7 questions to test innovations for big and unreasonable profit potential
DESCRIPTION
Logical frameworks are wonderful for shaping new ideas and explaining innovation to corporate sponsors, venture capitalists, bank managers and spouses. This article explains the seven questions you need to answer to test the potential of a new innovation.TRANSCRIPT
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
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.
simon kirby | opine consulting | www.opineconsulting.com | © Opine Consulting Limited, 2010
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
simon kirby | opine consulting | www.opineconsulting.com | © Opine Consulting Limited, 2010
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?
simon kirby | opine consulting | www.opineconsulting.com | © Opine Consulting Limited, 2010
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?
simon kirby | opine consulting | www.opineconsulting.com | © Opine Consulting Limited, 2010
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?
simon kirby | opine consulting | www.opineconsulting.com | © Opine Consulting Limited, 2010
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?
simon kirby | opine consulting | www.opineconsulting.com | © Opine Consulting Limited, 2010
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?
simon kirby | opine consulting | www.opineconsulting.com | © Opine Consulting Limited, 2010
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.]
simon kirby | opine consulting | www.opineconsulting.com | © Opine Consulting Limited, 2010
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?
simon kirby | opine consulting | www.opineconsulting.com | © Opine Consulting Limited, 2010
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.
simon kirby | opine consulting | www.opineconsulting.com | © Opine Consulting Limited, 2010
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