Monday, May 17, 2010

Ideas are a commodity

I've been noodling for a few days about the right way to frame this post.  Lately I've heard several prospects and clients say they want to get all of "their" ideas captured.  This seems to suggest that their is a limited pool of ideas that an organization "possesses" and they are simply waiting to be tapped.  Perhaps this is true from an intellectual property perspective, but I think on a grander scale ideas are probably more like natural resources that are freely available and widely available to those who can spot them.  What if we thought of ideas in the same way we did as oil or drinkable water or valuable minerals?  Then, there are three factors that really matter.

The first factor is discovery.  If ideas are really like natural resources, then one of the most important factors is to simply discover the ideas and stake your claim.  Note that a big "pool" of ideas or opportunity is probably like a vein of gold or a large pool of oil - there may be other people prospecting in the same area, and finding the same opportunities.  Too often we believe we have a "monopoly" on an idea, not realizing that problems are evident and many people are searching for viable solutions.  The ideas are out there, in your organization, in your customer base.  Whether you prefer a tightly controlled internal idea generation process or throw open your idea generation to all your customers and prospects, the ideas are out there.  Just don't think there aren't other prospectors watching the same turf.

The second factor that matters is refining the raw material.  In fact, this is probably the most important factor.  Many countries have abundant raw materials like oil or gold, but don't have the means to convert the raw materials into usable products.  The list of countries that have oil but import gasoline - a refined byproduct of oil, includes many Middle Eastern countries.  The point is that simply having an abundance of the raw material doesn't necessarily add value.  The value for commodities like oil or gold, or ideas, is added as the ideas are refined, and shaped, and made into useful, valuable products.  In the innovation world, being creative but lacking the means to refine ideas is like being an oil exporter but a gasoline importer.  You have all the raw material but none of the means that make the ideas truly valuable.

As any large commodities trader can tell you, the last factor is in the marketing.  What's the difference between Exxon gasoline or BP gasoline or other brands of gasoline?  You certainly can't tell where the oil that makes up the gasoline came from, and the firms that did the refining have many of the same processes, so what drives you to choose one brand of gasoline over another?  Marketing and availability.  Likewise, an innovation process needs to frame ideas and position them in such a way that they are the solution to an important internal or external problem, at the right place at the right time.  Eventually, no one cares about the origination of the idea, or how it was refined, as long as it meets the right needs at the right time for the right consumer.

If you've read this far along, then the conclusions seem to be:

  1. An abundance of ideas is less important than a refinement process
  2. Ideas are everywhere, and abundant.  Processes are much less proficient
  3. Many people are prospecting the same needs and opportunities as you are
  4. Since many people are prospecting and ideas are abundant, the winners will be the people who can refine and market ideas effectively
  5. At the end of the day, no one really cares where your idea came from, or how it was refined, as long as it meets a need that an important set of customers have.  The backstory is always interesting and can become part of the mythos of the product, but is far less important than solving the right problem or challenge at the right time.
I'll stipulate that if all these points are true, then ideas are commodities, and what drives innovation value is an excellent refinement process that matches great ideas to important market needs, and brings them to market as the needs become apparent.
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posted by Jeffrey Phillips at 6:50 AM


Anonymous Kate Shore said...

Very thoughtful post, Jeffrey - thanks!

It's been my experience that companies can learn quite a lot about themselves in the idea extraction and documentation process. Assessing the distribution of ideas (by technology, core competency, product line, or any relevant metric) can generate objective data that shows strengths and weaknesses.

One of the ways to leverage these learnings is to identify areas where you want/need ideas but don't have them (e.g. a key product line) then discuss strategic options for filling the gaps, such as partnering, hiring in new expertise, licensing in IP, etc. I'm sure that most companies arrive at these type of strategic discusisons through other means, but it can be very powerful to use your internal intellectual capital as a starting point.

10:52 AM  
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