Earlier this week I did an interview for a second-year MBA student researching the challenges companies face when it comes to innovation. I argued that companies tend to see similar challenges (see my article on avoiding common innovation pitfalls)—and one of the most common is deciding which potential new innovations to pursue. More than a few companies, if they’re honest, would admit they pick prospective innovation projects based on who raised the idea, how ‘sexy’ the idea is, or what piqued the interest of their CEO.
Contrast this with companies that have a systematic method to picking projects, and the difference is stark. While innovation is innately risky, organizations with a formal approach to innovation are 50% more likely to successfully launch new products.
But how do you systematically choose which potential innovations to focus on? You need both a framework to weigh ideas and an objective process to prioritize them.
A Framework to Weigh Ideas
Step one is ensuring you have a framework to think through potential innovations. If, as Drucker wrote, “the essence of strategy is choosing what not to do,” then what we need is a way to identify those innovation items we won’t do. There are myriad frameworks to approach such decisions; I like two in particular in determining which potential innovations to pursue.
Framework 1: IDEO’s Venn Diagram
The first is IDEO’s well-known but effective desirability/feasibility/viability Venn diagram. The core idea is that great innovation happens at the intersection of three critical elements:
A need or problem to be solved (desirability).
An ability to realistically meet the need (feasibility).
An opportunity for sustained business (viability).
Used as a framework, IDEO’s model calls for weighing each potential innovation against each of the three elements and looking for items that fit well in all three.
Framework 2: George S. Day’s Three Questions
The second framework I like is a twist on IDEO’s classic. Wharton Professor Emeritus George S. Day suggests asking three questions when considering innovation investments:
Is “it” real?
Can “we” win?
Is it worth doing?
In Day’s model, these three questions can be broken into further questions. “It” is real if both the potential market and the potential product are real. “We” can win if both the product and the company producing the product can be competitive in the space. “It” is worth doing if the potential product can be profitable and it fits with company strategy.
As with IDEO’s desirability/feasibility/viability, Day’s questions can be used as a framework by framing each question in binary (yes/no) terms, answering each question for every prospective innovation, and looking for the innovations with the highest number of ‘yes’ answers.
A Process to Prioritize Innovation Work
In either framework, the key is to assess all potential ideas or innovation projects using the same set of criteria, and to do so objectively. After all, having a framework is only valuable if you’re able to use it to make decisions.
The core challenge, in our experience, is finding a way to quantify comparison points. It’s hard to gauge whether one idea is objectively more “desirable” than another. For example, we might compare the total number of people who could be impacted by the idea or the number of survey respondents who expressed a willingness to try a product. Our work, then, is to identify the quantifiable data points that will differentiate among concepts. An example of a typical assessment from one of our client projects is below:
As with selecting a prioritization framework, countless methods exist to quantify differences among ideas. While the “right” method will depend on the specific factor at hand, the resources available, and the time allotted, a few of my go-to quantification methods include the following (mapped to IDEO’s desirability/feasibility/viability framework):
Desirability of an Innovation
Total addressable market (number of users with a particular problem).
Google search volume for the problem at hand.
Likert-scale consumer surveys.
Clicks on a faux social media ad (see Zynga’s “ghetto tests”).
Feasibility of an Innovation
Estimated cost to execute the concept.
Fit with existing company capabilities (e.g., low/medium/high).
Time required to bring to market (as a proxy for fit with capabilities).
Viability of an Innovation
Estimated annual revenues.
“How much/would you pay” consumer surveys.
Number of clicks on a faux landing page’s “Add to Cart” button.
It is worth noting that quantifying comparison points need not be tedious. In the above example, for instance, it may be sufficient to calculate “estimated cost to execute” in terms of T-shirt sizes (e.g., XS, S, M, L, XL) rather than in actual dollars. The main point, again, is that ideas are compared using the same set of criteria and standards.
With a clear framework to weigh ideas and objective data to draw comparisons, weighing among potential ideas becomes straightforward. Take the above example again—what was initially an opaque question (how do you decide whether it’s better to focus on proactive health alerts or a new loyalty program?) became a simple calculation once we had done the work of gathering objective data.
Pursue Systematic Innovation
In the end, the benefit of using a framework and consistent process to consider potential innovations is greater confidence that you’re pursuing the right things. At worst, you’ll have a better way to articulate why you’re pursuing the things you decide to pursue. At best, the framework and process become a way to make innovation repeatable at your organization—revisiting the framework on a quarterly basis, for example, or as new ideas are raised. In either case, you’ve taken a large step toward thinking about innovation systematically and using it to drive business results.
We love talking through these kinds of challenges. Feel free to reach out to us at email@example.com if we can help you think through innovation at your organization.