assessing business ideas

Carole Ferguson, a certified trainer in South Africa, set up 130 workshops one afternoon and by using one of the lateral thinking techniques generated 21,000 ideas for a major corporation. Such is the power of deliberate creativity. Whenever I mention this story, people always ask how good ideas could be selected from this huge number.

In the first place the ideas generated would apply to different areas. Some might be workplace ideas. So the first step would be to sort out the ideas and invite a team from that particular area to assess the ideas relevant to it. The team would be asked to lay out the potential benefits, to lay out the difficulties and risks, and to lay out the costs. The ideas which get the most attention will be those which show the largest possible benefits.

In assessing potential benefits the 'value sensitivity' attitude of the yellow hat is essential. If you are not sensitive to value then you are wasting your time trying to be creative. I have sat in on so many creative meetings where excellent ideas were generated, but those present were unable to see the value in their own ideas!

FRAMEWORKS
One way of making a rapid assessment of a large number of ideas is to make an 'emotional assessment'. This would be based on intuitive feelings. It would be necessary to set a 'framework' for those feelings. Possible frameworks include the following:

...obvious values
...strong multiplier effect
...easy to implement
...easy to test
...fits in with existing strategies
...very simple
...low-cost implementation
...satisfies a known need
...very different from traditional thinking

Any one of these simple frames can be used to scan the idea and pick out those that seem to satisy that frame. It would be a mistake to become greedy and to try to combine different frames. You can do many scans, but each scan should have one frame.

The ideas that are picked out on this 'red hat' first scan or first 'pass' can then be explored in fuller detail. The remaining ideas are not rejected or discarded. They are kept in the idea bank for future examination.

FULL BENEFITS
The first step in a more detailed examination is an exploration of the full benefits. How large are the benefits? On what do the benefits depend? How durable are the benefits? Who enjoys the benefits? How might competitors respond? and so on. Very often the benefits are even greater on closer examination. Sometimes it is the other way round. An idea which seemed to show benefits at first sight turns out to have benefits that are limited to only a very few people under special circumstances.

The originator of an idea should be asked to spell out the benefits of the idea. It is not enough just to be creative and to expect others to work out the benefits. At the same time, it does happen that people other than the originator of the idea can see more benefits than the originator.

Supporting evidence for the claimed benefits would need to be collected. Such evidence may take the form of statistics or trends. There may also be comparisons with somewat similar ideas (me too). Why do we think this idea will have these benefits?

There is always some speculation and uncertainty about benefits. If we lower the price, will people buy more? This may not work in areas which are not price-sensitive, or in areas where price and quality are strongly linked: a cheaper product may be seen as of inferior quality.

The intuition and feelings of those who have experience in the market is also an ingredient in assessing the benefits. 'Gut feeling' is a useful ingredient and can put together a number of complex factors. It can also be wrong.

As the benefits are explored there may be suggestions as to how the idea can be changed in order to increase the benefits. Such possible changes are kept in mind.

EASE OF IMPLEMENTATION
This comes next. How easy would it be to use this idea? There may be channels or mechanisms in existence through which the idea could easily be used. There is a big difference in value between an idea that can be used easily in an existing structure and an idea which requires new structures. Sending a new signal down an existing wire is much easier than laying down new wires.

The 'ease of implementation' must also include the people factor. Who is going to carry out the idea? How will that person react? Will that person or group be competent to carry out the idea? What are the 'political' feelings of the people involved? There are some people who are resistant to any change. There are others who might be unhappy about a particular idea. At this moment the 'cost' of implementation is not considered. The simple question is: can this idea be implemented?

COSTS
If the idea has benefits and can be implemented, then the next phase is consideration of the costs. This consideration needs to be rather broad. There is money. There is time. There is management attention. There may be resource considerations. What other ideas and opportunities would be crowded out? Are the costs known or is it an open-ended 'blank cheque'?

It is obviously not economic to try out every good idea. When resources are committed to one idea, those resources cannot be used for other ideas. So the 'opportunity cost' needs to be looked at closely. It may mean that one very expensive (but good) idea will lose out to several less expensive (but also good) ideas.

RISKS
There are many different sorts of risks. The first risk is that the idea may simply not work out. For example, something that worked in the laboratory may not scale up to full production. Then there is the risk that the idea may not be implemented properly. There is the risk of intervening circumstances: a mail order campaign may be disrupted by a postal strike: new legislation might affect a new credit concept. There is the risk of unforeseen customer response. Consumers may not react as had been supposed: car buyers may not react well to a tiny, cheaper car from Mercedes-Benz. There is also the risk of competitive response. The competitors might respond with an even better idea or an even lower price. Once a price war is set off, then profit margins are eroded on all sides without any increased market share.

Risks can be met by changes in the idea and by the design of contingency plans. In the end it is the risk/reward ratio that decides whether an idea is worth trying out.

EASE OF TRIAL
If an idea can be tried out easily and at low cost, this is very much in favour of that idea. It may be possible to have a pilot project. It may be possible to try the idea in one region only. The advantages of a test are obvious. If the test works well, then there is much more motivation to get behind the idea and to allocate resources to it. If the test gives negative results then the idea can be dropped without the cost of a full-scale implementation.

As with all tests it is important to make a special note of the circumstances. An idea may have succeeded because of special circumstances. Perhaps the launch coincided with Christmas shopping. An idea may have failed because of special circumstances. Another product launch might have diverted attention.

BEST HOME
What would be the best home for this particular idea? Instead of focusing on the idea, we focus on the 'best home' for the idea. One idea might be suitable for a new company trying to establish a presence in the field. Another idea might be more suitable for a large company with established brands and a market presence. Another idea might be suitable for a company with a reputation for 'trying' new products. Another idea might be too risky for a conservative financial institution.

After considering the best home for the idea, that best solution is compared to the actual situation. This idea is best suited to a new company trying to establish a market niche - are we that sort of company?

This approach means that it is possible to acknowledge the intrinsic value of an idea and yet choose not to use that idea. Such an approach is much better, and much more honest, than seeking to show that it is a bad idea and that is why the idea cannot be used.

At the same time, there is always the danger of providing too easy an excuse for an organisation that does not want to use any new ideas: 'that idea is a great idea, but not really suitable for us'.

SUMMARY
The selection of ideas may require hard work. Why should it not, if the rewards are going to be substantial? The strategy of 'maintenance and problem-solving' works well right up to the point when it fails. It is then usually too late to do anything else.