One of the big divide is that you find in the management teams of start-up companies is between those who have ideas, those who assess ideas, and those who implement ideas. We could bore each other now for weeks talking about psychological profiles, Belbin tests, and the like. I don’t propose to do that here, as I am one of the people who spends more of their time having ideas, and finds it very tough to assess those ideas and put them into practice. Indeed, the times at which I’ve had the most success, have been those times where I have worked with people who are far better than I am at the other two stages.

 I cannot really describe the process of having an idea. I usually feel somewhat like the character in Terry Pratchett’s novels who has little particles of inspiration sleeting through their brain, and who struggles to capture them and write them down as fast as they arrive. I can say that the process of having an idea, or rather of having a good idea, is actually a very slow one. The original germ of the idea (which is often not very good and only partially formed) needs to be captured quickly. I do this by using my absolutely favourite Pilot G-Tec C4 ultrafine pen and a Moleskine notebook.   One quick scribble, and a couple of diagrams with the date is all that represents the idea.

 I make a point once a month of going through all my notebooks and dictating them, using Dragon speech or MacSpeech depending where I am, into dated files that are organised by subject.  This enables me to drop them into folders and let my operating system index them and make them searchable.  I then do a quick cross search through past ideas and tag ideas into groups. At this point the original germ of an idea has been knocking around for at least one month, and it gets to meet a bunch of ideas that might be over a decade old.

 And at that point the serendipitous part is more or less over. From here the hard grind of polishing an idea takes over.  And the only way that I have found truly works is to take that idea out and show it to other people. I start with people who I expect will understand the idea.  I am very promiscuous with ideas, and happy to share them. While I can think of times when those ideas have gone off to be used by other people, I recognized that I only have time to take and develop one idea every 2-3 years, so it’s fine if other ideas go off and get a life with somebody else. The payback is I get to use the feedback from the people I talk to.

Starting out with friends generally results in the idea being added to. Other ideas, facts, statistics, images, and products accrete themselves onto the original idea.  The idea blossoms out to fill whiteboards, notebooks, and the floor of the study.

But the problem with friends is that they are friends. The next stage is an internal process of taking the idea and documenting it (usually PowerPoint) so it can be presented to a neutral, or perhaps even hostile, group of trusted mentors. While most people have friends, it is only really entrepreneurs who find themselves with mentors. Mentors are not necessarily friends. Their vital qualification is experience, backed up by ruthless objectivity. The purpose of presenting the idea to them it is not for them to pat the idea on the head, but to lay into it with knives slashing out the fat, hacking away at false assumptions, and slaying glorious hypotheses was ugly little facts. This is usually a comfortable process for the idea generator. But it is absolutely vital, and if you find it too tough, I recommend that you ask for a five-minute break step outside scream, walk back in and carry on.

 At the end of the process I sit down and reconsider the original idea coolly in the light of all of the information, feedback, comments, and the fact that I’ve received.  The problem that I have had until recently is that there is always an emotional connection to the original idea, and it is hard to let go or to cull out the non-commercial aspects. Perhaps I should have said at the beginning that the whole purpose of having these ideas is to generate useful unprofitable businesses, after all, I’m an entrepreneur not an artist.

  I tend to run this process on four or five ideas of the time, not just because that is the way my mind works, but because the cross fertilisation of ideas in the same time and technology space is verified and powerful way of improving all the ideas of the portfolio. However in the very earliest stage of a start-up one just has to cull the list of ideas is that one has had and select the one, and just the one, idea which you are going to take forward. And to do that I have had to build my own selection matrix which I thought I would share with the community as a way of weeding out you’re the bad ideas from the good.

 The basic matrix can be summarised in just 12 steps.  For each of the steps I assign a score:

“0” means there is good evidence that this will fail

“1” means that either we don’t know, or have real doubts.

“2” means that we are confident, or there is a good external proxy, but I do not yet have definitive proof.

“3” means that there is a third-party evidence, or proprietary evidence, to support that step.

For each of the steps below I won’t progress to the next step until the current step has scored at least a “two”.   There will be another idea which is better, and it is more efficient to stop right there.

The 12 steps are:

That last might be slightly easier for me than many others, as I have an accountancy background (translation: “I am a spreadsheet jockey with advanced Excel Foo and Moxie”), and if you don’t, then I suggest you find someone who does have.  It requires one to build a full business model that takes into account not only the basic production factors and distribution costs but all of the timing, tax, and cash flow functions and dependencies as well.  For online businesses it is important to have a look at the cost to service per customer and cost to deliver per product versus revenue per product. (see previous post on Andrew Chen’s models) The more you can embed your business logic into that model, and the more you can make it interactive and driven from a set of transparent assumptions and more useful it will be to you as you go forwards.

 One quick pass through this list and I end up with a heap of discarded ideas, and one idea that has at least two in every box and a bunch of threes in many of the boxes. That is the idea that gets the next week or two of attention. The purpose of that attention is to work out what remedial action will raise any 2’s to 3’s.

 And here is an example I prepared earlier…

 So then, when everything has been raised to three, you can just get started, right? No, sorry there is another very important step to go through in assessing ideas.  It is now important to feed your idea to the sharks.  By sharks I mean venture capitalists, angel investors, corporate investors, and potential trade partners. You may feel that it is time to reach for your lawyer, patent attorney, and mutual nondisclosure agreements. That is really up to you at this point, and to some extent depends on how close your idea is to profitability and how much it relies upon patented technology processes.  In most cases there is more to be gained from openness and transparency that lends itself to speed, then there is to be protected by way of legal paperwork. However you should always take advice.

 You may also be feeling that you simply don’t need to expose your idea to anyone as it is an idea that you can bootstrap from your own resources. I would caution you that it is a very wise idea to expose your idea to potential investors. You, as an entrepreneur, have a vast amount in common with them, not least your mutual desire for profits. Because, you see, even if you are not seeking funding, you are thinking of investing the next three years of your life into an idea. You, the entrepreneur, are the biggest single investor in the idea, and time does not regenerate nor does it gather interest. The time that you put in will be irrecoverable, and pursuing the idea is going to cost you a tremendous amount of your health, family time, and personal energy. You owe it to yourself to see if others would at least back the idea with a little bit of their time and a small amount of other people’s money.  The reaction of potential investors, who have many years of experience, and extremely objective, will provide you with vital information on the likely success or failure of your idea.

 You can then go back and plug that information back into the matrix.

 Having determined from all of this feedback that this is an idea that you are going to go forward with, you should analyse the amount of investment required, not just financial but your own time, and build the rest of the business plan.

 Any Google search will give you plenty of great business plan templates and advice so I won’t repeat it here.

 So, for those of you who have a head full of ideas, I hope this little decision matrix is of use to you and helps you to take your ideas  from brain to boardroom rapidly.  Happy culling.