HBR.

ORG May 2011

reprint F1105Z

Vision Statement

How Hot Is Your

Next Innovation?
Data by Geoff Tuff; visualization by Open
Idea watch

Vision Statement Geoff Tuff (gtuff@monitor.com) is

a partner at Monitor Group. Open
is a design studio in New York.

How Hot Is Your Next Innovation?

Data by Geoff Tuff; visualization by Open

Choosing which innovative ideas Doblin’s Ten Types of Innovation

to pursue is often an exercise in
guesswork. But by using existing Finance Process Offering Delivery
1 Business 3 Enabling 5 Product 8 Channel How
management tools in a new Model How the Process Assem­ Performance you connect custom-
way, you can effectively gauge enterprise makes bled capabilities Features and func- ers to your offering
your innovation’s potential along money you typically buy tionality 9 Customer
from others
two crucial dimensions: Can 2 Networking 6 Product Experience How
How your value 4 Core Process System Extended you create an inte-
it withstand market pressures chain and partners Proprietary pro- system surrounding grated experience
from competitors? And can it make your offering cesses that add value an offering 10 Brand How you
deliver more economic value to distinctive 7 Service How you express your value to
customers than alternatives? service customers customers
Here’s how it works.

First, take your idea’s

ambient temperature. 4
To find out if your idea is hot enough, consider 6
how it is kindled. Each flame represents one of
the Ten Types of Innovation, developed by Doblin
(a part of Monitor Group) on the basis of research
with hundreds of companies. The more ways in
which your idea is innovative, the better able it is
to stand up to competitors’ offerings.
According to our research, ideas that inno- 3 8
vate in six or more areas are well positioned for
success. Fewer than three types and your idea is 5
cold: Chances are, it’s not distinct enough from
products already on the market. 7
Most companies focus their innovations on
product offerings, but you’ll get more heat from
ideas that also innovate new business models 2 9
and customer experiences.

10
Next, measure your idea’s
heat index.
So your idea is hot, but will it deliver measurable
value to customers? Doblin and Monitor have
developed a simplified version of the pricing tool
Economic Value Estimation (EVE) to calculate,
by innovation type, how much increased value Incremental Reference
your idea offers over what’s already available.
Interpreting the EVE factor depends on the
Economic Value Value
(the sum of the increased revenue (what customers pay for
industry. A hot number in a B2B business could
or decreased costs associated with the next-best alternative)
be as low as 1.5, whereas in a CPG context,
each innovation type)
where brand matters so much, the number will
most likely need to be much higher, say 3 to 5.
Anything below 1.1 would be cold, and anything
less than 0.75 would be a nonstarter. IEV ÷ RV = EVE factor

2 Harvard Business Review May 2011

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Example
GenetiCorp’s New DNA Testing Kit
In this fictionalization of a real case, GenetiCorp’s idea is DynaTest, a product
The Heat Behind
that enhances DNA analysis by increasing the yield of each sample collected
and by preserving the integrity of samples much longer than its primary
Some Other Ideas
competitor, EnSyn, can. DynaTest innovates in just four categories—a tepid
idea. But when GenetiCorp tested its product with customers, it discovered Cold: Microsoft Zune
a robust EVE ratio of more than 2. The high EVE brings this idea from tepid product performance
to warm. customer experience
To get it hot, GenetiCorp should find ways to wrap more types of innovation
around the core DynaTest offering, even if they don’t add much incremental
economic value (there’s enough already). For example, DynaTest could inno-
Microsoft’s portable music player, Zune, inno­
vate in customer experience by creating an online community for lab techs to vated in product performance with built-in
share best practices. It could also innovate in networking by partnering with wireless and in customer experience with song
a software company that sells products used for DNA analysis. and photo sharing. But innovating along two
dimensions was not nearly enough to allow
it to withstand the market pressure of its
3 5 9 10 primary competitor, Apple’s iPod.

Enabling Product Customer

Process Performance Experience Warm: Groupon
Because DynaTest allows Emergency sample collec- And Brand
customers to get more yield tions require researchers to business model
DynaTest’s proven ability to core process
from each sample, labora- repeat the entire analytical maintain uniform quality
tory staff work is reduced. test—an extra 16 hours of product performance
was lauded in interviews channel
Customers save two hours of labor at the $24-per-hour with customers. Trust in
processing labor compared rate. That’s $384. DynaTest customer experience
its performance allows
with the reference value reduces emergency collec- researchers to eliminate
product, EnSyn. Laboratory tions by 10%. Groupon’s innovations include its business
two hours of quality-control
personnel earn $24 per hour. model—forcing scarcity on good deals by
work at the $24-per-hour
Labor Savings: $38 imposing a time limit. It created a new channel
rate.
Labor Savings: $48 between shoppers and merchants. It invested
in customer experience, customizing offers
Labor Savings: $48
regionally and employing a creative team to
write witty e-mails to patrons. Its core process
allows businesses to make up for the discounts
through higher volume. Groupon’s EVE is high
now, but because the idea innovates along
only five dimensions, it’s not clear how long
Groupon can sustain its advantage.

3 Hot: The Grateful Dead

5 business model
enabling process
product system
9 service
channel, customer
experience, brand
The Grateful Dead was an innovation machine.
10 4 Types of Its business model was based on concert
Innovation revenue, not record sales; it had a direct-to-
­consumer sales channel; its customer experi-
ence was unique. In addition, the product
system was buoyed by bootleg recordings;
its enabling process allowed merchants to
IEV RV EVE factor become business partners; and pre-internet
mailings announcing concert dates showed
$48 + $38 + $48 = $134 $50 $134 ÷ $50 = 2.68 customer service innovation. Though it’s
doubtful that the Grateful Dead knew or cared
about EVE, it’s safe to say that the band’s
members were higher than anyone else in the
industry. 
HBR Reprint F1105Z
Note This example was adapted from The Strategy and Tactics of Pricing,
by Thomas T. Nagle, John E. Hogan, and Joseph Zale.

May 2011 Harvard Business Review 3