A manager has found some ideas for new products or services, and would like to use them to develop actual products or services. Their first step is to identify those ideas that their organisation could potentially develop and supply successfully, and this blog post will discuss their characteristics that can be used for identification. A flowchart will be presented, which the manager can use to identify a potentially successful idea by answering a series of questions about the idea and organisation. The flowchart will be applied to ideas for innovation by an up-market hotel in Kinshasa, capital of the Democratic Republic of the Congo.
Organisational strategy for innovation
An idea should suggest a product or service that is consistent with any innovation strategy that the organisation has. An innovation strategy is a set of organisational policies that apply to all the organisation’s innovation activities. For example, an innovation strategy may state the industrial subsector in which the organisation should innovate, and an idea that proposes a product or service outside that subsector is not potentially successful. As another example, an innovation strategy may state that the organisation should only look for small changes in its products, and an idea that proposes large changes is not potentially successful.
Ability to develop and supply the product or service
An idea should suggest a product or service that the organisation has the ability to develop and supply to customers or clients. There are several major requirements here. One is that the organisation’s employees and management have sufficient skills for development and supply of the proposed product or service, or can get them. For example, an organisation’s employees may have skills in customer service, but no skills in computing, so an idea that proposes the development of a new internal computing system is not potentially successful unless the organisation is willing to hire external expertise or buy an existing system.
Another major requirement for an idea is that the organisation has sufficient equipment and material for the development and supply of the proposed product or service, or can get them. Equipment is any asset that is used but not consumed in the development and supply, and material is any asset that is both used and consumed. For example, if an organisation has no manufacturing facilities, an idea that proposes that the organisation develops and builds a new physical product is not potentially successful.
A further major requirement for an idea is that the organisation has sufficient finance, or can get it. Finance pays employees, and it buys and pays for the maintenance of equipment and material. For example, an organisation may have limited finance, so an idea that proposes an expensive development process is not potentially successful.
These three requirements are individually necessary. An idea is not potentially successful if the organisation does not have all of sufficient skills, sufficient equipment and material, and sufficient finance to develop and supply the proposed product or service.
An idea should propose a product or service that will create value for the organisation. Creation of value means that the value of the product or service is higher than the cost of its production. For a company, creation of value would mean that the product or service makes a profit, while for not-for-profit organisations, creation of value would mean that the product or service is an effective way of serving its clients. If the manager wanted to calculate the exact value that the product or service would create, they would have to do some numerical estimation, but for an initial evaluation of ideas, that isn’t necessary. Instead, a few requirements of the proposed product or service can indicate creation of value.
The first requirement is that many people want the proposed product or service. If most people don’t want the product or service, its value to the organisation is likely to be low. The second requirement is that few or no other organisations will provide the same product or service. Sometimes the organisation can take measures to prevent such competition, by keeping its production methods secret, or by forming a strong brand on the product or service, or taking out a patent. If the organisation has many competitors, the value of the product or service to the organisation is again likely to be low. The third requirement is that the organisation can develop and supply the product or service cheaply.
An idea is not potentially successful if most people don’t want the proposed product or service, if many other organisations will provide it, and if it is expensive to develop or supply. If one or two of these statements is true, there is uncertainty about its potential.
Flowchart for identification of potentially successful ideas
Figure 1 presents a flowchart summarising the discussion. It gives a series of questions about an idea that are answered in order, with the answers determining whether the idea is potentially successful, not potentially successful, or has uncertain potential. The flowchart is also available as a pdf download at the end of the post.
Once the manager has assessed the ideas, they may keep the ideas that are potentially successful, discard the ideas that are not potentially successful, and decide whether to keep any of the ideas that have uncertain potential success. If there any many ideas that are potentially successful, the manager may discard all ideas of uncertain potential success.
Figure 1: Questions to identify potentially successful ideas
Example: Identification of potentially successful ideas for an up-market hotel in Kinshasa
The following example identifies potentially successful ideas for innovation by an anonymous up-market hotel in Kinshasa, using the flowchart in figure 1. Information about the hotel and its market is taken from its website and from www.hotels.com. The set of initial ideas examined is taken from my last blog post: a fitness centre open 24 hours each day, a garden, a free area shuttle, free childcare, free supervised activities for children, a playground, greater staff efficiency, reduced noise, improved room service, improved reservation service, improved reception service, and better value discounts on rooms. I’ll examine the first idea in detail, and summarise the results for the other ideas.
Idea 1: a fitness centre open 24 hours each day
Idea is consistent with strategy?
Yes. The management company’s stated strategy for the hotel includes 24-hour service.
Employees have enough skills?
Yes. If the centre is staffed, the daytime employees can be offered night shifts too, or other people can be hired and trained if necessary.
Organisation has enough equipment?
Yes. The current centre has all required equipment.
Organisation has enough finance?
Yes. The organisation invests in much larger projects than this, and its expenditures and income far exceed the likely spending on this innovation.
Many people want the product?
No. It seems likely that there would be few holidaymakers or businesspeople who would want to work out in the middle of the night.
Little or no competition?
Yes. There are few other upmarket hotels, and only one offers a 24-hour fitness centre, according to the reports on www.hotels.com. It is possible that independent fitness centres are open 24 hours a day, but they are not strong competitors, as hotel guests would have to travel late at night to get to them.
Figure 2 shows the responses to the questions, and the path down the flowchart. The potential success of the idea is uncertain.
Figure 2: Assessment of the idea “a fitness centre open 24 hours each day”
The flowchart was applied to the other ideas as well, and their potential success is shown in table 1. The assessment used my limited knowledge of the hotel, and a hotel manager’s assessment may be different.
Table 1: Innovation ideas for the up-market hotel in Kinshasa, classified by their potential success
The ideas that are not potentially successful can be discarded, and a manager can decide whether to discard any of the ideas with uncertain potential success.
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The blog and site are written by James Waters. He is a British economist.