How to Know Which Ideas Your Company Should Pursue

As companies adopt open innovation and crowdsourcing to stay at the forefront of innovation, the challenge of selecting which ideas to pursue is enormous. Research shows that organizations that receive a large number of ideas have difficulty selecting the most original. Idea evaluators often lack the skills needed to recognize the value of an idea. And managers favor ideas from people they know or who somehow resemble them. To evaluate ideas, innovation scholars have often proposed novelty, feasibility, and market potential as the most important criteria for “good” business ideas. However, there is no widely shared notion of what constitutes a good idea or how to rank relative “goodness,” because good ideas can have a wide range of benefits. Beyond financial profitability, some ideas can create value for the company in terms of customer satisfaction, branding, customer loyalty, and so on. But there may be an easier way: Evaluate the benefits an idea promises relative to the cost of developing it. A concept that offers only incremental benefit but requires little investment might be more profitable than a fantastic idea that requires a lot of investment. In an approach analogous to value investing, the company’s aim becomes to look for ideas that appear to have a high benefit relative to the cost of development.