Wednesday, September 6, 2017

Vetting Experience Concepts

Lately, I’ve had rather too many conversations with interns and junior employees who are upset or dejected that their brilliant ideas for new products or product improvements are not gaining any traction.   Sometimes, this is conservatism – a well-established firm tends to assume its success means it’s already doing everything it needs to do to be successful – but in most instances there is an obvious flaw with the idea itself.    I find myself saying the same things, over and over.

What new outcome will this idea achieve for the customer?

This question is the foible of many bright ideas: they are intrinsically interesting, but do not achieve a new outcome for the customer.   It may be an interesting way to do something that people don’t want to do, or a new way to do something that people are already doing by more effective or more efficient means.  In sum, an idea is sustainable only if it offers genuine value to the customer.   Novelty has a very limited appeal.

An effective way to vet an idea for value is to show the idea to a small number of customers (half a dozen is sometimes sufficient) and ask them what outcome they could achieve by using it.   Rather than telling them what you think it is good for and asking them to agree, let them discover the value on their own.

Does the idea have sufficient and sustainable appeal?

If the idea clears the first hurdle, a more intensive investigation should follow to determine the extent of the appeal: how many customers would use this, and how often would they use it?   It may take a sizable panel to get quantitative results – but once you have them, you have a basis for estimating revenue from the product’s release: the number of people suggests market share, and the frequency of use suggests frequency of purchase.

If the idea replaces an existing means to achieve the same outcome, testing it in comparison may tell you whether the idea has a chance in a competitive marketplace (against solutions that already exist) and whether you will be cannibalizing your own sales (which is not bad if the cost to the firm is less for the new idea).

Is it legal?

Particular in heavily regulated industries such as healthcare and financial services, there are many great ideas that cannot be pursued because of legal and regulatory restrictions.   Even if the idea is completely benign, offers good value for dollar, and would be warmly embraced by an audience who’s well aware of the conditions, the precise letter of the law could be used to shut it down and possibly damage the brand if it were released.

Arguably, this should be the first hurdle – but legal advisors are fond of saying “no” without intensive diligence and business decision-makers are prone to go along with their legal advisors unless there is a compelling reason to take a risk.   The market appeal is often necessary to get an executive to tell the attorneys “thanks for the advice, but we’re going to proceed anyway.”

Is it profitable, or at least sustainable, for the firm?

Because money makes the world go around, any idea has to pass the test of financial potential: it has to generate more revenue and/or incur fewer expenses.   At the very least it has to make enough revenue to cover its own cost – otherwise it is leeching resources from more viable lines of business and must eventually be terminated for the health of the firm.  This is true even for nonprofit organizations: any operation has to be sustainable rather than feed upon the life-blood of the organization.

This can be a very difficult hurdle to leap because the cost of the idea has to be paid for out of the revenue.   It is not enough to make a million dollars in additional sales if the expense of providing the idea is $1.2 million for the same duration.   It’s easy to get excited about what happens at the register, while ignoring what is going on in the ledgers.

Caveat: Beware of Unqualified Experts and Self-Vetting

I have a sense that these four questions will help to understand the reason that exciting ideas are shot down – but this is the scope of their value: understanding why the ideas are shot down by others, not limiting your own thinking because of your assumptions.   Be prepared to hear a "no" but do not abandon an idea because you assume that's what you will hear.

Unless you are an accountant, you do not know what will be profitable; and you will think a good idea is not sustainable when in fact it is.  The same goes for market appeal and legal compliance: you are not an expert, and unless you have done a thorough investigation, you cannot say – you must defer to experts, and ensure that their deliberation is thorough.

And apply the same standard when others criticize the idea: I have very often seen a designer attempt to shoot down a product idea saying that it will not be appealing to the customer when he does not know, and until it has been properly vetted, no-one knows.   In this sense, the vetting process works both ways”: it deflates ideas that do not have merit, but may also bolster confidence in an idea that does not seem to have merit, but actually does.

No comments:

Post a Comment