Ranking Ideas

How many times have you hard someone say: “That’s a great idea. You could make a lot of money with this.” Or on a flip side, I am sure you’ve heard someone say: “That idea is not worth a thing.” Well, how do you know if an idea is worth it? I guess great entrepreneurs just know it in their gut. Well, I am not there yet so if nothing else, I would like to use some kind of a checklist to rank my ideas and then go after the ones that have the most promise. When I listened to the below podcast, I realized that’s exactly what I've been looking for. Here are some notes pretty much verbatim from the podcast. For those who would like to know more, the podcast is called Killer Innovations by Phil McKinney (www.techtrend.com/blog/podcast.xml ).

In this episode Phil asks a fundamental question - how does one choose the best idea among many ideas? The answer is that one needs to answer yes to at least one of these three questions.

1. Does the idea improve the customer expectation or experience?
   1. How? Provide details.
   2. Can you measure the improvement experience? 2 times better? 5 times better?
   3. Will the customer value it? Will they pay premium for it? 

1. Does the idea improve the competitive landscape?
   1. How will the idea reshape the competitive landscape?
   2. What will the competitors do? How will they react?
   3. Does the idea create a sustainable competitive barrier?
   4. What is the current market value chain? Now, how does this idea change the value chain? 

1. Does the idea fundamentally change the structure of the industry?
   1. Can the ecosystem partners play in this new value chain?
   2. Can the existing or new players benefit from the new value chain?

If you cannot answer yes to one of these three questions, the idea is a waste of time. But we are not done yet. Other questions to ask are:

1. Can you actually turn the idea into reality?
2. Do you have expertise and capabilities?
3. Do you have the right knowledge?
4. Do you have a contribution to make?
5. Can the idea generate enough margin?
6. What is the total addressable market that you can go after?
7. Can you price the product to create enough margin? A rule of thumb is that you add up a total R&D cost of a product. Look at the total margin the product can generate. Depending on the industry the new idea should generate 5-10 times the R&D cost at minimum. Some industries are 20,30, even more times the cost.
8. Is there enough sizzle? Can we create the sizzle through a model or a prototype?
9. Will the senior management support it? Can this idea get funded?
10. Can we access the customers’ preferred channel?

Now, for each new idea at the top of your list, rank the ideas based on the above criteria. The results give you the best ideas.