What is a good idea really worth?

Working as a software developer for just over a decade I have seen my fair share of ideas and execution, dismal failures and (insert interesting adjective) successes.

The basis of this post comes from a post by Derek Sivers (and the comments to that post), the dude who made CDBaby.com ,where he wrote some interesting things about the value of ideas versus the value of the execution of those ideas. Read the entry here.

Which ideas are we talking about here, you are no doubt thinking to yourself. I am distinguishing ‘ideas’ into two broad categories, commercial/business and intellectual. By commercial/business I mean ideas like Google, Amazon, Facebook, Kreepy Krauly; ideas that people came up with that made them money or that were made into a successful businesses. I am not talking about intellectual ideas like those had by Plato, Nietzsche, Galileo or Da Vinci which changed the world (and no doubt could have and did make them some money) but are not currently raking in the cash. Obviously I am also biased towards software/web type ideas, since that is where I have virtually all my experience.

In Derek’s post, he basically states that the ‘idea’ is purely a multiplier to the value that is the ‘execution’. It works like this:

Ideas:

  • Awful idea: -1
  • Weak idea: 1
  • Average idea: 5
  • Good idea: 10
  • Great idea: 15
  • Brilliant idea: 20

Execution:

  • No execution: $1
  • Weak execution: $1000
  • Average execution: $10,000
  • Good execution: $100,000
  • Great execution: $1,000,000
  • Brilliant execution: $10,000,000

To make a business, you multiply the two:

  • A brilliant idea with no execution: $20
  • A brilliant idea takes brilliant execution to make it worth $200,000,000

Fundamentally, I agree with him. A great idea with no execution is basically worthless but there are some other factors to think about around this concept.

When you consider an entire project/product, how much of the totality of the project is the idea and how much is the execution. From a pure time and effort point of view, the idea may very well end up being a very small fraction (say 0.1%) of the project effort while the execution is the other 99.9%. Sure, some people may put a lot of effort into developing an idea, but I have never seen a project where the idea part of the project was more than the ‘very small fraction’ of the whole project. If you think about it, the idea of Facebook was relatively straightforward and pretty simple and when you compare the initial idea (regardless of the hours spent on developing it at the outset) to just the millions of development hours that have gone into creating the system it is today,  it is pretty easy to see that the idea vs. execution effort is hugely skewed towards execution. It works the same for all the big ones like Google and Amazon and most (if not all) of the smaller ones.

Other things that affect that simple ‘idea multiplied by execution’ equation is timing and market saturation. A brilliant idea, brilliantly executed may still end up being worthless if it’s done at the wrong time. You may argue though, that timing is part of the execution. I agree. A lot of the dotcom bubble companies had very good ideas  which were executed brilliantly but were premature, the market just wasn’t ready for doing business on the internet to the extent which the start-ups needed. Amazon was nearly one of these casualties but managed to hold on long enough for the timing problem to be worked out. That, in my opinion, is part of the brilliant execution.

As far as market saturation goes, I think Apple in the smart phone market is a prime example of how a brilliant idea, brilliantly executed can succeed even if there are very many players already operating in the same space. Again, I think overcoming market saturation is a function of execution and not a completely separate factor entirely.

In my career as a software developer I have seen some good ideas executed terribly and fail and I have seen some reasonably terrible ideas executed exceedingly well and win, big time. In every single case I can think of, executing the idea was wildly more difficult than developing the idea in the first place and I think that this is where the ‘ideas’ people can learn a lot. Coming up with a reasonably good idea is not that difficult. Many people have good ideas. In fact, I have several. Executing those ideas, however, is a completely different ball game and is what makes the difference and the insanely big bucks in the end.

Having said that, I do believe in protecting ideas. While in the bigger scheme of things, developing the idea may only make up a fraction of a project, that may still and does usually add up to a huge amount of effort and let’s face it, nothing is worse than working your ass off on something just to have it taken away and not get anything for it. There will always be somebody better able to execute an idea than you are (unless you are Google possibly) and so you need some protection against this happening. No protection is complete though and big names like Microsoft have made a business out of crushing ‘the little guy’ reasonably often.

All things considered, I would rather have an average idea executed brilliantly than a brilliant idea executed averagely.

The price for a male llama varies between $200 and $1000 while a female fetches between $400 and $3500+.

Interesting, no?