How To Evaluate An Idea

An idea is usually born from a flurry of caffeine-infused conversations. It sparks delight and possibility from its creators. Whether in the form of a Post-It note, a brief email, or a fragile thought - it is the picture of “What if…”

But - what usually happens next?

The business adopts an evaluation model that is unconsciously taught - asking, “What is the expected ROI? How profitable will this idea be?”

This is a great question - but is like asking what the dessert special is when you’re ordering entrees. It’s way too early.

Imagine if we adopted this evaluation method when it came to human life. We’d look at a baby, and say - “It can’t walk. It can’t talk. All it does is sleep and slobber. What kind of value is there in this?”

Business model economics matter - but they should not be the first avenue when evaluating an idea or new opportunity.

Instead, businesses should frame their questions around UFE:

  • Upside
  • Feasibility
  • Economics

Upside

The first questions should be looking at the upside of an opportunity. This allows the thinking to explore how interested the company should be in the idea, how hard it should work to push the opportunity forward - and how committed they should be.

These questions should be:

  • “How big could this idea be?”
  • “What kind of impact could this have on our customers and our industry?”
  • “How would customers use this - and how much would they actually want it?”

Feasibility

After considering the upside, move to evaluating the feasibility of the idea. This moves the thinking into practicalities - and helps frame expectations of teams, timeline and fit-for-organisation.

Questions to evaluate at this stage include:

  • “Do we have the resources and capabilities to make this happen?”
  • “Do we have the channels to bring this to market?”
  • “Are there partnerships we could form to make this a reality?”

Economics

Only after engaging with upside and feasibility should the economics come into question. The previous questions will help inform the business model decisions - and will stop you culling an idea to early. 

These evaluative questions include:

  • “What would be the costs involved?”
  • “What kind of revenue could this generate?”
  • “How could we make this pricing attractive to customers?”

Following this framework will help you assess an idea’s potential size, potential feasibility - and only then the potential profitability. 

As Skarzinksy and Gibson write, “Large organisations are often so afraid of overinvevting in a lousy idea that they fail to appreciate the concomitant risk of prematurely killing a great, but immature idea. By asking the profitability questions first - instead of last - they make it almost impossible for the innovator to present a compelling case.”

Flip your questions on their head - and begin to adopt the UFE model - looking for the upside, exploring the feasibility - and then questioning the economics.