August 2022

Ikuo Shinagawa, Chief Researcher, Future Project Planning

 

Idea Generation in Business Setting is Usually Achieved by Examining Solutions to Customer Challenges or in Brainstorming Sessions

One of the books I have read recently is “Leap for growth (McKinsey; Rules for Making a New Business Successful)” (Authors: Kenji Nonaka and Taro Umemura; Published on July 7, 2022). This book is written about new businesses, and its feature is that it focuses on “new businesses of large companies.”

In the “introduction” part at the beginning of this book, there is a following sentence: “There have been many books that encourage entrepreneurship in the past. However, these books do not always focus on how a large company should and can start a new business as a main subject.” (This sentence is cited from the book.) This sentence really “hits the mark.” From our past experience in supporting the establishment of new businesses, we think that one “new business” includes various requirements and conditions, and there is no uniform method to proceed with it. I am not explaining the general points of what are required to launch a new business by a large company, the goal, and how it should be carried out, since they are all written in this book, and I am going to just focus on “conception of ideas,” the very first step in a new business development.

There tends to be only a single methodology for conceiving ideas that can be learned from books, publications, and other sources. Also, in actual workplaces, when corporate participants generate ideas for the business, they either consider how to solve customer issues that have been revealed, or brainstorm.

 

Similar to Marketing Theory, the Methodology for Sharing Ideas with Others Works Better for “Consumer Goods”

The former, in the previous paragraph, is a realistic and steady method, and is undoubtedly effective in considering ideas by various business operators. However, this is a consideration of ideas in the limited area of solving only “current” problems, and the most of the results are highly feasible ideas that will improve the business.

On the other hand, the latter is often carried out from a different perspective and at opportunities of idea generation for a completely new business. These kinds of occasions involve so-called “leapfrogging” ideas. I wonder how many effective ideas have been generated through these brainstorming sessions within a company. What I can say from my experience and what I have seen and heard so far is that, I suspect that, in many cases, even if some “ideas” are generated, actually useful ones that can create new businesses seem to “rarely exist.”

Various methodologies for generating ideas other than brainstorming have developed, which can be learned from books, the Internet, or the like. However, these methodologies are just basic frameworks, and the quality significantly depends on the amount of experience and knowledge of the operators (facilitators, participants, etc.). Moreover, there is an appropriate situation for each of the methodologies, but this fact is not understood much. Furthermore, the problem is that this idea generation methodology is relatively suited to the field of consumer goods and not so much to the field of industrial goods, especially in cases of establishing a new business by large companies, which was introduced in the first paragraph of this column.

I believe that such situation is generally the same as the situation of creating and spreading so-called marketing theory. Marketing theory has been developing mainly in the field of consumer goods where consumers are customers, and books and studies about market theory also generally target consumer goods as tacit knowledge. In recent years, marketing theory focusing on industrial goods has gradually been emerging, but marketing is still dominantly based on consumer goods.

 

Idea Generation Requires Diversity, Especially in the Cases of Industrial Goods

I might get off the track. So why does idea generation such as brainstorming not work effectively in the field of industrial goods? This is because cost effectiveness is the most important factor for industrial goods. That is, no matter how good the idea is, it is difficult to create a business if it is not cost-effective. Furthermore, for consumer goods, consumers’ feelings sometimes influence purchasing activities, but for corporate purchasing, this hardly happens, which is one of the major differences. There are two major types in cost effectiveness: that resulting in an “increase in revenue” or that resulting in “reduction in costs” for the client company. Of course, there are various cases, for example, direct, indirect, short-term, or long-term cost effectiveness, but the most of these result in an “increase in revenue” or “reduction in costs.”

Therefore, the key point is to utilize the company’s own management resources. The shortest way to generate new business ideas to be used is to think about which management resources to utilize in what kinds of situations and in which forms.

Methodologies for generating ideas such as brainstorming are not uniform, and it is crucial for business operators to become more creative by taking these factors into account. “Diversity,” not uniformity, is the important point in methods for generating ideas.