Idea generation seems to be an easy task. For any product, we can generate more or less an infinite number of ideas for adding new features or improving existing ones. However, each of those ideas does not have the same potential to extract value from the market. How to generate and select only those ideas which matter for innovators to generate profitable revenue? Hence, idea management is important for making sure a steady flow of quality ideas for systematically ferreting out value from the market out of Innovation.
Idea management focuses on a disciplined approach to generating, capturing, screening, testing, selecting, and applying ideas for systematically ferreting out value from the market. Generating ideas does not sound difficult. It is not only a creative genius, but we all also have the inherent capability to come up with ideas. Moreover, idea formation techniques like brainstorming, lateral thinking, Synectic, and random simulation facilitate to produce a Flow of Ideas. However, producing profitable revenue from ideas is a tough call.
On the other hand, developing and deploying the wrong idea leads to a waste of resources and loss of opportunities. Numerous studies indicate that failure in succeeding with ideas is far more than success. On the other hand, in the absence of ideas, products do not sustain in the competition space, let alone grow. Hence, idea management is at the core of profiting from technology possibilities and sustaining a competitive market position.
Ideas are like fuel–the right quantity of desired quality should feed to the innovation engine at the right moment to produce adequate thurst
Ideas are like fuel to the value extraction process out of innovation. An adequate number of ideas of desired quality should be ensured on time for value extraction. The primary purpose of idea management is to make sure the timely supply of sufficient quality ideas to product and Process innovation teams for systematically ferreting out value from the market out of ideas. Hence, it emphasizes on science for generating, screening, and refining ideas to have an effective, predictable, and efficient system capacity.
Idea management in perspective
More than 80% of executives consider innovation to be very important for the future of their organization. However, most of them are unhappy with their innovation performance. Evaluating ideas, together with prioritizing them, for dealing with competition and implementing growth strategy is one of the most challenging aspects of innovation management. As the 2018 Global Innovation 1000 study finds, up to 70% of the total costs are locked in at the ideation and project selection phases. Furthermore, the BCG 2015 Global Innovation Survey reveals that selecting the right ideas to implement is the second most common challenge organizations face in their innovation work.
The primary purpose of generating ideas is to improve products and processes so that higher-quality delivery at lower cost keeps extracting value from the market. The idea management challenge begins with gathering knowledge about customer requirements and competition response and developing a winning strategy in the market. This knowledge and technology possibilities are fed to the creative process for generating ideas. These ideas are for winning over the competition by offering customers means to get their job done better. Innovators need ideas for creating an entry in the market, sustaining innovation in competition space, supporting the innovation’s growth, and switching to the next wave at maturity.
Ideas go through refinement, evaluation, prioritization, testing, and validation before proceeding towards implementation. Ideas emerge in the market as the quality and cost attributes of products in extracting value from the market. The idea management challenge has been pursuing a disciplined approach for systematically getting value out of technology ideas. Hence, systematic inventing, design thinking, culture, organizational capability, and tools play vital roles. Besides, generation and selection should have a strong linkage with the innovation life cycle of products.
Purposes and types of idea
There’s an infinite amount of different kinds of ideas and it isn’t exactly trivial to be able to know a good idea from a bad one. Hence finding relevant ideas is one of the major challenges of idea management. To address this issue, we should link ideas with the purpose of winning with innovation.
Broadly, ideas are of two types: ideas for product and process innovation. Innovators need ideas for adding and improving product features for increasing the perceived value, thereby enhancing willingness to pay. They also need ideas for reducing the cost, often through a redesign. Ideas for process innovation also help innovators to improve the quality and reduce the cost.
Innovators face four major challenges in extracting value from ideas. It begins with the creation of an entry opportunity in the product space. The next one is to support the growth of the product. Major growth indicators are volume, and profitability having sub-indicators like willingness to pay, target customer volume, and cost. In the competitive market, innovators face a serious challenge in sustaining innovation in the market. Irrespective of the innovation’s greatness, competition response will force the willingness to pay for the innovation drifting downwards. Hence, innovators need ideas for sustaining innovation in the market. Ultimately, innovation will mature, slowing down the scope of value extraction out of ideas. At this stage, innovators need ideas for changing the technology core to start a new wave of value extraction.
