IDEA SCREENING

Selecting winning ideas

The overall purpose of idea screening is to guide the
organization to profitable new products.
The organization chooses the most likely winning
ideas on the market.
Idea screening occurs throughout the whole new
product development process. E.g. evaluation also
takes place at the concept development and testing
stage, financial analysis, market strategy, product
development and market testing stage.
REASONS FOR IDEA SCREENING
Organizational resources are limited and should be focused on worthwhile ideas.
The organization does not need to waste resources on NP projects that will not
give it maximum returns.
Ensures organization takes advantage of its core-competences. It makes sure the
organization plays the game on its home field. [Crawford 2008].
Ensures product fits in well with corporate strategy
Screening new product projects makes sure that the organization remains
focused on the chosen project.
Idea screening does not discard the not chosen new product ideas. The screened
ideas are placed on standby just in case the ongoing project fails and is cancelled.
Unacceptable potentially worthwhile ideas can, therefore, be recycled back to the
ideation stage for refinement.
Idea screening is not a task delegated to a single department. The whole
organization is involved in the process. The screening process, as a result,
encourages cross functional communication which leads to the whole
organization supporting the chosen project.
TOOLS
A numberFOR EVALUATING
of models NEWinPRODUCT
exist to assist management selecting the newIDEAS
product
ideas that fit in well with the organizational strategy. These are discussed below.
Quantitative weighted scoring models
Management has to decide on the variables against which projects will be
evaluated. Total possible score against which each variable is rated is set and the
different new product ideas are scored on all the chosen variables. Scores for
each new project are added up and compared against the other entire suggested
new projects. The project with the highest score is chosen.
Example
Benefit measurement models
Managers use their personal judgment based on their experience and expertise
to evaluate the new product ideas. Managers have to decide on the variables to
be used in the decision making. The variables can be determined quantitatively
by scoring them out of a possible score of 10.
For example
Management can then use the checklist below to evaluate the new project ideas.
Criteria Typical Question guiding Project 1 Project 2 Project 3
management in decision
making
Technical -Do we have experience of the
technology
-Do we have skills and facilities

-What is the probability of

technical success
Competitive -How does the project compare
relative to the competition

Rationale -Is it necessary to defend an

existing business
-Is the product likely to be
superior
Market -What is the size of the market

-Is it a growing market

-Is there an existing customer
base
Strategic Fit -Does it support our short and
long term plans for the business

Financial -What is the expected Return on

investment [ROI] from the
Financial / economic models
Organization uses the Net Present Value method to
evaluate the attractiveness of a np project.
The initial investment into a project and the future
returns are compared to assess its profitability .
The Accounting Rate of Return can also be used
The Net Present Value (NPV) of a new product project
indicates the expected impact of the np project on the
value of the firm.
Projects with a positive NPV are expected to increase the
value of the firm.
Thus, the NPV decision rule specifies that all independent
projects with a positive NPV should be accepted.
When choosing among mutually exclusive projects, the
project with the largest (positive) NPV should be selected.
Financial / economic models
The NPV is calculated as the present value of the project's
cash inflows minus the present value of the project's cash
outflows. This relationship is expressed by the following
formula:
where
CFt = the cash flow at time t and
r = the cost of capital.
Example
A farmer producing oranges is considering undertaking
value addition of the farm produce. The farmer is
considering producing orange juice (Project A) and stock
feed (Project B). The two projects are expected to yield the
following cash flows over their five year lives. The cost of
capital for the projects is 10%.
  Project A Orange Juice Project B Stock Feed

Year Cash Flow Cash Flow

0 $-1000 $-1000

1 500 100

2 400 200

3 200 200

4 200 400

5 100 700
Portfolio selection models
Portfolio selection models attempt to find new product
ideas that fit in with the business strategy and attempt
to balance the product portfolio of the organization
.These models consider a business` entire set of New
Product Projects rather than in isolation.
Dimension of balance can be;
-Newness; i.e. Does the New Product Project add
something new to the company`s current portfolio
-Time of introduction: Is the New Product Project
going to deliver a constant stream of cash flows or will
it be a case of feast and then famine?
-Markets: Are the different markets and business
areas of the company receiving resources proportionate
to their size and importance?
The Risk/ Payoff Matrix
The main purpose of screening ideas is to select those
that will be successful and drop those that will not.
At any single evaluation point in the new product
process, the new product manager’s decision may
result in either a success or failure of the new product.
The new product manager, when presented with a
new product project has two options of either moving
or killing the project. The Risk/Payoff matrix
summarizes the decisions available to the new
products manager.
Risk/Payoff Matrix
Decision is to A B

If the product were Stop the project now Continue to next

Marketed evaluation

A It would fail AA (no error) BA (go error)

