Just catching up to this post about idea creation by Hank Williams at Why Does Everything Suck?
Here’s an excerpt:
I am a member of the NextNY mailing list which is a group of New York folks that talk about tech business and entrepreneurship. A recent conversation and actually a persistent theme in that group is that in a startup, an idea is worth 1% and execution is worth 99% or some other highly disproportionate ratio.
I take issue with the concept.
Here’s the problem with the formulation. It belies a misunderstanding of what an actionable “idea” really is. A good idea is almost never some light bulb moment that occurs where you realize some insight that no one else has seen. In truth there are few of those. Very, very few people are that smart or that lucky. Great actionable ideas are really a collection of much smaller ideas, weaved together in such a way as to create something useful unique and compelling. There are few actionable “aha” moments.
In other words, to me, coming up with great actionable ideas requires lots of perspiration, iteration, and ideation. However, once you have an actionable idea that has been achieved through this process it is worth *way* more than 1%.
Great stuff, Hank.
I left the following comment in response:
I think that the idea could be worth a lot more than than the 1% valuation as well, but I look at it from a different point of view. A great idea, with a good plan behind it, is the product of a lot of work. The planning, thinking, and critiquing, when done properly, can eliminate wasted effort during the life of implementing this idea. A former colleague once used the following rule for testing: one day of test planning is worth (or saves) three days of actual testing by eliminating lost time. If the valuation is based on time and effort, then the time taken to develop a stellar idea would be significantly greater than the 1%.
If you’re interested in the process in developing and creating ideas (or content), I recommend checking this out.
Accountants tell you that they cannot value a business until it is sold. The same is true of an idea. The notion that you can construct the valuation of an idea before you've sold it is not possible.
I stage gate on two things and they exist. I won't guess their growth rates. I just want to know the number of seats and the number of dollars in the vertical. It's won't be a vertical I pick. I find a client. That client is in that vertical. If there is a enough seats and money, then we sit down and discuss an application that that client wants.
If there is money, but not enough seats, I'll pass, because my market leadership would not be constributed by this vertical. Sure if you have to eat, by all means eat, but I'm knocking my technology out of the park, not walking bases. It can be a long walk, or a long meal. Sorry gotta go if I'm going to take all the money off the table as possible. That takes care of a lot of problems in itself.
Ultimately, the value of an idea depends on its embodiment, the market, the customers, the seed client, the company, the capabiliities of the company, and the cost structure. If I was left to project a value, there would be way too many variables that change constantly, and that have to fit Moore's serial markets. No thanks. I'll stick to my stage gating.
The value changes in a manner synchronized with Moore, the Hype Cycle, and other geographies. Have fun projecting all of that.
Gate what you can. Don't project. Don't build “your” product. Build your technology while you build “their” application and the vertical's product. Walk the technology adoption lifecycle, leave the accounting to the accountants, leave the valuation to the past and the financial markets when you finally IPO. Then, do it again!