7 Factors to Help You Evaluate Innovation Ideas

Your company likely has hundreds of unexplored ideas that could help achieve strategic goals. But how do you identify which are the right ideas to move forward that will deliver business value? What are the best methods to separate duds from innovative ideas?

How to evaluate new ideas for your organization

Idea management software makes idea evaluation easier and more organized. It provides a structured process for rating ideas in your company against best-practice criteria. Getting everyone in your company to evaluate ideas has the potential benefit of enhancing employee engagement in innovation. But beware, idea ratings are still subjective opinions. It does not establish the truth. There is no foolproof way to determine what ideas will succeed, but ratings do support the decision-making process. This article will take you through smart criteria to score innovation ideas.

7 factors to consider for evaluating business ideas

1. How relevant is the idea?

When collecting ideas in an innovation challenge, the campaign manager should define the scope and strategic themes in the challenge description. This tells participants what types of ideas the company is looking for. Of course, you may still receive idea submissions that are intriguing but not aligned with the business strategy.

Judging relevance becomes trickier when the company pursues a diversification strategy: entering new markets with new products or services. When the market becomes saturated, expanding to unfamiliar product categories makes sense. But if a company tries to sell to a consumer base they don't understand, and the new product does not express the key attributes of the parent brand, the product idea is probably not relevant. Consider the case of BIC, the French manufacturer known for inexpensive yet reliable pens and lighters. In 1998, BIC tried to expand its product categories with a line of disposable underwear for women. It failed. Turns out consumers did not want their underwear from BIC. Associating underwear with pens, did not fit. If the new product or service does not align with the parent brand's connotations, it's likely not relevant to the company's strategic focus.

2. How much will the idea benefit customers?

Steve Jobs once said that Apple doesn't give customers what they ask for. Apple figures out what customers want before they know they do. But the lesson from this quote is not that you should ignore customers, rather that people often don't know how to articulate their needs. It is crucial to have a sympathetic understanding of how customers use your company's products or services and how it benefits them.

A cautionary example of under-appreciating customers comes from Nortel, the Canadian telecoms giant that filed for bankruptcy in 2009. They didn't listen to customers, lost an understanding of their needs, and ultimately lost their confidence. Another fumble is that Nortel dismantled its centralized R&D platform designed for collaborative teams to innovate on. Without a platform for innovation, it becomes difficult to integrate customer feedback with the development of products. So keep the benefit to customers in mind when developing new ideas.

3. How easy is it for competitors to imitate?

Rating the imitability of an idea makes you consider if it can be copied by competitors. If a product or service idea is easily replicated, it might not provide a sustainable competitive advantage. Managers believe that being the first to bring a new product or service to the market guarantees a first-mover advantage. But there are notable examples where a first-mover loses the lead despite strong brand recognition. In 2015, Snapchat was known as the social app for ephemeral photos and videos, but Instagram released its version of Stories in 2016. Snapchat did not have the network effects to accelerate and enrich its first-mover advantage, and by 2018, Instagram Stories had grown to twice as many daily users (400M) as Snapchat (188M).

4. What's the disruptive potential of the idea?

When disruptive products enter the market, established brands are often knocked off their pedestal. A product idea is usually considered disruptive if it is supported by new technology, highly accessible, low cost, and upends existing markets. Market leaders often dismiss disruptive innovations as inferior, while it's actually sufficient and affordable for customers with low needs. Disruptions often appear out of the blue from a company not previously considered a competitor. Consider Garmin, the biggest name in GPS devices in the 2000s. They likely did not see a competitor in Google, known at that time for its search engine and free email client funded by advertising. But when Google Maps became common on smartphones, it disrupted the GPS industry across the world, forcing Garmin to find smaller niches such as smartwatches for outdoor recreation and GPS devices for boats.

Could your company's next innovation be disruptive? Evaluate the disruptive potential of innovation ideas from your organization, keeping in mind that the ideal is to still use your company's existing strengths as a foundation when leaping into a new product category.

5. How complex is it to bring the idea to market?

There's a joke in computer science that the first step of any project is to grossly underestimate its complexity. When a team is excited about an idea, it's understandable that they won't consider how difficult it will be to see it through to a viable innovation. That is why it's necessary to sensibly assess if the idea is perhaps too complex for the capabilities of the business. Here, it might be ineffective to seek a democratic answer from all employees. Rather, consult the most knowledgeable experts in your organization with the needed experience to evaluate the complexity of submitted ideas.

6. How much profit is expected?

Estimating the expected numerical value of an idea, is difficult. Your company might not be able to say exactly how much profit it will generate. But consider the market potential of the idea on a scale of low to very high. Consider if the anticipated value of the idea will outweigh the cost of delivering it. What is the market size of the product? Even if your company makes the decision to pursue a loss-leader strategy with low margins on the product, there needs to be a vision for the business value it will create. So, incorporate profitability in your evaluation criteria to judge if the investment is justified.

7. Do you have internal know-how for the next step?

Professor Richard Rumelt, a giant in the field of strategy,  asserts that good business strategies involve making a bold bet while building on the company's strengths and competencies. Ask yourself, does your organization have the required skills and competencies to implement the idea? Is more experience needed before prototyping? The idea may be attractive, disruptive, and potentially profitable, but success is unlikely if you don't have employees who understand what's required to create the product.

"Ideation without implementation is merely intellectual indulgence," says Johannes Neudecker, Product Manager at ITONICS. For many companies, the process from ideas to project implementation is often missing. So, it's essential in idea evaluation to consider if the concept is a no-go because your innovation team lacks the internal know-how to implement it.

Effectively rate and implement ideas with ITONICS

Once you've done the idea evaluation in collaboration with knowledgeable employees, it's vital to have a structured process to take ideas with the highest scores to the next stage.

Ready to radically upgrade your ideation process? The ITONICS Innovation OS is designed to systemize all activities in the end-to-end innovation process, from foresight research to ideation to execution, at scale. Our innovation management software has tons of features to streamline your efforts, including:

• Customizable ideation campaign templates to get started quickly
• Capture ideas from internal and external sources
  
  
  
  
• Connect ideas to trends and emerging technologies as supporting evidence
• Collaboratively evaluate ideas with other teams and experts
• Prioritize ideas on a Matrix or Kanban Board
• Manage the implementation of ideas and projects on interlinked Roadmaps
• Monitor and track project progress and performance
• Reports on metrics and KPIs

Don't leave your organization's innovation success up to chance (or spreadsheets). Focus on what really matters: driving innovation and growth for your business.