At this stage, we already have a structured portfolio of ideas organized in innovation horizons. What we need, then, is to understand which of these ideas can become business opportunities.
To do this, we need to evaluate three main factors:
- 1- How much does the consumer (internal or external) need the idea?
- 2- Does the company have the capacity to put it into production?
- 3- What is the size of your value proposition for the user?
This phase is called Opportunities in Development and requires an innovation team capable of evaluating the proposed ideas' feasibility. If the company does not have an innovation team ready, it can create temporary teams formed from the expertise needed to assess each group of ideas.
STEP 1: USER NEED
The first step of the innovation team is to evaluate how much the consumer needs the idea. I would like to point out that factors that seem obvious at a distance become less clear when we investigate in more depth to decide which way to go.
An efficient and objective way to measure the user's need is to make a scorecard - ranging from 1 to 5 - on the following points:
How to answer questions 1 and 2
Different types of data can be used to answer questions 1 and 2. Customer support and sales channels, for example, have very rich information.
The innovation team must decide on the type of research to be done. For example, when your top customers have a very similar need for customer service via email, a next step might be to ask other customers if they also have that need.
A more sophisticated investigative method is required for more complex ideas or when the client/user has difficulty expressing what they need. Our focus is not to discuss all research methods in-depth, so let's just list some of the key methodologies.
- Delphi Technique
- Nominal Group
- Group Discussion
- Voice of Customer
- Lead/User research
- P.E.S.T.E.L Analysis
How to answer questions 3, 4, and 5?
The Innovation Intelligence platform helps you answer these three questions in a very objective and efficient, data-based way. This is because one of the platform's core objectives is to help our customers understand market movements, emerging technologies, and technological trends, in addition to tracking who are the investors, competitors, and customers who are associating with a particular technology or solution. The ease of use and quality of the tool associated with the speed at which information is generated helps our customers find these answers and gives them an unparalleled competitive advantage.
STEP 2 : DELIVERY CAPACITY
The second step in building the opportunity is to understand if the company can convert the idea into reality. This means turning into "real opportunity," an idea that already has its need confirmed.
Here again, we will use the scorecard technique to understand the delivery capacity of the company. If this capacity is not enough, we need to understand whether it is possible to develop it internally or if it is more recommended to look for startups to assist the company.
How to measure the company's delivery capacity
We can measure the delivery capacity of the company by making a scorecard ranging from 1 to 5 points on the following topics:
Understand if the company's brand positioning adheres to the desired audience. For example, it makes perfect sense for Shell to launch its network of electric vehicle stations, but it wouldn't make much sense if they tried to enter the fashion industry.
The goal here is to analyze the company's business model and analyze whether some elements would bring a competitive advantage over current and future players in its value chain. Network of partners, synergy with other products, combined offers, established distribution network, customer portfolio, synergy with manufacturing process or reuse of waste, there are numerous advantages that can be mentioned.
Technology, expertise, and/or partners
When the company has the talents and technology to build and deliver the solution, its innovation team can look to internal experts on the subject to better understand the challenges and who would be the people in the company who could help in the project.
A common challenge – and difficult to overcome, especially when the solution runs away from much of the company's core – is the availability of people. Although they are interested and willing to execute the project, they are usually already busy with other activities and will certainly not prioritize an innovation project in the validation phase of opportunities. That is why, as A. G. Lafley says, companies with the culture of "we do everything indoors" are usually not the most innovative.
In any case, talking to the company's experts helps the innovation team keep their feet on the ground so that when looking for a service provider or an innovation platform, they know clearly what to look for.
STEP 3: VALUE PROPOSITION
The third step in building opportunities is to understand the value proposition of the idea for the client. This exercise is vital because it helps to position and price the solution when it is commercially exploited. If two ideas come to stall concerning necessity and delivery, the one with the highest value should prevail over the other because it will be more profitable for the company.
How to evaluate the value proposition
For our value proposition score, we will use an article from the Harvard Business Review (The Elements of Value - Eric Almquist, John Senior, and Nicolas Bloch - September 2016 ) that addresses the topic very well.
According to the article, the value proposition can be divided into four categories: Functional, Emotional, Life Change, and Social Impact.
For each category, there are value elements, and each element must be worth 1 to 5 points. The value of 1 point must be assigned when the value is non-existent, and the 5-point value applies to cases where the value is extremely strong in the proposed solution.
Building and Prioritizing Opportunities
The result of this second phase is a matrix where it will be possible to evaluate the best opportunities clearly. To build the matrix, you need to perform the following steps for each idea:
- 1 - Average the requirements score (x-axis)
- 2 - Average the score of the delivery ability (y-axis)
- 3 - Add all points of the value proposition (circle size)
After that, simply plot the results of each opportunity in the matrix below:
Below is an example of plotting opportunities. It is important to note that the matrix makes it quite clear which opportunities should be prioritized and which ones should be discarded, and which one needs to be further investigated.
It is also worth noting that the circle's size represents the value for the client and the color of the circle represents the innovation horizon that the activity is related to.
This is another element that helps prioritize an opportunity according to your strategic alignment.
Let's do a quick analysis on the 1,2,3,4,5 and 6 opportunities presented above:
1 - Although the company has a high capacity to deliver this solution, it is not necessary for the user and therefore has no value to it. In other words, she is a strong candidate to be unlisted.
2 - This opportunity is clearly ruled out because the user does not need it, and the company cannot deliver it.
3 - Here, what draws attention is the size of the idea's value for the user. Although not an opportunity directly related to your need, it has potential value and, which is also essential, the company has a good ability to deliver. To complete, the innovation horizon 1 in which it is inserted makes the activity have high compatibility with the core offer of company products, generating synergy with sales and other areas. Therefore, this opportunity should be taken advantage of, and further investigation should be carried out to improve the company's ability to deliver and communicate its value to the user.
4 - Opportunity 4 has high demand for the user and also has a lot of value in the offer. The issue is the low capacity to deliver it. In this case, the suggestion is to deepen the search in startups' ecosystem, investigate companies more early-stage, promote hackathons, and go to universities to talk to researchers. Because it's a horizon 3, which is disruptive, if your company doesn't investigate, your competitor will probably do so, which directly or indirectly will hurt your company.
5 - This is an opportunity in an adjacent market, with good value proposed for the customer, clear need, and delivery capacity. Without a doubt, it is an opportunity that must be embraced.
6 - It follows the same reasoning as item 5, but it is a more disruptive opportunity.
Below is the result of the analysis:
With this, we were able to identify "Real Opportunities" and go to the next phase, which is the construction of compelling cases, which do not generate doubts that the project should be executed.
Below is a summary of what we are dealing with in this chapter.