Idea Potential Evaluation

Using Hydra and Tricks to Boost Innovation, it is easy to generate large amounts of potential business ideas in a short timeframe. Once written down, a phase that requires even more discipline starts: To prioritize what ideas should be developed. I call this also the idea potential evaluation.

This evaluation is typically difficult because in it’s infant state it is hard to estimate the impact of an idea. The following describes a mechanism that works very well for me.

The core of a profitable business is scalability and value

The concept to perform an idea potential evaluation is actually very simple, but the variables in the formula need some explanation.

As you will see, the evaluation will be quick and give you a list of ranked business ideas. It is best to use an excel sheet for the evaluation with the following columns:

  • Domain
  • Idea Name
  • High-Level Concept (Lean Canvas)
  • Brief description (only cornerstones, not too much detail)
  • Pain Relief
  • Gain Creator
  • Number of users
  • Effort/Complexity
  • Ranking

Pain-Relief

Pain is a distressing feeling through negative experiences. These experiences cause negative emotions that the customer feels in the process of getting a job done.

Pain-Reliefs are features to improve unpleasant tasks a customer has to do in a user journey.

To get a clearly prioritized idea backlog, use Fibonacci numbers for the estimation similar to Story Points.

Limit yourself to 5-6 numbers such as 1, 2, 3, 5, 8, 13. The stronger the pain, the higher the number.

Gain-Creator

Gain refers to the benefits which the customer experiences, what would delight customers and the things which may increase the likelihood of adopting a value proposition.

Gain-Creators are features to make pleasant tasks a customer has to do in a user journey even better.

To get a clearly prioritized idea backlog, use Fibonacci numbers for the estimation similar to Story Points.

Limit yourself to 5-6 numbers such as 1, 2, 3, 5, 8, 13. The higher the gain, the higher the number.

Pain vs Gain

Typically, customers experience the removal of pain more intensively than adding gain.

If a customer, for example, bought a car with no wheels, the experienced pain when looking at the car and thinking about the money spent, while not being able to use it, is very high.

If compared with creating gain such as adding more speed, the pain (getting wheels) will most of the time dominate.

If a pain-relief, however, targets a pain caused by a product you sold yourself before, the customer will often require to get it for free.

Number of Users

Estimate the number of users experiencing the pain or gain. It is important to note that users are not necessarily persons you sell the product to!

This might need some more explanation: If your added value enables your customers to gain a competitive advantage using your product, the pain/gain of their customers becomes their perceived value.

To get more accurate results, use officially available data from, for example, government agencies or ask google questions like “how many pizza places are there in the US” (answer btw. is 61269).

If you are targeting multiple customer segments, add the individual numbers.

Effort / Complexity

Similar to product backlog prioritization, estimate every individual idea and take the following into account:

  • The amount of work
  • The complexity (technical and logistics)
  • Any risk or uncertainty

For this estimation, it is best to involve a small group of open-minded seniors (Software: Product Owner, Architect, Developer, Tester, Data Analyst).

Explain the idea, but do not get tempted to go too much into detail. 5min for every idea should be enough. Better do this upfront for all ideas.

To be honest, I believe if your High-Level Concept (Lean Canvas) is well formulated, there shouldn’t be any long talking required.

To get a clearly prioritized idea backlog, use Fibonacci numbers for the estimation similar to Story Points.

Limit yourself to 5-6 numbers such as 1, 2, 3, 5, 8, 13. The higher the effort/complexity, the higher the number.

The Formula – Putting it all together

Using the information determined above, the actual formula is simple but beautiful.

\text{Ranking} = \frac {\text{Pain or Gain * Number Users}}{\text{Complexety of Solution}} 

Idea potential evaluation with the concept described creates a ranked list of potential business ideas with the focus on scalability and value.

Idea Potential Evaluation – Conclusion

Increasing complexity and effort means higher resource usage or slower time to market with constant resources.

More gain or removed pain, on the other hand, increases the value of the solution.

As the concept focuses on customer value, combining it with Value-Based Pricing enables you to answer the question about an approximated market price, as well as the revenue potential, very early.

The idea with the highest-ranking shows the best value to effort ratio.

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