ]

Key questions:1. Is the proposition clearly

defined?2. Does it meet strong

customer needs? 3. Is it different?4. Is it interesting?



Can I lock-out competitors?

Key questions1. Is the innovation

patentable? 2. Can I use or build a

powerful brand?3. Are there any scale

economies and can I get big quickly enough to benefit from them?

4. Do I have an insight, knowledge or skill that’s rare and significant to the innovation?

5. Can I build exclusive partnerships?



Is it do-able?

•

“…one must look at things from the simplest, most practical point of view. ”

- Fyodor Dostoevsky

Key questions1. Who needs to be asked

what to understand if it can be done?

2. Are there precedents that suggest it’s feasible?

3. Can you do it at reasonable cost and risk?



Is it profitable?

•

“Growth is the scoreboard, not the game”.

-Gary Hamel

Key questions1. What businesses are

comparable? How much do they make and what are they worth?

2. How risky are the cost and revenue streams?

3. How many revenue streams does the innovation generate? [Generally, the more revenue streams, the less risky is the idea.]



Is it a strategic fit?

•

If you work in a corporate you need to answer this. Many strategy academics, take a resource based view, which means answering:

Key questions1. What core competency

would the venture deploy?

2. How does it fit or leverage brand or distribution strengths?

3. Does it use proprietary processes, skills and know-how?



Be a storyteller, not an analyst

•

“Innovation is not the product of logical thought, although the result is tied to logical structure.”

-Albert Einstein

Use this framework to shape and develop your thinking but not to constrain it.

When you communicate the idea, use the facts and analysis. But don’t be limited by them.

Be a storyteller, not an analyst.



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7 questions to test innovations for big and unreasonable profit potential