1. Innovation Leadership Training Day Four Idea Evaluation February 20, 2009 All materials © NetCentrics 2008 unless otherwise noted

2. Welcome In this section of the innovation process training we’ll examine the steps necessary to establish a consistent idea evaluation and further investigation

3. What We Want to Accomplish

4. Goals for this section Our goal this section – Establishing an evaluation method and standard criteria – Identifying the appropriate evaluators – Creating a business case for selected ideas

5. Key Points Once an initial selection is accomplished, the ideas must be evaluated against standard evaluation criteria – These criteria have to be established and documented After the evaluation, the team should identify the most promising ideas for further investigation – This may include rough prototyping or the development of a business case

6. Selection Bias There’s an important selection bias to avoid at this point – downselecting too early to one or two ideas rather than continuing to investigate a number of ideas At this phase of the process it’s simply too early to place all of your focus on one idea – without the deeper investigation of a business case and prototyping, you may discard viable ideas in favor of one that looks viable but has hidden flaws

7. Evaluation It’s important to establish and publish a consistent set of evaluation criteria for ideas – This demonstrates that all ideas receive equal treatment – Standard, published criteria help idea generators understand how ideas will be evaluated and selected – Evaluation teams can become accustomed to a common set of criteria and can compare ideas against each other These criteria need to be developed before the evaluation begins and remain consistent across a number of ideas

8. Iterative Evaluations In most cases you’ll want an iterative evaluation process – The “first pass” is simply to weed out any ideas that are outside our scope or are infeasible – The “second pass” may create a business case document with more detailed financials

9. Consistent Evaluation

10. Three domains We need to evaluate the idea against three “domains” Feasible Technical Domain Desirable Customer Domain Profitable Financial Domain Success

11. Evaluation Criteria Opportunity: How large is the market, how “open” is the market window and how many competitors? – 1 – small market/many competitors – 2 – moderate market size/some competitors – 3 – large market/some competitors or niche/no competitors Feasibility: Can we do this with existing capabilities and technologies or will we need to gain or partner for those skills – 1 – must partner for or invent the capability – 2 – near term capabilities – 3 – existing capabilities Distinctiveness: Is this the first instance of this concept in this market, or are we creating a new market? – 1 – Fast follower – 2 - First instance of the idea in the market – 3 - Creates a completely new market Market Impact: What impact does the idea have in the market? Acceptance, forcing others to change, or making some other product or service obsolete – 1 – Customer acceptance – 2 – Forces competitors to change or react – 3 – Makes another product or service obsolete Consumer Impact: What impact does the idea have for the consumer? – 1 – solves a basic need – 2 – provides an improved benefits – 3 – provides unexpected benefits Consistent with a “positive bias” the team approves most ideas rather than seeking to kill them early in the process

12. Initial Evaluation The criteria demonstrated previously is a recommended “first pass” evaluation that can quickly “score” an idea and help prioritize it against others in the queue Note the concept of “positive bias” – this is included to remind the team not to kill ideas too quickly and narrow the pipeline of ideas dramatically too early in the process Note also that we don’t recommend too much emphasis on “profitability” yet

13. What’s necessary for evaluation? When we are evaluating an idea we need: – A consistent presentation of an idea – All the relevant data available about the idea – The evaluation criteria necessary to consider the idea – A team of people who can evaluate the idea, usually from different backgrounds or perspectives – A “score” for the idea – The ability to capture the evaluation

14. Outcomes In this or any evaluation, a number of outcomes are possible: – Continue evaluating the idea – Launch the idea – Create a business case for the idea – Conditions not right – shelve the idea – Stop/Terminate due to many reasons

15. Business Case The deeper evaluation and investigation of an idea often results in developing a business case In this phase we build a business model for the idea – Market size and sales opportunity – Projected Revenues – Costs to build and market – Channels – Risks – Competitors

16. Presentation to Selection Team A standard business case for an idea is presented to the steering team or a selection team who can evaluate the opportunity and decide to move forward with further investment At this point the idea may need to be “adopted” by a sponsor or assigned to a specific business unit or the central innovation team.

17. “Packaging” the idea While the steering team may be familiar with the idea, you’ll need to consider the appropriate “packaging” for the idea – Unmet need or opportunity – Recommended new product or service – “Elevator pitch” – Value proposition for the idea – A recommendation from the team – An identified adopter or sponsor

18. Leaving this phase At the end of this phase, the idea has been evaluated In some instances a business case has been developed The outcomes are: – Proceed to commercialization – Proceed to prototyping – More research/investigation required – No further action

19. Key Takeaways Define the criteria for the idea evaluation as early as possible and use consistent criteria whenever possible Use an iterative evaluation process to weed out ideas and dive deeply into ideas that pass the initial screenings Begin to map ideas to departments or sponsors who can “own” the idea after evaluation

20. Questions?