After Eureka: 7 questions to test innovation for big and unreasonable profit potential

“Irrational passion is the key change agent of our economy.” – Seth Godin

Right brain frameworks like this one aren’t the key to creating transformative innovation, but they help to polish and explain the idea.

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 proposition?
4. How can we lock out competitors?
5. Is it do-able?
6. Can it be profitable?
7. Is it strategic?

Is the market attractive?

TV was a both an ingenious tech innovation & a clever vehicle for marketing

“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.  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 favour?

What customer needs does the innovation meet?

Disruptive innovation means looking beyond the horse

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

But ultimately, what Henry Ford’s customers needed was to get places faster.  The Model-T met a strong, unvoiced 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?

What’s the proposition?

Wealth management (offline version)

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

Can I lock out competitors?

It’s not enough to be a first mover if you have powerful competitors that can overtake you.  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?

Is it do-able?

Imagination often exceeds capability.  See my post on premature genius.  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?

Can it be profitable?

Scores are only outcomes; investment in innovation is key

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.

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?

Be a storyteller, not an analyst

“Innovation is not the product of logical thought, although the result is tied to logical structure” -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.

Be a storyteller, not an analyst.