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TIP OF THE DAY: VALUATION ISSUES
One of the useful methods of valuing ideas is to analyse the practical impediments that may impede an ideas progress to commercial success.
One of the useful models is Utterback's (1994) S-curve, which describes how the performance and cost characteristics of a technology change with time and continued investments.
The performance of the established technology improves over time, at first rapidly, and then more slowly until maturity as years of improvement exhaust opportunities to better cost and performance (e.g. Windows in 2005, MS Office).
When the new technology first arrives (e.g. Linux, OpenOffice) it is crude compared to the existing, with many issues still unresolved. At this point it may be written off.
These problems are gradually resolved over time and ultimately the innovation is able to compete with the cost performance characteristics of other players. Then it is picked up by lead users who value it highly, and goes on to win market share through a variety of mechanisms.
By plotting an idea against the S-curve, it is possible to gauge how long before an idea is able to engage with rivals. Major barriers also include cultural and emotional objections. For example, condoms have a low take-up rate in Africa, despite the prevalence of Aids, because of cultural taboos.
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