After Eureka: 7 Questions to Test Innovation for Profit Potential

Analytical strategic frameworks are not the key to creating transformative innovation. But a robust strategic framework is essential for shaping and developing an idea. In the battle for hearts and minds, analysis is also the only way to win over the brains of corporate sponsors, venture capitalists, bank managers and spouses. After the "Eureka" moment, it's essential to have a disciplined framework that puts a spotlight on the things that will determine the commercial potential of your idea.

The following framework is a simple set of seven key questions. It’s logical and empirically tested. Using it will transform your ability to troubleshoot ideas and communicate them.

Seven key innovation questions

There are the seven questions to ask about any new innovation:

  1. Is the market attractive?
  2. What customer needs does the innovation meet?
  3. What’s the value proposition?
  4. How can we lock out competitors?
  5. Is it do-able?
  6. Can it be profitable?
  7. Is it strategic?

1. Is the market attractive?

“I have determined that there is no market for talking pictures” – Thomas Edison, 1926

The market is a set of external, immutable forces acting on your idea. It’s terrifyingly easy to create a killer proposition for a stagnant, shrinking, locked-in or non-existent market. To avoid that, you need to think about:.

  • What’s the size and value of the market?
  • What share is realistically available?
  • Is the market changing, growing, shrinking or consolidating?
  • Are there any unprecedented changes or discontinuities like new legislation, new entrants, disruptive technology or other tipping points that could transform the market in your favor?

2. What customer needs does the innovation meet?

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

In fact, what Henry Ford’s customers needed was to get places faster. The Model T met a strong, unvoiced and transcendentally important customer need. The most common pitfall of innovation and new product development is to proliferate features that don’t meet a significant customer need. Ask yourself:.

  • Are my customer needs clearly defined, strong and unmet?
  • Are there unvoiced customer needs?
  • What’s it worth to the customer to meet those needs?

3. What’s the proposition?

A proposition describes the sum total of benefits that a customer gets from a product or service. For me, one of the ultimate proposition statements of all time was Apple’s “one thousand songs in your pocket” tagline for the first iPod. To develop a great proposition, ask:.

  • Is the proposition clearly defined?
  • Does it meet strong customer needs?
  • Is it different from what competitors offer?
  • Is it interesting?

4. Can I lock out competitors?

It’s not enough to be a first mover if you have powerful competitors that can overtake you. History is littered with the corpses of failed first movers. To lock-out competitors, ask:.

  • Is the innovation patentable? Or is there any other intellectual property that can’t be substituted?
  • Can I use or build a powerful brand?
  • Are there any scale economies and can I get big fast enough to benefit from them?
  • Do I have an insight, knowledge or skill that’s rare and significant to the innovation?
  • Can I build exclusive partnerships?

5. Is it do-able?

Imagination often exceeds capability; a fact that often leads to premature genius (see http://www.opineconsulting.com/how-time-product-launches/ for more about the perils of being too early). To avoid premature genius, think about:.

  • Who needs to be asked what to understand if it can be done?
  • Are there precedents that suggest it’s feasible?
  • Can it be done at reasonable cost?

6. Can it be profitable?

As Gary Hamel observed, “growth is the scoreboard, not the game.” Profitability is the outcome of innovation. But, when it comes to drawing up forecasts and valuations ask:.

  • What businesses are comparable? How much do they make and what are they worth?
  • How risky are the cost and revenue streams?
  • How many revenue streams does the innovation generate? Generally, the more revenue streams, the less risky is the idea.

7. Is it strategic?

If you’re working in a big company, you’ll need to answer this too. Strategy is either brutally simple (if it makes money, it’s a fit) or inscrutably complex. Many strategy academics, take a resource based view, which means answering:

  • What core competency would the venture deploy?
  • How does it fit or leverage brand or distribution strengths?
  • Does it use proprietary processes, skills and know-how?

Conclusion: 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..

In other words: Be a storyteller, not an analyst.

Simon Kirby consults on innovation, service and strategic marketing for corporate and government clients. He’s the founder of Opine Consulting.

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