Innovation & Business Creation, the Steinbeis Transfer Institute based in Gräfelfing just west of Munich, has developed a checklist method called Seven Key Questions (SKQ), which helps assess business concepts and innovations with just a short list of controls. It also highlights whether concepts are implementable with respect to target customers, the value they add, differentiation from the competition, and financial viability.
The institute’s checklist is an expanded version of an original model called the Six Key Questions, which was developed by eLab in the 1990s as part of a collaborative venture between two universities, LMU Munich and the Technical University of Munich. The new SKQ model is used to evaluate business concepts and innovations to see if they can be realized immediately and if they should deliver results that are both financially acceptable and sustainable. The method is aimed at:
To answer the Seven Key Questions, the model is not about sequentially putting check marks in boxes but rather about going round and round in loops. If respondents discover that answering one of the key questions raises issues with a previous question they answered, they simply go back to it again. In this way, the method has parallels with so-called design-thinking techniques. A good example of how this works in practice is the winner of the 2015 Seifriz Award, the Bad Sassendorfbased scaffolding manufacturer Wolfgang Henning, which developed a new kind of permanent anchorage system for scaffolding in collaboration with the TU Dortmund University. The anchors use a special fixture to remain permanently attached inside walls. This makes it possible to use the anchors again the next time a building needs plastering or painting.
Key Question 1: Who is the customer? Every business concept or innovation should be aimed at a specific target group. Defining and understanding the exact nature of this group is a key to successful implementation. The primary customers in the case of Wolfgang Henning are all of the other 3,827 scaffolding manufacturers in Germany.
Key Question 2: What problem does the product or service solve? Ideally it solves a customer problem by fulfilling an urgent need or addressing the most challenging shortfalls. Depending on whether it’s a B2B or a B2C business model, this could be something like capacity problems, quality issues, time constraints, availability problems, performance problems, risks, budgetary problems, image problems, application or complexity problems, etc. With the new scaffolding anchor, the product solves several problems at the same time. It’s easier to mount (complexity problem), it stays where it is in the wall (time or availability problems), it’s not affected by temperatures, so it does not conduct thermal energy (quality problem), and it’s inexpensive (budgetary problem).
Key Question 3: What value does the solution add? Can problems faced by the customer be expressed in numbers? If so, can the corresponding value added by the solution also be expressed in volumes, time, or units? The better the benefit can be quantified in its ability to solve a quantifiable problem, the more likely the customer is to perceive the value of the benefit – and thus the more likely they are to buy the product. In the case of the scaffolding anchor, it is possible to point to the time it saves during mounting and the improved thermal insulation. This is ignoring cost benefits.
Key Question 4: Why is the solution that’s offered better than any comparable alternatives? It’s not enough to solve a customer’s problem. A solution must do this better than the competition. With this question, it’s important to keep an eye on direct and indirect competitors. Wolfgang Henning’s direct competitors are producers of other permanent anchorage systems, whereas indirect competition comes from other anchorage systems, as well as totally free-standing scaffolding.
Key Question 5: What’s the market potential? This depends on the theoretical maximum (annual) volume of the market. Taking the real market volume (i.e., actual current size of the market per year) as a proportion of the potential market size gives a number equating to the current level of market penetration. This is an indication of how much of this market potential has already been exploited. It’s also important to consider whether a market is expanding or shrinking. The annual turnover of German scaffolding companies has risen in recent years. Accordingly, this is a growth market. Breaking down market turnover by the different kinds of anchoring systems also provides a more detailed picture. This will also make it possible to estimate market shares.
Key Question 6: How can money be made out of the proposed offering? By selling products and services, companies generate turnover. This can be through one-time sales or through repeat business, such as monthly rent or leasing fees, commission, or advertising revenues. However, it may be more important to calculate the anticipated cash flow and not so much the revenues. This is especially the case for business founders and new startups, which have no established business model as a reference point. As a result, calculations should not just cover sales revenues but also the resulting cash flows. When calculating the cash flow for the new permanent scaffolding anchors, budgeted income had to be contrasted with forecasted outgoings. Later on, this had to be compared with actual payments received and expenditures.
Key Question 7: Does the business concept match the company well? Dr. Bernward Jopen and Uwe J. Umlauff at the Steinbeis Transfer Institute for Innovation & Business Creation are convinced that entrepreneurial freedom is not a function of financial independence but also the amount of leeway individuals are given to make decisions themselves and lay their own plans. As such, companies should start by asking themselves whether a business concept or innovation is also compatible with their values, skills, professional experience, or even personal experience. If it’s not, even if the revenue prospects look good, the entrepreneur, experienced businessman, or even the investor, should really steer clear of it.
Dr. Bernward Jopen is founding director and Uwe J. Umlauff codirector of the Steinbeis Transfer Institute for Innovation & Business Creation. The Steinbeis Enterprise’s portfolio of services ranges from entrepreneurship education to startup management and business training.
Dr. Bernward Jopen
Uwe J. Umlauff
Steinbeis Transfer Institute Innovation & Business Creation (Gräfelfing)