Ideas for creating an entry
Innovators have four entry opportunities for turning ideas into economic value. It begins with leveraging scientific knowledge and technology inventions for innovating completely new products. The innovation of the ECG machine, MRI imaging, or microwave oven falls into this category. The next option is to imitate existing innovation through reengineering. Upon reengineering, the journey of innovation begins by adding ideas. The next entry opportunity is about changing the technology core of existing mature products and starting a new wave of innovation. The last option is about focusing on improving the production process through ideas. For example, Samsung used this route for entering into DRAM and Microwave oven business.
Hence, in a product life cycle, innovators can create entry opportunities at multiple points for opening the path of creating value out of ideas. The nature and challenges of ideas for each of these entry opportunities vary. Hence, idea management should have a strong focus on such variation.
Ideas for incremental progression and sustaining innovation
Upon making an entry into the product life cycle, innovators need ideas to keep improving the product and the process through incremental steps. There are two major purposes. Incremental progression is vital for making the product appealing and also affordable to a growing number of customers. Ideas should contribute to quality improvement and cost reduction. Hence, the role of Incremental innovation is vital for expanding the market, increasing revenue, lowering costs, and growing profit.
However, in a competitive market, innovation faces competition forces. Due to the competition, the willingness to pay (WtoP) keeps drifting downward. Hence, innovators are compelled to keep releasing successive better versions, preferably at a lower cost. This response is vital for the purpose of sustaining innovation in the market. For meeting the requirement of keep releasing successive better versions at a regular interval time, idea management should focus on a portfolio of ideas. Hence, innovators should take into account strategic goals, the time horizons of different kinds of ideas, and their risk profiles for making sure that they all match the expectations and likely responses from competitions and customers.
Innovators should also look for ideas for leveraging positive externality effects. Some of the ideas could be to facilitate 3rd party component plugins. Ideas for creating network externality effects are gaining importance. Moreover, ideas for reducing the dependence on infrastructure and increasing computability should also get due focus. Besides, there are very well-defined windows of systematic idea generation for increasing quality and reducing cost.
Ideas for creative destruction leading to Disruptive innovation
The maturity of innovation offers both challenges and opportunities. For the incumbent, this is a challenge. As the scope of incremental innovation slows down, value extraction out of ideas starts evaporating. To start the next wave, the option is to change the technology core. This is a challenge for the incumbent as it requires the exit from the comfort zone of making a profit out of incremental innovation and embarking on an uncertain, often loss-making journey. On the other hand, this is an opportunity for aspiring new entrants. To come up with ideas for pursuing the next wave is far more challenging than generating ideas for pursuing incremental innovation. Often Nobel Prize-winning technologies are needed to get such ideas. Sometimes, incumbents fail to pursue such ideas and also fail to predict the likely implication. Such failure leads to suffering from the damaging effects of disruptive innovation.
Idea management as a system capacity
As we explained, neither mere creativity nor random generation of ideas matter. The nature and gravity of ideas vary with the purpose and state of maturity of the innovation. Hence, idea management should have a strong coupling with the management of both technology and innovation. Moreover, for winning the race of turning ideas into profitable revenue, innovators must have consistent as well as predictable capability. Therefore, the focus should be on developing institutional system capacity for idea management.
It begins with the strategy. The strategy of entering, sustaining, and switching to the next wave demands an appropriate capacity of idea generation and filtering. Hence, there is a need for a well-thought-out winning strategy. Besides, the winning strategy should have a linkage with the idea management strategy. It should include continuously collecting ideas on making gradual improvements in products and processes, and focusing on identifying and progressing with radical technological innovations for leveraging breakthroughs.
Furthermore, idea management should focus on key performance indicators-based target setting, resource allocation, monitoring, controlling, and improving for having a disciplined approach.
For the implementation of the strategy, we need a process of idea generation, screening, evaluation, development, and implementation. It should be a systematically measured process so that it helps identify bottlenecks and opportunities for improvement. Of course, we need tools and methods for practicing the process. On top of it, we need culture. The culture should have a strong winning trait for pursuing a relentless race of perfection for extracting value from ideas by offering better quality at a lower cost.