1-2-3 of Innovation
Do you have an innovative idea worth pursuing?
“Innovation is work” – Peter Drucker in Innovation and Entrepreneurship
Why do you want to pursue your idea? Do you want to make money through your creation? Do you want to see your creation getting used and get recognized? Or, do you want to create just for the joy of creating? If it is for the sheer joy then you need not bother to read the rest of this post. Otherwise, before you start your journey, it may be worth your while to ask three questions. These questions are the starting point irrespective of whether you want to pursue the idea within your organization or become an entrepreneur.
1. What is really new and different about your idea?
“In order to make an apple pie from scratch, you must first create the universe” – Carl Sagan
Do not worry if your idea is not truly original. It is very difficult to find an idea which is original – you may be lucky if you have one. Your idea may be a variant of an existing idea, it can be an existing idea applied in a different context or it can be a combination of multiple ideas. Irrespective of what it is, you will need to research and find out for your benefit how new or how different it is. You would not want to be told by somebody else that your idea is not new and what you are trying to do is already done. You should to be ready to point out how your idea is different.
The best way to find the answer is to do a thorough Internet search. It will help you to avoid spending effort on something which already exists. It will also help you refine your idea. If it is a software idea, then do not forget to go through the projects in Source Forge.
2. Who will use what you create?
For any idea to be successful, you need people to use it. You have to be clear on how it can fulfill an unsatisfied need or how it can better satisfy an existing need. Who is that user who will not be able to live without your creation? What do they do now?
People are reluctant to change the way they think and work. You have to work out what will make them switch from what they do now. Will the benefit derived from your outweigh the disruption of change?
Only way to find this out is to find such persons and talk to them. You need to talk to them about your idea and listen to what they have to say. It will definitely help you to refine the idea.
3. What strategy will you follow to get the money and help from others to make the idea work?
You may be asking – “why would I need money? I want to work on it on my own.” You have to realize that no idea is fully formed at the beginning …
- … it needs to be tinkered
- … it needs to improved based on usage
- … it takes effort (and also money) to do that
You may not like the idea but you have to sell your idea to other people. You need to convince people that it is worthwhile to back your idea. It can be to people within your organization or it can be to a funding agency that can finance you to become an entrepreneur
You can follow one of the four strategies to sell your idea.
i) Follow the traditional approach – show ROI
To follow this approach your chances of success needs to be fairly high. You also should be able to tell how much money you can make from the idea. You have to answer the following questions:
- What will people be willing to pay for what you make?
- How many such people can you find?
- Where will you find such people?
- Who will help you sell it?
- How much initial effort will it take before it can be used?
- How much will it cost to keep making it?
- What are the chances of success?
You need to understand terms like cost of capital and risk adjusted return on investment. If you think this is too complicated then do not worry, there are other methods.
ii) Look for a Venture Capitalist
Have you ever wondered how does the movie industry function? Majority of the movies seem to be flops.
The basic principle is that the failures may be many and success may be few but they are big. One success can cover for ten failures. The distributors who buy the movie rights from the producers do not mind losing money on the flops as long as they make it up with one big hit. Since nobody has found a sure formula to predict a hit, the distributors have to spread their bets to many movies of different types. The book publishing industry also works in a similar way.
“Venture capital (also known as VC or Venture) is a type of private equity capital typically provided to immature, high-potential, growth companies in the interest of generating a return through an eventual realization event such as an IPO or trade sale of the company. Venture capital investments are generally made as cash in exchange for shares in the invested company.” – Wikipedia
In the year 1946, Georges Doriot known as the father of VC, founded one of the first VC firms American Research and Development Corporation (ARDC).
Your approach needs to be different. A VC is in search of an idea which is different enough to be disruptive or game changing. Higher the disruption the better it is for them. You have to figure out who and what will get disrupted. You need to be familiar with how such a successful idea spreads through the web. You also need to have the passion to back it – and that passion should show.
Can you clearly state how your idea is different? Do you have an elevator pitch, i.e. can you clearly explain your idea in couple of sentences? You have to work towards impressing the VC not only about the idea but also about your ability and passion to take it forward. In short, you have to sell the idea.
If you think that your idea may not be disruptive enough or you do not like selling, still do not lose heart, there are more techniques.
iii) You can try getting a budgeting allocation
Do not think that this method is only followed in government circles? If you do then you will be surprised to know that majority of funding decision in both public and private sector happens this way. It is the normal method of funding in academic research. Even in a typical enterprise, this is the most common funding mechanism.
To use this mechanism, you need to know how the budgeting mechanism works in your organization. You need to understand …
- … the budgeting cycle
- … who controls the different expense heads
- … who initiates budgeting proposal
- … who validates it
- … who approves it
Once you are familiar with how the mechanism works, you can apply one of the two strategies:
- You can locate unutilized budget amount and persuade the owner of the budget to fund your idea
- You can work towards getting your idea included explicitly included in the next budgeting cycle
If you consider all this to be too political and you want to work on your own terms, there is still another option available.
iv) Make your idea into a crusade and enroll supporters – NGO style
Have you noticed how funds get raised for running Wikipedia? It could raise more than $ 2 million by just putting a notice on the site. There are low budget products which survive on voluntary contribution. Some believe that people only contribute to other people they know, but it is not always true. There are many examples of people donating and volunteering for a cause.
Try creating an open source project and make a release and see how unknown people will try out your release. Locate people who find your idea worthwhile and ready to invest effort. You can look for volunteers in your organization willing to help you. If your idea is interesting enough, you can find people on the web willing to put effort to try out your product.
There are people waiting to support and fund idea like yours – but the starting point is …
- … you need to have an interesting idea, and
- … you need to have the conviction to back it