There are three phases in this stage of the incubation: identification, assessment and evaluation. If a new venture or product is being proposed then a funnel for it is built and portfolio review is conducted. Priorities are decided and then M&A partnerships are proposed.
Identification
This is used to set expectation requirements for new ideas and serve as initial screening. The following questionnaire is the first step in this process.
Every question is answered yes or no:
- Has the product or solution been in the market for more than 18 months?
- Is this a new feature or modification of an existing product?
- Is the projected annualized revenue after 5 years less than $10 million?
- Does the product overlap an existing M&A opportunity?
- Does the product have a relevance horizon of less than 10 years?
- Does the product fall out of scope of the company’s long-term strategy?
- Are there any other relevant reasons why this is not a good fit?
If 100% of the responses are yes
The idea moves on to the assessment phase.
Even if 1 of the responses is no
The idea goes to the parking lot.
Assessment
If all of the questions are answered with a 100% yes, then we move on to the assessment phase. This serves as a second level of screening and determines prioritization of multiple ideas. It highlights strengths and weaknesses of ideas, and rates and ranks proposed projects.
Desirability
Does anyone want it?
- 5
- Macro market trend indicates strong customer desire, customer pain is validated.
- 4
- A small number of competitors are piloting similar solutions and pain is understood.
- 3
- Some evidence of broad market trend, the pain is understood.
- 2
- Market trend gaining momentum, customer pain not validated.
- 1
- We have 1 to 3 customers who have indicated desire for product, customer pain not known.
Viability
How much money do we make?
- 5
- 5 year annualized revenue prediction of $80 to 100M or more.
- 4
- 5 year annualized revenue prediction of $60 to 80M.
- 3
- 5 year annualized revenue prediction of $20 to 60M.
- 2
- 5 year annualized revenue prediction of $5 to 20M.
- 1
- 5 year annualized revenue prediction of under $5M.
Feasibility
What should we build?
- 5
- Solution identified, we have the tech stack to deliver the product.
- 4
- Solution identified, some conflicts in ability to provide technology.
- 3
- General product idea, some confidence of technology capabilities required.
- 2
- Generic idea of solution identified, doubts around ability to deliver technology.
- 1
- Product idea does not exist, we do not understand the technology required.
Sustainability
Why us?
- 5
- We currently have brand recognition in this space, we have technology, desire fits within strategy.
- 4
- We have technology but no brand recognition, this falls within strategy, we have desire to play in this space.
- 3
- We have technology but no brand recognition, fits with strategy but not a priority.
- 2
- No brand recognition or technology, but desire to play in this space and fits in strategy.
- 1
- No brand recognition, technology or desire.
Capability
Can we build it?
- 5
- We have the talent, technological competency and operational abilities.
- 4
- We have most talent, technological competency or operational abilities.
- 3
- We have some talent or technological or operational abilities.
- 2
- We are missing key capabilities.
- 1
- We do not have the talent, technological competency and operational abilities.
Based on the average score received from the table, the venture is mapped in the following chart with axes of market pull versus ability to push. Depending on the score given, the venture is either taken to the evaluation phase, reassessed or killed.
Two dimensions
- Market pull
- Average score, 1 to 5
- Ability to push
- Average score, 1 to 5
High market pull, lower ability to push
Reassess internal capabilities
Explore external partnerships
High market pull, high ability to push
Proceed to evaluation phase
Lower market pull, lower ability to push
Parking lot or kill
Lower market pull, high ability to push
Reassess market need
Potential parking lot or kill
Evaluation
During this phase, the team needs to agree on key operations such as how do we execute, who and what resources are needed, and depending on this a project plan needs to be decided. Once these core questions are identified then a project output is agreed upon.
Criteria for venture launching
- High potential market need
- Product solution is not fully defined
- A new venture is planned at the end of the process
- Full-time resources are available
- Product is not already launched
- Big swing solution is the goal
Criteria for product launching
- Product solution is already identified
- Existing tech push to adjacent markets
- Core business requiring new solutions
- Full-time resources not available
- Existing product isn’t as successful as planned
- Existing solution needs new business model exploration
Criteria for parking lot or kill
- Long horizon solution, more than 10 years to market need
- Resources not available
- Overlaps with existing M&A targets
- Heavy R&D investment needed, not enough budget
- Does not fit with the strategy
- Has no sponsorship or mothership capabilities