Published on June 13, 2024
When it comes to innovation, governments and big businesses, startup entrepreneurs and even individual investors all make choices – place bets – on ‘what will work’ under a cloud of uncertainty.
We all try to pick winners, but we don’t all do it well.
In the case of an organisation that has committed to building and progressing a portfolio of innovation projects and initiatives, it is a matter of prioritising work and investments, choosing the initiatives to take forward and then project managing them in a firm and disciplined way.
There are many ways to decide on which ideas should go forward and which should not, and there is no golden bullet.
Even the most successful of innovative organisations like Apple, Google and Samsung have taken innovation ideas forward and invested in them heavily, only to see them fail in the marketplace.
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Our research has identified that a purely subjective, or gut feel, approach to choosing innovation initiatives is generally a bad idea, but there is a systematic and structured approach that can effectively test new ideas.
Even better, these tests can be periodically reapplied to the portfolio of ideas as the research, development and commercialisation processes continue. This ensures ideas that sounded good at the time continue to deliver on their potential.
You can use these tests to rank and prioritise innovation ideas at each stage of the research and development process.
We propose, as a minimum, a set of eight key tests that every proposed innovation should be evaluated on:
The function and value test.
Will the innovation fundamentally serve a required need and be fit for the purpose that is intended? Will the value that is delivered be superior to existing offerings or solutions in the marketplace, such that customers will consider switching? Or if it is a process innovation, will any extra cost lead to net benefits?
The market and marketing test.
Will the innovation appeal to customers and can we find an effective channel to distribute our product to the marketplace?
The operations and scale up test.
Can the product or service being developed be effectively mass produced? It is not good enough to just rely on a pilot or prototype – the new innovation’s design must be sufficiently robust that it can be mass produced without compromising quality or productivity.
The management and key personnel test.
Do we have or can we recruit the human resources required to scale up and commercialise this innovation?
The financial test.
Will this innovation, whether it’s a product, service, new process, new technology or even a new business model, provide a financial return on our investment? Any calculations need to be adjusted to take into account the project risk.
Intellectual property control and access test.
Do we have full control of all intellectual property to be used in this innovation, or are we transgressing on the intellectual property of others? An intellectual property strategy is crucial when developing your innovation.
Strategic alignment test.
To what extent does the innovation fit and align with our organisational strategy and its priorities? Does this new product or service fit within or sensibly extend our existing portfolio of marketplace offerings and do we have the capabilities to produce, market, sell and distribute it, or to effectively outsource those activities?
Sustainable development and ESG.
Does this innovation at least meet minimum – and ideally much higher – standards of environmental and social sustainability? Will the innovation be attractive to consumers who are increasingly mindful of environmental and social factors when choosing products and services?
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Using this sort of structured approach across a range of potential innovation projects can be an effective screening process that leads to a shortlisted set of projects that can be assembled into an innovation portfolio of activities.
Good businesses already use many of these tests when developing new products, and good Governments should also use test criteria like these.
The worst thing a government can do is simply wait and expect an efficient market to work: good governments and good business leaders are proactive and sensibly tilt the playing field to their advantage.
At all levels (government, big business, startups), good judgement, channelled through a strategic framework and set of structured criteria and tests, is the best way forward.
This article was first published on Pursuit. Read the original article.