Article: How do you measure how good your idea is?


How do you measure how good your idea is?

Measuring the 'Return on Idea' can help business predict the success of the idea

The ‘Idea Benefit Cycle' provides a process to evaluate the value of ideas


What an idea, sirji, these iconic lines got me thinking about how often I have been asked, ‘How do I know this is a good idea?’ Can you remember the number of times you have agonized and debated over the value of your idea? How do I take my dream, turn it into an idea and action it into reality?

There is a certain dread in dealing with the uncertainty one faces when deciding upon which opportunities to pursue. Good ideas can boost value but bad ones can destroy it. This leads to a peculiar situation, when we can end up potentially taking one of the two defensive positions categorized fondly by me as “The Head Scratcher” and“The Ostrich”.

The Head Scratcher is characterized by statements like,

“I have this idea but I don’t know what to do with it.”
“How do I know when I get a good idea?”
“How do I know my idea will work? How can I predict the future?”
On the other hand, the Ostrich makes statements like,
“I am too busy fire-fighting to be thinking of new things at this point of time!”
“I still need more information/data to make a precise decision!”
“Why should I take the risk? How will it impact me should I fail?”

Both types of these species can be found amongst us, corporate leaders and entrepreneurs, who at times make copious excuses to avoid committing ourselves to predictions of future business value of an idea. These range from lack of data, rapidly changing markets and lack of accuracy of previous predictions.However, nasty surprises can be expected when ideas are launched without proper testing, modelling or predicting results.

It is said that there are two things that make the difference between success and mediocrity - a great idea and a purpose driven action on that idea. An idea to be successful in the business context must create financial value. From ‘imagining’ an idea, to ‘validating’ the idea, to ‘profiting’ from the idea, it is essentially about putting a process in place for predicting the value of the idea and then implementing it to ensure the actual or demonstrated value is equal to, if not higher, than that predicted. This in short is the ‘Return On Idea’ (ROI).

The idea benefit cycle

The idea benefit cycle illustrates the process required to validate the authenticity of an idea and assesses its financial value and business relevance before implementing it.

Imagination: Ideas are sparked through imagination. Look at social trends, consumer behavior and competitor products to uncover potential opportunity. Tata Nano illustrates this well.

Predict value: These ideas then need to be ranked by predicting the future value that each idea will contribute. The initial screening of ideas can be quickly done by empirical methods. They should be assessed for their financial contribution and not selected based on wish fulfilment.

Validate: The top two or three ideas need to be further filtered through prototyping, testing and refinement. For example, ‘ChotuKool’ at Godrej is an innovative cooling solution for masses, wherein Godrej worked closely with potential consumers to get insights on their needs, desired solutions and barriers to consumption, before launching this product. Where it is too expensive to prototype, analyze the patterns of the past to provide clues to extrapolate to the future. Also look for analogies and draw insights from available data.

Customer response: The primary test any idea must pass through is answering the question, ‘Why will the customer buy the product or service?’ This involves investigating on those factors causing strong customer responses and avoiding or eliminating those that are weak; sometimes evidence is strong and at other times judgement has to be used to find answers to, “What are my impacts?”, and focus on those which add value.

Similarly, scan the business environment in terms of ease of business entry barriers, regulations, competitor activity, and other external factors, using them to refine ideas and calibrate predictions. At this stage, the final selection or discarding of the idea will take place.

Demonstrate value: Now the project is ready to be commercialized and by this time, dependencies with internal and external partners would have been mapped out, teams put in place, issues identified and processes put in place. Tatas demonstrated this well by collaborating to make their product “TATA Swach”, a nano-tech water purifier with a patented purifier bulb to make safe drinking water accessible to have-nots.

A mechanism for feedback to gather credible evidence for review and enable improvement in future ideas and predictions, is also required.

Once the revenue starts, it will help answer the question,”How will we build and sustain the benefits?” and “How will we change?” in response to new consumer behavior to continue delivering profitable revenues. Greater the accuracy in “predicting the value and demonstrating results”, greater will be the confidence in implementing new ideas.

However, this process is not without risks. One has to deal with a whole lot of uncertainty and there is a need to understand and mitigate the risks involved.And sometimes, even the best research can fail, for example, New Coke or Pepsi Blue. But this should not dissuade a true entrepreneur.

While the failure rate of ideas can be reduced through this process, the same cannot be eliminated. This model provides an adaptive learning process, where the hypothesis can be tested as early as possible and as inexpensively as possible, thereby giving the maximum ROI. Thus, the Idea Benefit Cycle provides a process to evaluate the value of ideas and there is no reason to head scratch or behave like an Ostrich when your next idea could be a winner!

Rakesh Kochhar is a Business Performance & Executive Coach. He represents CoachNme ( He can be reached at

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Topics: C-Suite, Leadership, Learning & Development, #Innovation

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