Idea screening

A company should motivate its employees to submit new ideas to an idea manager whose name and phone number are widely circulated. Ideas should be written down and reviewed each week by an idea committee. The company then sorts the proposed ideas into three groups: promising ideas, marginal ideas, and rejects. Each promising idea is researched by a committee member, who reports back to the committee. The surviving ideas then move into a full scale screening process. In screening ideas, the company must avoid two types of errors.

A DROP is an error when a company dismisses otherwise a good idea. It is extremely easy to find fault with other people’s ideas. Some companies shudder when they look back at ideas they dismissed or breathe sighs of relief when they realize how close they came to dropping what eventually became a huge success. This was the case with the television show Friends.

The NBC situation comedy Friends enjoyed a 10 year run from 1994 to 2004 as a perennial ratings power house. But the show almost didn’t see the light of the day. According to an internal NBC research report, the pilot episode was described as “Not very entertaining, clever or original” and was given a failing grade, scoring 41 out of 100. Ironically, the pilot for an earlier hit sit-com, Seinfeld, also was rated as “weak,” although the pilot for the medical drama ER scored a healthy 91. Courtney cox’s Monica was the Friends character that scored best with test audiences, but characters portrayed by were deemed to have marginal appeal, and the Rachel, Ross, and Joey characters scored even lower. Adults 35 over in the sample found the characters as a whole, “smug, superficial, and self absorbed.”

A GO error occurs when the company permits a poor idea to move into development and commercialization. An absolute product failure loses money; its sales do not cover variable costs. A partial product failure loses money, but its sales cover all its variable costs and some of its fixed costs. A relative product failure yields a profit that is less than the company’s target rate of return.

The purpose of screening is to drop poor ideas as early as possible. The rationale is that product development costs rise substantially with each successive development stage. Most companies require new product ideas to be described on a standard form that can be reviewed by a new product committee. The description states the product idea, the target market, and the competition, and roughly estimates market size, product price, development time and costs, manufacturing costs, and rate of return.

High tech covers a wide range of industries- telecommunications, computers, consumer electronics, biotech, software. Radical innovations carry a high level of risk and typically hurt the company’s bottom line, at least in the short run. The good news is that success can create a greater sustainable competitive advantage than that which might come from more ordinary products.

One way to define the scope of high tech by its common characteristics:

High technological uncertainty: scientists working on high-tech products are never sure they will function as promised and be delivered on time.

High market uncertainty: marketers are not sure what needs the new technology will meet. Some of the ideas under debate were buyers’ use of interactive TV, DVD format uses after Toshiba’s introduction of HD DVD etc.,

High competitive volatility: Will the strongest competition come from within the industry or from outside? Will competitors rewrite the rules? What products will this new technology replace?

High investment cost, low variable cost:

Many high tech products require a large up front investments to develop the first unit, but the costs fall rapidly on additional units. The cost of developing a new piece of software is very high, but the cost of distributing it in a CD-ROM is relatively low.
Short life: Most high-tech products must be constantly upgraded. Competitors will often force the innovator to produce a second generation before recouping its investment on the first generation.

Finding funding sources for such risky projects is not easy: Companies must create a strong R&D marketing partnership to pull it off. Few reliable techniques exist for estimating demand for radical innovations.

Lastly, Focus groups will provide some perspectives on customer interest and need, but high-tech marketers will have to use a probe and learn approach based on observation of early users and collection of feedback on their experiences.