Thursday, February 7, 2013

The Idea Funnel

If you envision the process of brainstorming an idea to actually executing on a business opportunity like a sales funnel, then you might break up the process into distinct phases:

Phase 1 - Brainstorming

Phase 2 - Filtering / Reducing

Phase 3 - Market Validation

Phase 1 is all about volume, just brainstorm ideas. Then Phase 3 is where you might go after 1 idea or maybe do an initial market validation exercise with perhaps 3 ideas. Phase 2, and what I want to explore here, is how you narrow the ideas down from a bunch to just 1 to 3 ideas? I am not sure, but the first step might be to determine the criteria. These will be different for different people or organizations, but for me here is what comes to mind:

  • Passion - are you passionate about the market space, idea and technology (you better be because it's a long road!)
  • Recurring revenue - does the opportunity yield recurring revenue.
  • Technical risk - Does this depend on a hope and a prayer - pharmaceutical / biotech dev cycles - or can you visualize the solution with some confidence.
  • Product-based scalability - will the business model scale with the technology, or will you continually need investment as the revenue grows
  • Phased approach - now this might really be uniquely me, but I am very interested in a model in which I can quickly create a nascent product that will enable me to quickly get in front of potential customers to validate the concept, learn from customers and define future feature sets. Spending $100 million on drug discovery and FDA approvals is not on my personal radar. My vision would be to be able to get something out to customers with a self-funded or angel level of financing.
  • Big market opportunity - A phased approach to a rollout does not necessarily imply a small opportunity. Ultimately you'd want to go after a big opportunity should you succeed in early phases of development.
  • Sales territory density - This may not be an issue for an online consumer model, but the idea here is really about market validation and early sales: do you have to get on a plane to validate the product and build profitability. 
A next step might be to evolve these attributes. With the right attributes, potential opportunities should be readily prioritized. Also, it was already mentioned that I should consider thinking of this as more of a boiling pot where good ideas percolate to the top, rather than a funnel. This implies that the process for evaluating these may be more iterative than a direct path. 

I am a big market validation fan and the one book that comes to mind that really influences this thinking is Little Bets: How Breakthrough Ideas Emerge from Small Discoveries by Peter Sims.

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