How to spot a bad idea before it costs your business: health.com.au founder Andy Sheats

Published 03 March 2014 11:13, Updated 04 March 2014 10:02

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How to spot a bad idea before it costs your business: health.com.au founder Andy Sheats

There are three steps to effective ideation, says health.com.au co-founder Andy Sheats.

Once upon a time there was a man called Alex Osborn. He worked for an advertising agency and wrote a book called Applied Imagination (1953) in which he describes the process of generating ideas. Osborn called his process ‘brainstorming’, and is one of the fathers of structured group ideation.

Osborn had a number of rules for brainstorming, among them a focus on quantity (which he hoped would lead to quality down the line); the restraint of criticism and suspended judgment to encourage an open flow of ideas; the support of unusual ideas that encouraged participants to look at new perspectives to find better solutions; and the development of ideas in combination with or as an improvement to initial ideas—“Yes… AND…”.

After brainstorming comes the refinement process in which team members evaluate the proposed ideas. I have long worked in companies where we would debate and argue the merit of various ideas (usually the ones we came up with). The process is flawed due to two dud assumptions:

1. The assumption that we have the right ideas.

2. The assumption that we understand the criteria to determine whether they will deliver value.

HOW TO SPOT A BAD IDEA

The only way to truly know if an idea is ‘bad’ is to try it. The team can only really decide on an idea that is likely to succeed compared to another; it is the customers who will provide the real proof. At health.com.au we look for opportunities to test our ideas with real customers at relatively low cost, and we let the customer response decide whether it is a winner or not.

One way you can do this is through split testing, pitting the status quo against a new idea. For example, we had some ideas for a new quoting mechanism for our health insurance products. Last time we developed a quote page it took us months of debate, refinement, more debate, more refinement, change of direction, new colour schemes and so on before we even built it. And that was just us arguing against ourselves. This time we built it in a ‘good enough’ format and launched it for split testing on the health.com.au website. Split testing means that some customers see the ‘old’ quote page and others saw the ‘new’ one. We tracked the number of sales through each and let the sales on each decide which was the winning concept. Instead of arguing for a winner we are competing to come up with the best concepts to test out.

Letting the customer decide is an objective way to evaluate an idea, so being able to measure the success of a new idea is the key to deciding if it’s worth keeping. You can measure this in a number of ways: sales are an obvious factor, but response and engagement may be important for you too. And it doesn’t have to be a website—you can split test anything from sales scripts to store layouts.

THE UGLY TRUTH

Sometimes customers won’t react the way you expect. The challenge is to accept their response as valid and see what you can learn from the test to develop a new hypothesis.

We recently developed a new sign up page where we close sales. We thought the new page looked fantastic and would convert way better than the old one; in the past we would have pushed it live and wondered why our sales had evaporated. Because our new page was so cool we’d have blamed seasonality, competitive issues or the weather. However, we tested the new form against our old one and it had less than half the conversion rate, which goes to show that even when the team agrees, we’re often not right. Good thing we asked the customers first.

If the new idea trumps the status quo, the winner replaces the loser and we invest the time and money to build the idea out in a more robust and scalable way. We then try to come up with a new idea to beat it. Evolution is a cruel mechanism, but it works. The difference is we now compete to come up with the best ideas rather than to win an argument over whose idea is the best.

PRACTICE EFFECTIVE IDEATION

•The good: Make generating ideas a regular practice in your business, whether you supply a suggestion box for anyone to drop in their thoughts or run a formal brainstorming session.

•The bad: Choose ‘the idea most likely’ and test it with real customers. They’ll be the judges of a bad idea.

•The ugly: Sometimes customers reject the idea you think is great. Take that in your stride, learn what you can and come up with better ideas to test next week.

Andy Sheats is co-founder and CEO of health insurance start-up, health.com.au.

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