Wonder why your amazing idea couldn’t work? Try this simple exercise to better understand the answer.

Startups and corporate projects aimed at innovating often ignore how things are currently done.

  • They have a bigger idea
  • Existing players just don’t get it
  • Current assumptions will stifle their creativity

This is a big mistake.

If you are looking to innovate, one of the most powerful things you can do is understand and model the existing approach. Yes, perhaps your new idea is born from a clear frustration with the status quo.

So you have a bold “why can’t we…?” type question.

Well, you should answer that question. Here are three key things you should understand and do:

Dig into the key business ratios

All industries have key business ratios for understanding and managing their operations.

For example, in the hotel industry they use Profit Per Available Room, Occupancy Rate and Revenue per Room Available among others. The point isn’t to know what these are.

It’s to ask, “why are these used?”

When you dig into why these ratios are important, you start to uncover the true foundation of the industry.

Map the ecosystem players around the industry

Exploring the business ratios leads you to understand more of the components of the core business system.

But you should also model the ecosystem in which the industry exists. Sometimes the existing business is dependent on an ecosystem – Apple’s App Store, for example.

In other cases, the ecosystem has a variety of entities that play different roles to support the business — local labor pools, regulatory bodies or adjacent industries. Model this system out so you can see it.

Map your idea against the ratios and ecosystem

Now map your current idea to the business ratios and existing ecosystem.

How does your model work? Do you have different ratios? Are you dependent on similar ecosystem partners or do you need new ones?

It is easy to focus on your own idea as you pursue world changing innovation. But it is invaluable to understand exactly what world you are really trying to change. That understanding will be an important reference throughout your journey.

Get smart before you get going.

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