UNIT II - New Ideas

Idea Generation and Evaluation for New
Venture Creation
Idea Generation and Evaluation
Identifying and evaluating new ideas
Avoiding the wrong ideas
Some interesting trends and ideas
Using brainstorming to generate ideas
Sources of New Business Ideas
Forces, trends and mega-trends tech, macro, social, political
Changing market structures and needs
Market inefficiencies
Products in the market
Personal experience, hobbies and pastimes, personal passions
Cross regional, discipline or industry
Evaluating New Ideas
 Original?
 Feasible?
 Marketable?
 Profitable?
Assessing Feasibility of a New Venture
Analyze Strengths and Weaknesses
1. Is the venture proprietary?

2. Are the initial production costs realistic?
3. Are the initial marketing costs realistic?
4. Does the product have potential for high margins?
5. Is the time required to get to the market and to
reach the break-even point realistic?
Look at Both Internal and External
Factors
 Is the potential market large?
 Is the product the first of a growing family?
 Does an initial customer exist?
 Are the development costs and calendar times realistic?
 Is this a growing industry?
 Can the product and the need for it be understood by the
financial community?
Evaluate Technical Feasibility
 Functional design and attractiveness
 Flexibility, durability, reliability
 Product safety
 Ease and low cost of maintenance
 Ease of processing and manufacturing
 User friendliness
Evaluate Marketability
 Investigate the full market potential and identifying customers
 Analyzing the extent to which the potential market can be
exploited
 Determine opportunities and risks
 Information sources include
- General economic trends
- Market data
- Pricing data
- Competitive data
Use an Idea Checklist
 Basic Feasibility  Production of Goods & Services
 Will it work? Is it legal?  Make or buy or both? QA?
 Competitive Advantage  Staffing Decisions
 Advantages, competitors  Who, when and competence?
 Buyer Decisions
 Financing
 Who are the likely customers?
 How much is needed, where will it
 How will they be serviced? come from, ROE, exit strategy?
 Marketing of Goods & Services
 How much budget for
advertising and selling?
Pricing? Distribution?
Do you have these Critical Success Factors?
 Uniqueness  Product Availability
• Amount of innovation required during pre-  Product and service still in development?
start-up  Products released too soon be have to be
• Length of time a non-routine venture remain recalled for further modifications, affecting
non-routine company’s image
 Investment  Customer Availability
• Capital investment varies from industries  Critical consideration to determine who
• Extent and timing of funds needed the customers are and what their buying
 Sales Growth habits are.
• Growth pattern anticipated for new-venture
sales and profits
Ask the right 10 questions about your idea
1. Is the product or service idea 6. Has market research been
new? conducted?
2. What are its weak points?
7. What sales and distribution
3. What reaction has it received from
the public? methods will be used?
4. Is it easily understood? 8. How will the product be made?
5. Can the product penetrate
different market segments? 9. Will the business concept be
developed and licensed to others
or sold away?
10. Can the company get, or does it
already have the necessary skills
to operate?
Idea Generation and Evaluation
Pitfalls in Selecting New Ventures
Pitfalls Ways to avoid
 Lack of objective evaluation  Subject all ideas to rigorous

study and investigation
 Project the life cycle of the
 No real insight into the
product; timing is critical
market
 Study the project thoroughly
 Inadequate understanding of before initiating it
technical requirements
More Pitfalls in Selecting New Ventures
Pitfalls Ways to avoid

 Poor financial understanding • Do not underestimate
development costs
 Lack of venture uniqueness • Ensure customer awareness
of product superiority
through product
 Ignorance of legal issues differentiation
• Patents, trademarks and
copyrights to protect one’s
inventions
Why do new ventures fail?
 Product / Market Problems
• Poor timing, product design problems, inappropriate distribution
strategy
• Unclear business definition, over-reliance on one customer
 Financial Difficulties
• Initial under-capitalization, assuming debt too early, VC
relationship problems
 Managerial problems
• Concept of a team approach
• HR problems
Internal problems experienced by entrepreneurs
External problems experienced by entrepreneurs
Determinants of new venture failures
Idea generation and evaluation
Some big-name new venture ideas that failed
 RCA’s Videodisc
• Superior image quality, but lack of
recording capability lost out to
videotape. Loss: $500 million
 IBM’s PC Jr
• The awkward Chiclet keyboard,
slow microprocessor, unattractive
price and a late launch cost IBM
$40 million
myUrbio.com Urban Vertical Garden
Print real photos from your iPhone/iPad
popbooth.com
Rompicollo Calorie counted chocolate
Details Ltd Walk-station Desk
SRS Energy: Solé Power Tile
Avoids covering a roof in unsightly solar panels

The solar panels are shaped like clay tiles
Ecocabs Ireland
What if the customer didn’t have to pay for the product?
Solve a problem…
Inchworm.co.uk Recession product!!
Idea generation and evaluation
Brainstorming - no criticism
 Designed to produce as many ideas as possible
 Key ground rule: Postpone all criticism and
evaluation of ideas
 Invent ideas with no fear of looking foolish
 Wild ideas are explicitly encouraged
Before brainstorming
 Define your purpose
 Choose the right number of participants
 Change the environment
 Design an informal atmosphere
 Choose a facilitator
During brainstorming
 Seat the participants side by side facing the
problem
 Clarify the ground rules, especially the no-
criticism rule
 Brainstorm
 Record the ideas in full view
After brainstorming
 Star the most promising ideas
 Invent improvements for promising ideas
 Set up a time to evaluate ideas and decide
Brainstorming tips
 Allow enough time to get below the surface of your thinking
 20-30 participants are ideal. Large but not too large group
 Divide the group into teams of four to six people for more
diverse thought and to dilute the impact of those who know
all the answers
 Invite a wide variety of people to participate and go outside
the core group
 Do a warm-up mental exercise to break the ice
 Brainstorm in bursts
Brainstorming tips
 Have everyone write their own ideas on sticky
notes
 People should stand while ideating
 Push for quantity and you will get quality
 Distill the output periodically
Thank you

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UNIT II - New Ideas

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Idea Generation and Evaluation for New

1. Is the venture proprietary?

 Lack of objective evaluation  Subject all ideas to rigorous

Pitfalls Ways to avoid

Avoids covering a roof in unsightly solar panels

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