Events and
publications
June 23, 2010
Business model innovation
8.00 – 9.00 am
University of San Diego
July 23, 2010
Free
webinar: Agile Strategy for New Ventures
An introduction to applying the principles of agile strategy to maximize new
venture success.
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Ideation: your foundation for new product success
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Step 5: Plan
This step is the most time and resource intensive in the ideation phase, and is thus reserved for those few ideas that are under serious consideration for investment. This step involves building a comprehensive business plan using a sound innovation business model framework. It is essential to develop a solid plan through a combination of creative thinking and fact-based analysis. This business plan will the basis for the investment decision, and all future work. It is vital that the plan developed is not just for presentation to investors, but is actually going to be implemented and followed. For independent ventures, this step also comprises identifying and pitching prospective external investors.
Develop the business plan. Based on our innovation business model, the business plan should comprise the following seven elements:
- Definition of target markets and customers, the needs to be addressed, and the markets’ current and future size.
- Clear definition of the whole product offering, including features, benefits, technology, pricing, positioning, value proposition and customer experience.
- Detailed competitive analysis, including competitive offerings versus customer needs, and how your offering meets customer needs better than all options.
Product development and lifecycle management – approach, organization, skills, processes and resources required to design, build and evolve the product.
Sales and marketing – approach, organization, skills, processes and resources required to attract, win and grow customers.
Operations – approach, organization, skills, processes and resources for production, delivery and support.
Partners – strategic alliances and partners needed to accelerate any part of the business model.
Financial model – key assumptions, revenue, cost and cash flow forecasts, amount of funding required, sources of funding; for independent ventures, capitalization table.
- Your strategic management system – governance, and how you will plan, implement and control the product or venture launch and growth.
- Detailed implementation plan, with tasks, responsibilities and timing.
Build the plan through both creative thinking and detailed analysis. In addition to a series of internal discussions and brainstorming sessions, it is essential to develop your business plan through solid research and analysis, including:
- Customer research and concept testing (product, message, pricing, buying process)
- Detailed product requirements definition
- In-depth technical research, including defining and building a prototype
- In-depth discussions and preliminary agreements with key vendors and partners
- Legal, IP and regulatory evaluation
- Detailed financial modeling, risk and sensitivity analysis, and option evaluation.
Pitch (and for independent ventures, source and pitch) investors. This step also includes presenting the business plan to the investment decision makers. For independent ventures, this step normally includes the added complexity of securing external funding. Through your planning efforts, you need to determine the right categories of investors to pursue – angel, venture capital, private equity or strategic corporate investors. You then need to identify and contact a number of prospective investors just to secure a first meeting. Thereafter, the presentation process and subsequent discussions and negotiations are analogous to, but far more complex than, securing investment internally within a large corporation.
Step 6: Approve
The final step is to secure approval and funding to proceed. Following the presentation of the business plan in step 5, there is normally a process of reworking and fine-tuning the plan, and negotiation over investment terms and conditions, leading up to the decision to proceed.
For independent ventures, this is a longer and more complex process, as it normally involves negotiation over company equity holding, governance, personal commitments of founders, as well as a due diligence process.
This step, and the ideation phase, is concluded with the final decision to invest and proceed, or to delay or abandon the opportunity.
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An effective ideation phase is critical to maximizing the chances for success for your new product and service innovations. Ideas that graduate through steps 1 to 6 have been carefully selected from a broad range of exciting options, and have been methodically analyzed and carefully planned. This phase requires far less time and resource than subsequent phases, and done well, will make an enormous difference in time-to-market, capital needed and success probability.
As is widely known, many ideas that are funded for development never reach the market, and a majority of those that are launched do not achieve success. For this reason, your product innovation model should be built on a solid ideation foundation. By implementing a dynamic, but disciplined ideation system, you will create and harness innovative thinking, focus your limited resources on the best concepts and opportunities, and maximize your organization’s ability to achieve your innovation goals.
* * *
Resources
Bughin, Jacques, Michael Chui and Brad Johnson. “The next step in open innovation” McKinsey Quarterly, June 2008.
A recent article discussing the advantages and challenges of co-creating products with external partners. Among other topics, the article focuses on the technologies enabling these product development activities.
Cooper, Robert G. and Scott J Edgett. “Ideation for product innovation” PDMA Visions Magazine, March 2008.
An informative article based on a 2007 study, which had over 160 companies assess the effectiveness and popularity of 18 ideation methods. The resulting analysis presents a useful matrix plotting the effectiveness and popularity of these ideation methods.
Cooper, Robert G. Winning at New Products: Accelerating the Process From Idea to Launch.
One of the classic product development texts. It presents Robert Cooper’s Stage-Gate process, which has been adopted by innovative companies over the past two decades.
Jolly, Vijay K. Commercializing New Technologies: Getting from Mind to Market.
This book, focused on new technologies, lays out a end-to-end framework that differs from the strictly linear processes previously developed. The technology commercialization process presented by Professor Jolly advocates the use of five diverse sub-processes linked to each other by intermediate stages of stakeholder mobilization.
Skarzinski, Peter and Rowan Gibson. Innovation to the Core: A Blueprint for Transforming the Way Your Company Innovates.
Building on the ideas of strategist Gary Hamel, Innovation to the Core presents a holistic guide to instilling innovation into your corporate DNA. Particularly relevant to this month’s Insights, the authors not only advocate widening the innovation pipeline through ideation, but also stress the importance of enhancing the quality of ideas through focusing on themes and creating collisions of diverse insights.
About the Authors
Michael Lurie is Founder and CEO and Dan Zagursky is a Manager with Blue Mine Group in San Diego, CA. Blue Mine Group is a strategy firm specializing in new product development, venture management, and corporate innovation.