Even companies with great ideas usually don't know how to analyse them. Bill Wilmot makes sure ideas get scrutinised - ruthlessly. Here's how he helps kill bad ideas and give great ideas a tune-up

Picture the scene: A high-ranking BBC executive has just been given one minute to pitch an idea to a group of her colleagues, many junior to her. She chooses a project that is already happening, that she is responsible for, and on which the company has spent over £100,000.

At the end of her time she has to stand there, without saying a word, while the group responds to what she has said. Some of them have coloured hats atop their heads, and others are wearing large comedy spectacles. Twenty minutes later the project is dead. It will be scrapped and started from scratch.

The story is true, and for Bill Wilmot, who led the session, it's an illustration of the power of a simple innovation process, and the potential costs of not bothering to go through it.

Wilmot works for SRI International, is an emeritus professor at the University of Montana and is director of the Collaboration Institute, which specialises in workplace communication and collaboration. He is also the co-author of Innovation: The Five Disciplines for Creating What Customers Want ( Buy@Fishpond).

He has played a part in nurturing innovations like the computer mouse and high-definition TV, and helped nudge the BBC away from its collision course with the government axe man. On his way he has probably arranged the deaths of thousands of dumb ideas that could have cost his clients millions in money, time and reputation.

At the heart of the process is a simple mnemonic: NABC. This stands for:

• Identify the marketplace need for your product or service
• Define the 'golden nugget' or the unique advantage of your approach
• Outline the benefits to the customer, your partners in the market ecosystem
• Pinpoint the competition and systematically compare your approach with competitive products or services

Do not go glossing over this list. Look at it again and think about it. When was the last time you systematically went through all of the steps thoroughly?
Considering its simplicity, Wilmot finds it startling how haphazard this process is in most firms, if it is followed at all. The resulting confusion is readily exposed in the one-minute pitch exercise he uses at the outset of his sessions.

"They know this stuff, but it's about getting them to do it rather than talk about it," he says. "What's fascinating for me is that businesses world-wide use these terms but they can't define them. It is unbelievable how bad it is the first time. I walk up to employees and say, 'What's the value you bring to this company?' They say, 'Erm … I'm a vice president.'"

The average pitch, he says, is mostly approach - how we've come up with this new way of making X, with a distinct lack of knowledge on whether anybody wants X, what X will do to enhance people's lives, and whether or not X's role is already being filled by a similar product or collection of products.

"People don't tend to want to open their ideas up, but it's often the person who comes in from the outside and says 'I just don't get it' who is most important"
"The typical thing is to say, 'Well, it's better than the competition,' but that doesn't really cover it," says Wilmot.

When he told me this, it reminded me of a piece of marketing analysis I did for some friends working on an Internet start up in the UK. They had spent three years working with investment cash from friends and family developing a new online tool.

We got together and they told me what the thing was called and why, how it worked, and so on. They also told me that when they explained it to people the response they invariably got was, "That sounds like Facebook or MySpace."

I checked out their website and asked them a few questions. They couldn't tell me exactly who their tool was for or what made it unique, and I couldn't really get to grips with how it worked. We parted company. They have tried it as a website for individuals. They have tried aiming it at business. Last time I checked it was sort of aimed at both.

This was three years' work, remember. Wilmot tries to get this all sorted out in an hour or so. After participants do their initial pitch they get 20 minutes of feedback in which they are not allowed to speak. Wilmot calls this the Watering Hole. This is also where a little light role-playing comes in.

"The Brits were so critical at the BBC that we gave them green hats and said those wearing them could only say something positive," said Wilmot. "In Asia, people sometimes have more difficulty being critical, so we gave them red hats and said they could only say things that were negative.

"Then we give some of the group these giant spectacles, which we call the Eyes of the Customer, and tell them to feedback from that point of view - you know, I don't care about the technical stuff, just tell me what I want to hear."

"People don't tend to want to open their ideas up like that, but it's often the person who comes in from the outside and says 'I just don't get it' who is most important. They learn more in those 20 minutes than they have learned in the last year."

After their initial Watering Hole, the participants are given time to come up with a more detailed proposition that takes the form of a four-minute pitch. According to Wilmot, the key is to do this multiple times.

"I see it as a strength that there are a lot of small companies in New Zealand. That is where innovation happens. What isn't happening is talking to each other"
Many people are incredibly uncomfortable doing this the first time, especially with an idea that may be close to their hearts. But with the right coaching and preparation, most become more comfortable.

Then they are able to drop their defensiveness and learn from the intense feedback they are given. This makes them part of the innovation process. They themselves come up with the changes that can quickly turn a good idea into a great one - or a bad idea into a forgotten one.

Says Wilmot: "The customer and competition parts are the hardest. Most people do not do a good job of identifying customer needs. They tend to just ask customers what they want, but customers cannot always tell them. They think they do a focus group and that answers the question. But you can't really see what people need unless you shadow them and follow them.

"Go into an airport and you will see people sitting on the floor propped up against the wall. Why? They are plugging in their laptops and phones. What are airport designers thinking? You can't really tell what people need until you watch them start to clog up the spaces. It is not a one-time thing, it's an ongoing process."

At SRI International, people pitch ideas to each other as they pass in the corridor. The company is currently helping to develop the next generation of intelligent Internet browsers and 'packet hop' technology that would enable mobile phones to work at short range without the use of a tower. It's also working with Worcester Polytechnic to build innovation into the curriculum, and in Singapore they are working on making innovation a part of children's school work.

The aim is to engender an entire culture of innovation. Wilmot, who visited New Zealand in September to meet with organisations like AgResearch and the University of Waikato, sees potential for that here too.

"You guys are talented, and well educated," he says. "The thing that is missing is realising how competitive the world is. The exchange rate falls and you won't be selling lamb to France. I would suggest more flexibility.

"I do see it as a strength that there are a lot of small companies in New Zealand. That is where innovation happens. What isn't happening is talking to each other. But you must have a clear process for innovation, a common language you can use to make it happen."