B It would succeed AB (drop error) BB (no error)
Source: Crawford and Di Benedetto (2008:177)
Strategies to minimize risk associated with go error
Acceptance: eliminate the risky product project
altogether though an opportunity cost is incurred (what if
the organization had pushed through with the project
and succeeded?)
Mitigation: reduce the risk to an acceptable threshold
level, perhaps through redesigning the product to include
more backup systems or increasing product reliability.
Transfer: move the responsibility to another organization
in the form of a joint venture or subcontractor. The other
party would be better equipped to handle the risk.
develop a contingency plan now or deal with the risks as
they come up.
Which one to take?
Cells AA and BB are correct decisions. The organization drops an idea
that would ultimately fail or continue on an idea that would ultimately
succeed. Cells BA and AB are errors that have to be avoided, they
different cost and probability dimensions.
AB is a drop error. It occurs when the company dismisses an otherwise
good idea. If an organization makes too many drop errors it implies
that the organization is resistant to change. Ideas are seen as not
compatible with the organizational culture and strategy.
BA is a ‘go error’. A loser is continued to the next evaluation point and
sometimes the poor idea is allowed to move into development and
commercialization.
Of the two ideas, which one does the manager most want to avoid?
The answer depends on the dollars. First, throwing out a winner is very
costly, because the ultimate profits from a winning product are bound
to be much greater than all of the development costs combined, let
alone those in just the next step. So error AB is much worse than BA.
CONCEPT DEVELOPMENT AND TESTING
Definitions
The words ‘idea’ and ‘concept’ tend to be used
interchangeably. For example, Webster’s Dictionary
defines a concept as an idea.
However, in NPD product idea and product concept are
not synonymous.
A product idea can be said to be a possible company
offering to the market. Acknowledge source.
Trott (2001) defines a product idea as a wish or a dream.
Crawford and di Benedetto (2008) posit that a concept
“is a stated relationship between product features (form
or technology) and consumer benefits (a claim of
proposed satisfactions).”
Developing a concept
3 forms
Form: this is the physical thing created, or in the case of a service it
is the sequence of steps by which the service will be delivered. Thus
with a new steel alloy, form is the actual bar or rod of material. On
a new mobile phone service form includes the hardware, software,
people, procedures, etc by which calls are made and received.
Technology: This is the source by which the form is to be attained
or it can be referred to as the power to do work. Thus for the steel
alloy it included among others the steel and other chemicals used
for the alloy, the science of metallurgy, product forming machines.
Need/Benefit: The product has value only as it provides some
benefit to the customer that they see a need or desire for.
NB a firm may find need on the market, calls on its technology to
produce a form that is then sold to the customer. If any one of the
three is missing there cannot be product innovation.
The Concept
A concept may be viewed as a positioning statement. It
communicates the product benefits to the target market.
For a low involvement product it must be communicated
in just a few words and must emphasize those attributes
that make it different from competition’s products.
High involvement product concepts must contain a lot of
detail.
The concept developed should be unique, believable and
practical. A concept statement describing “a fast, one
wheeled, diesel engine powered car” is rather not
practical.
 Suggestions
Sources of conceptsent in by consumers
statements
Inventors
 Employees and consumers. Manufacturers can hold
employee and consumer idea contests
Resellers and vendors
Concept testing
Once the product concept has been developed it is tested to
find out if consumers are prepared to buy the final product.
Concept testing is a form of screening new product
projects. For example, if housewives cannot conceive an
electrical broom that will automatically switch on and start
cleaning the room the moment a small fleck of dust
accumulates on the floor, then the organization may have
to stop the new product project.
Purpose of concept testing
Identify poor concepts and eliminate them
Estimate the sales and trial rate likely to be enjoyed by
the new product (i.e. sense of likely market share or a
general range of dollars.)
Helps in concept development and refinement.
Attributes desired by the consumer can be identified
during concept testing and be incorporated in the final
product before commercialization.
Problems associated with concept testing
When the concept being tested involves a personal sense such as taste of a
new food type or fragrance of a perfume, concept testing fails. The concept
cannot be tested in the absence of the food itself.
Concept testing also fails when the concept being tested is experiential in
nature. For example, concepts in the arts and entertainment industry are
difficult to test since thrill has to be personally experienced.
If the concept encompasses new technology that users cannot visualize,
concept testing tends to be weak. Doctors could not visualize the full
attributes and the risks of a heart pump before the work was completed.
Concept testing is sometimes mismanaged such that organizations blame the
tool for misleading them. When Coca- Cola Company conducted blind taste-
tests of the New Coke the company got response in favour of the new
product. However, when the product was launched it failed on the market
because the company had failed to manage the blind taste-tests.
Consumers do not know what problems they may have such that concept
testing may not be helpful in such a situation. This was the case with concept
testing of the micro-wave oven. Consumers did not know what to do with a
micro-wave oven even after its introduction in the market.
Improving concept testing with consumers
Instead of testing concepts verbally, the following can be
adopted to improve the process:
Use diagrams, drawings or sketches accompanied by a
narrative statement.
 Test concept together with a prototype. A prototype is a
physical form of a new product still in its rough or tentative
mode. Prototype concept testing is usually done for foodstuffs
Virtual reality: this encompasses use of technology that
allows organizations to build three dimensional images.