Knowing a winning business idea when you see one

Abstract

Identifying which business ideas have real commercial potential is fraught with uncertainty, and even most admired companies have stumbled. It's not as if they don't know what challenges of innovation are. A new product has to offer customers exceptional utility at an attractive price, and company must be able to deliver it at a tidy profit. But uncertainties surrounding innovation are so great that even most insightful managers have a hard time evaluating commercial readiness of new business ideas. In this article, W. Chan Kim and Renee Mauborgne introduce three tools that managers can use to help strip away some of that uncertainty. The first tool, the buyer utility map, indicates how likely it is that customers will be attracted to a new business idea. The second, the price corridor of mass, identifies what price will unlock greatest number of customers. And third tool, the business model guide, offers a framework for figuring out whether and how a company can profitably deliver new idea at targeted price. Applying tools, though, is not end of story. Many innovations have to overcome adoption hurdles--strong resistance from stakeholders inside and outside company. Often overlooked in planning process, adoption hurdles can make or break commercial viability of even most powerful new ideas. The authors conclude by discussing how managers can head off negative reactions from stakeholders.