EXHIBIT 3-5 The overall tournament structure of the opportunity identification process for Fro l iCat. Fifty raw opportunities were eventually fil tered and explored, resulting in a "sw inging ba ll" opport uni ty that was developed into a product l aunched to the market.
2. Seek high quality of the opportunities generated. Adopting better methods for generating opportunities and mining better sources of opportunities can increase the average quality of the opportunities under consideration, which will also increase the quality of the best ideas resulting from the tournament.
3. Create high variance in the quality of opportuniti es. This is a direct, though not im mediately obvious, implication of statistics. Holding the average quality and numbe r of opportunities constant, you '11 generate more exceptional ones from a process th a t exhibits greater variability; that is, if it's less consistent in the quality of its output. The quest for variability contradicts normal approaches to process improvement, but it 's ex actly what you want in opportunity creation. Generating wacky ideas and wild notions increases the chance that at least one of the opportunities will be exceptionally good.
Opportunity Identification Process
We divide the opportunity identification process into six steps as follows:
l. Establish a charter.
2. Generate and sense many opportunities.
3. Screen opportunities.
4. Develop promising opportunities.
5. Select exceptional opportunities.
6. Reflect on the results and the process.
Each step is the focus of a section of this chapter.
Step 1: Establish a Charter
Organizations create new products to achieve goals such as growing revenues from exi st ing customers, filling a hole in a product line, or entering new market segments. Entre preneurs starting new organi zations also have goals like creating a new product related to an area of personal interest. The innovation charter articulates these goals and establishes the boundary conditions for an innovation effort. Charters are closely analogous to (al though somewhat broader than) the mission statement for a new product. (See Chapter 4, Product Planning.)
For example, the charter for the FroliCat effort was:
Create a phvsical product in the cat t oy cat eg0/ )1 that we can launch to rhe 111arket within about a year through our existing retail sales channel.
The main restrictions in this charter were the emphasis on physical goods instead of software or services, a focus on the cat toy category, a preference for opportunities that would not require enormous investments of ca lendar time, and a desire to take advantage of the company 's existing relationships with retailers.
The charter requires resolving a tension between l eaving the innovati on problem un constrained, and specifying a directi on that is l ike l y to meet the goals of the team and organizat i on. By specifying a na r row charter, the team avoids wasting effort generating
opportunities in areas that are unlikely to be pursued. On the other hand, sometimes decid
ing which opportunities are worthy of pursuit in advance and in the abstract is difficult.
Similar to the mission statement for a new product, we recommend that the innova tion charter be broad, perhaps a bit broader than the team is comfortable with. Generating id eas is inexpensive, and sharpening the focus later is not difficult. The benefit of allow ing a broad focus is that opportunities that may otherwise have never been considered will challenge the team 's assumptions about what kinds of opportuniti es it should pursue.
Step 2: Generate and Sense Many Opportunities
Based on a survey of companies across many industries, about half of innovation op portunities are generated internally to an organization and about half are recognized from customers and ot her external sources (Terwiesch and Ulrich, 2009). The distribution of sources of opportunities is shown in Exhibit 3-6.
We therefore recommend that the team explicitly focus on both internal and external
sources of opportunities. Typically, the team will want to identify dozens if not hundreds of raw opportunities. Fortunately, this daunting task is made much easier through the application of some structured techniques, which we outline here.
Techniques for Generating Opportunities
For some creative people there i s nothing more fun than coming up with new ideas. How ever, we find that the majority of people have a hard time when asked simply to generate some promising opportunities. For them the problem of coming up with something new is simply too a bstract, too unstructured, and has too many degrees of freedom. Following are seven basic techniques for stimulating the identification of opportunities. Most work well in both entrepreneurial and corporate settings.
EXHIBIT 3-5 The overall tournament structure of the opportunity identification process for Fro l iCat. Fifty raw opportunities were eventually fil tered and explored, resulting in a "sw inging ba ll" opport uni ty that was developed into a product l aunched to the market.2. Seek high quality of the opportunities generated. Adopting better methods for generating opportunities and mining better sources of opportunities can increase the average quality of the opportunities under consideration, which will also increase the quality of the best ideas resulting from the tournament.3. Create high variance in the quality of opportuniti es. This is a direct, though not im mediately obvious, implication of statistics. Holding the average quality and numbe r of opportunities constant, you '11 generate more exceptional ones from a process th a t exhibits greater variability; that is, if it's less consistent in the quality of its output. The quest for variability contradicts normal approaches to process improvement, but it 's ex actly what you want in opportunity creation. Generating wacky ideas and wild notions increases the chance that at least one of the opportunities will be exceptionally good.Opportunity Identification ProcessWe divide the opportunity identification process into six steps as follows:l. Establish a charter.2. Generate and sense many opportunities.3. Screen opportunities.4. Develop promising opportunities.
5. Select exceptional opportunities.
6. Reflect on the results and the process.
Each step is the focus of a section of this chapter.
Step 1: Establish a Charter
Organizations create new products to achieve goals such as growing revenues from exi st ing customers, filling a hole in a product line, or entering new market segments. Entre preneurs starting new organi zations also have goals like creating a new product related to an area of personal interest. The innovation charter articulates these goals and establishes the boundary conditions for an innovation effort. Charters are closely analogous to (al though somewhat broader than) the mission statement for a new product. (See Chapter 4, Product Planning.)
For example, the charter for the FroliCat effort was:
Create a phvsical product in the cat t oy cat eg0/ )1 that we can launch to rhe 111arket within about a year through our existing retail sales channel.
The main restrictions in this charter were the emphasis on physical goods instead of software or services, a focus on the cat toy category, a preference for opportunities that would not require enormous investments of ca lendar time, and a desire to take advantage of the company 's existing relationships with retailers.
The charter requires resolving a tension between l eaving the innovati on problem un constrained, and specifying a directi on that is l ike l y to meet the goals of the team and organizat i on. By specifying a na r row charter, the team avoids wasting effort generating
opportunities in areas that are unlikely to be pursued. On the other hand, sometimes decid
ing which opportunities are worthy of pursuit in advance and in the abstract is difficult.
Similar to the mission statement for a new product, we recommend that the innova tion charter be broad, perhaps a bit broader than the team is comfortable with. Generating id eas is inexpensive, and sharpening the focus later is not difficult. The benefit of allow ing a broad focus is that opportunities that may otherwise have never been considered will challenge the team 's assumptions about what kinds of opportuniti es it should pursue.
Step 2: Generate and Sense Many Opportunities
Based on a survey of companies across many industries, about half of innovation op portunities are generated internally to an organization and about half are recognized from customers and ot her external sources (Terwiesch and Ulrich, 2009). The distribution of sources of opportunities is shown in Exhibit 3-6.
We therefore recommend that the team explicitly focus on both internal and external
sources of opportunities. Typically, the team will want to identify dozens if not hundreds of raw opportunities. Fortunately, this daunting task is made much easier through the application of some structured techniques, which we outline here.
Techniques for Generating Opportunities
For some creative people there i s nothing more fun than coming up with new ideas. How ever, we find that the majority of people have a hard time when asked simply to generate some promising opportunities. For them the problem of coming up with something new is simply too a bstract, too unstructured, and has too many degrees of freedom. Following are seven basic techniques for stimulating the identification of opportunities. Most work well in both entrepreneurial and corporate settings.
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