Confidence can be a killer
What makes a good idea – this is the so-called 64 million dollar question. Without a doubt, anybody with a new idea naturally thinks and hopes their idea will be an outstanding success, however, most are wrong. Interestingly, this overwhelming confidence is why business plans are so often overly optimistic.
The real question that needs answering is what are the ingredients of a good idea?
“Stage Gates” – or due diligence
Many companies, especially the larger ones, have so-called “Stage Gate” models for new products where an idea progresses through a series of gates with “hurdle criteria” at each gate to be passed before moving on to the next phase of development. Of course, big companies need this type of due diligence to put some science to their work. Such approaches are commonplace and also serve to limit the wrath of senior management or shareholders, in case of a failure.
Notwithstanding the use of a stage gate approach, these may be of little value unless the right questions are being asked.
The assessment tool we employ and have refined over many years as a “first pass assessment” is referred to as the “Technology Diffusion Model”. The term diffusion being the rate the product will likely penetrate the market, much like the analogy of a dye diffusing into a liquid.
This tool has proven to be extremely reliable and in fact when we applied it to the A380 Airbus, it gave a negative answer. It seems history has proven this to be correct. However, no product in the gadget category would pass our Diffusion Model test. Such things seem impossible to confidently predict. The one possible exception may be a clear and meaningful change to a successful product, such as a Braille embossed Rubik Cube. This is a sure success and even better, the market size can be immediately established.
Just a few of the questions the Diffusion Model explores and asks to be quantitatively scored on a scale of one to 10 includes:
- How well does the innovation improve performance relative to current practise?
- Are the gains significant?
- What is the cost benefit or “Value Proposition”?
- When will I get a return on my investment?
- How easy is it for the user to understand and adopt?
- How much training is involved and will it be easily understood?
- How compatible is the innovation with existing practises?
- Does it require a significant change in behaviour for the user/market?
- What is the level of investment to test the innovation?
- How much investment is at possible risk?
- What are the consequences of the innovation failing?
- If the new approach fails, how hard is it to revert to previous practices?
With these and other questions scored it’s a simple matter to evaluate the likely success of the product, market penetration and Diffusion rate.
Another way we look at products is by reference to our Market Risk Map where the market category, degree of novelty and market turbulence are explored. More will be said about this in the following posts.
What’s the message?
There can never be 100 per cent certainty of success with any new product. To assume backing a new idea is guaranteed to succeed is complete folly. What is important is to ask the right questions, apply measures where possible and never be blindsided by enthusiasm, passion and overconfidence.