Innovation always means dealing with the future. Innovation is not about generating sales and success with current activities. Rather, it is about laying the foundation for success in the future with today’s activities.
That’s why it’s helpful – and that’s probably a clear understatement – to get involved with the future and try to figure out what the future might look like. A magic crystal ball would be good for this. However, we do not have this magical instrument for predicting the future. What we do have, however, are development patterns that we can already see today and that we assume will exist in the longer term and cause relevant changes. Observing and analyzing these trends can provide valuable information for developing innovation ideas. You all know the usual megatrends from the media: aging society, climate change, and urbanization…
Exercise
Get inspired by a trend for new innovation ideas.
- Identify a trend. Consider what trends you currently perceive in your environment? Don’t just focus on the megatrends. Also try to identify ‘smaller’ trends that you consider exciting and relevant.
- In doing so, also think about why this trend is occurring right now. What political, economic, social, technological, environmental, legal changes are enabling the trend or promoting it right now?
- Consider which basic human needs are affected by the changes brought on by this trend. In doing so, take a very broad view of the idea of basic needs. Social status, self-improvement, entertainment, social relationships, security, identity, social interaction, creativity, fairness, honesty, freedom, recognition, transparency, and so on can also be basic needs.
- What needs are now emerging in people as a result of the trend? What expectations, what longings are developing? These needs are important because they are the ones you should address with your innovation.
- For inspiration, take a look around at how other industries, companies, organizations even from completely different areas, deal with these new needs. Let it inspire you!
- What innovations are possible here? Consider whether you want to innovate a physical product, a service or a (business) process.
- Now you have done the groundwork. Now be creative and gather ideas on how you can help customers meet the need you have identified. Now you can collect innovation ideas.
This process is based on the structure of the Trend Canvas (Trendwatching 2019).
Idea evaluation
Please always remember that the evaluation of ideas always comes after the idea generation and is separate from it.
The first step in evaluating ideas is to separate good ideas from bad ideas. This means selecting from the large quantity of ideas generated by creativity techniques those that have the greatest potential for the company. The term ‘good idea’ therefore does not refer to a general characteristic of the idea, but always to the context in which this idea was generated. If an idea is likely to be able to contribute to the achievement of the company’s goals, then the idea is a good idea.
As a general rule, three dimensions must be included in the evaluation of ideas:
- Market. In the market dimension, it must be estimated whether there will be a market, whether the returns will be sufficient to cover the development and manufacturing costs.
- Technology. In the technical dimension, it must be clarified whether the idea is achievable from a technical point of view.
- The company. Here, it must be determined whether the company has the resources, knowledge and capacities required to implement this idea. It must also be clarified whether the idea fits the company and its strategy at all.
The market, technology and company dimensions are briefly described in the following section using the 7-C list.
Criteria for the evaluation of ideas
Here we briefly go into the criteria for evaluating innovation ideas with the help of the 7-C checklist. This summarizes seven dimensions important for innovation success in concise and easy-to-remember categories:
Customer potential
A technically interesting and sophisticated product idea is not sufficient for innovation success. This product idea only becomes commercially useful if a sufficiently large market can be developed with the product. Checking the market potential is one of the key analyses that allows the economic potential of the innovation project to be assessed.
Customer benefit
Not only the market potential – i.e. the number of customers – is decisive for the success of the innovation project, but also the customers’ willingness to pay, which has a direct influence on the price that can
The decisive factor for customers’ willingness to pay is the customer benefit generated by the new product. Solutions are only marketable if they reflect actual customer problems or needs and adequately address them. Benefits can depend on:
- Prior knowledge / skills
- Pre-investment
- Number of other users
- Culture & daily life of the customer
- Social environment of the customer
- Aspiration level of the customer
- Availability of complementary technologies
Competitive advantage
Essential for the success of an innovation and to be able to realize the market potential or to be able to benefit from the customers’ willingness to pay is a significant advantage over the competitors. Possible advantages arise from:
- Better quality
- Interesting additional benefits
- Special quality of experience
- Easier manageability
- Higher availability
- Lower risk
- Time-saving usage
- Better quality-price ratio
Important information for assessing competitive advantage is obtained by focusing on current and future products and technologies and their manufacturers. Guiding questions can be:
- Who is currently active in this market with which products?
- Who could be active in the market in the future?
- Who is currently researching or developing similar ideas or has done so in the past?
- Which competitors are collaborating?
- Who may have protected certain technologies that are essential for market entry?
Communication
Communication is necessary for the market success of the innovation, since the market can be developed more quickly and the size of the market or the market potential can be positively influenced by means of communication. Another positive influence on market development and innovation success is when the characteristics of the innovation can be communicated easily, especially the additional benefits, which are seen as essential for the willingness to pay.
An additional benefit that cannot be communicated will generally be difficult to bring to the market at higher prices.
Cost
As a decisive variable, costs influence the possible lower limit of the selling price of the new product. They are therefore directly relevant to the cost-effectiveness of the innovation project. When considering costs, it is important to look not only at the manufacturing costs of the new product, but also to take into account the marketing, communication and sales costs.
In many cases, the costs of the innovation project are also of considerable importance, ultimately affecting the profitability of the project. Here, a target cost calculation could facilitate the decision as to the range within which the development costs may move, in order to achieve the announced profitability targets at a given market price.
Competence and skills
Since product development from an idea to a product requires knowledge and competencies within the company, special attention must be paid to the available technical, economic and administrative skills in the examination of the project. In the course, unforeseen difficulties may arise in solving, for example, technical problems, which can be traced back to the fact that the company does not have the necessary expertise. At this point, a decision must be made as to whether external development partners should be integrated into the project as part of a development cooperation, whether a development contract should be assigned to external development service providers to solve the problem, or whether the company should decide to build up the required skills itself. The development of competencies can be achieved through the targeted personnel development of the company’s own employees or by recruiting new employees with the appropriate competencies.
Capital requirements
Turning an idea into a finished product always requires additional resources. This means not only financial resources and time but also, from a management perspective, attention that is focused on the innovation project and distracts from so-called day-to-day business. Innovation projects are therefore in direct competition with other operational investment projects. As a rule, the latter are considered to be less risky than the former, which makes consistent planning and continuous review of innovation projects urgently necessary as a risk management measure.
Here you can see a panel discussion that is not only about idea evaluation but also includes other exciting aspects of innovation management.