Idea evaluation - "Making the right projects"
Simply put, there are two things in innovation management that make for success: "Doing projects right" and "Doing the right projects".
The aim of "Doing the right projects" is to identify those ideas and projects that have the greatest impact. The most promising ideas are to be filtered out from the multitude of options in order to get the maximum out of the limited resources for innovations. A functioning idea evaluation should also ensure that possible flops are detected and stopped at an early stage.
Evaluation of ideas in the innovation process
Idea evaluation is a rolling process and has three important applications:
First, ideas are evaluated at birth to decide on release.
Secondly, ideas and then innovation projects are regularly evaluated in the course of a review to assess their value and benefits. In the course of a project, new findings and changes in the environment change the framework conditions for an innovation. This means that their significance can move in both positive and negative directions.
Thirdly, an evaluation is important in order to calculate the priority and to compare the individual innovation projects against each other in order to focus on the most important topics.
There are many different evaluation criteria. In principle, it is a matter of weighing up opportunities and risks. The ideas and innovations
- should have the highest possible benefit (success potential) and
- the implementation should be feasible (feasibility), which means high chances of implementation with as little risk and costs as possible.
The success potential can be evaluated with the following criteria:
- Strategy fit is the contribution to corporate strategy.
- Synergies, e.g. with existing products, preferably no cannibalisation of currently profitable products.
- Added value for customers, customer benefit and attractiveness of the future product for the customer.
- Attractiveness of the target market, e.g. market size, market growth, intensity of competition, Neuer Markt...
- Differentiation potential from the competition - a unique position over the competition and a difficult imitation is important.
- Sales potential Earnings potential are the quantitative aspects, which brings us the innovation in the purse.
Feasibility is represented by the following criteria:
- Technical feasibility - Is the technical solution feasible? For example, do you have the necessary skills and technologies?
- Market entry - How difficult is it to bring the product to the target group? Behind this are e.g. market barriers, available sales opportunities, sales competences etc.
- Economic feasibility, in principle the be-all and end-all, in particular the cost-benefit calculation.
- Legally relevant is that it complies, for example, with laws, available property rights and standards.
- Internal barriers must be excluded, e.g. acceptance by employees and integration into existing processes and the product portfolio must be ensured.
Qualitative or quantitative evaluation?
One can decide on the basis of numbers, analyses or gut feeling. What is right about innovations? Unfortunately, there is no right or wrong here.
Even if management tends to quantify everything, innovation must be realistic. You often want business cases with sales figures, profits and costs right from the start in order to make a rational decision for or against an idea. But that is impossible, we are dealing with the future and can therefore only make estimates. Therefore, the handling of quantitative, rock-hard figures should be treated with caution. Because we cannot measure the future.
You should also not rely on your gut feeling, which is an intuitive decision based on experience.
Especially for innovations, an assessment based on analyses of several evaluation criteria is recommended. From the criteria presented above, those should be selected and weighted for a relevant one. This provides a semi-objective assessment, which is a very good basis for decision-making.
Evaluation in the innovation portfolio
On the basis of the assessment of the various evaluation criteria, a value for each of the dimensions success potential and feasibility can be achieved. This allows you to create an innovation portfolio in an XY diagram with all current ideas and innovation projects.
These XY diagrams are very clear and bring an extremely high benefit in the decision-making process.
- It is immediately apparent what the top topics are, namely those with high success potential and high feasibility. Quick-wins are ideas with high feasibility but low success potential. Ideas with high success potential but low feasibility are attractive but risky and should therefore be well kept in mind. The rest must be set.
- Already the process of determining the values provides deep insights, especially if you use group processes and, for example, discuss different assessments and get to the bottom of them. It is therefore advisable to involve as many employees as possible in the evaluation.
- The innovation portfolio provides a perfect overview of all topics and is a great basis for discussion and decision-making.
The XY diagrams can be easily extended with a further dimension. With the size of bubbles, for example, the quantitative sales potential, the stage or effort could be represented.
Conclusion - Evaluation of ideas
The evaluation of ideas and innovation projects is an important aspect in the innovation process in order to identify the most important topics with the strongest leverage. The main criteria are success potential and feasibility. It is important not only to rely on quantitative assessments, but also to consider qualitative assessments. In addition to an objective and comprehensive evaluation, the presentation of the evaluation results as a basis for decision-making is also essential and XY diagrams or bubble charts are extremely helpful here.