Innovation and Risk Taking - A Disciplined Approach

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In this presentation, Dentons' Heather Barnhouse discusses the following topics in relation to innovation and risk taking in business:
- What is Innovation; What is Risk?
- Benefits of Innovating
- Process of Innovating
- Opportunities for Innovation
- Putting it all together: A disciplined approach

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Innovation and Risk Taking - A Disciplined Approach

  1. 1. Dentons Canada LLP INNOVATION AND RISK TAKING A Disciplined Approach By Heather Barnhouse, Partner Dentons Canada LLP 22 October 2013
  2. 2. Overview • What is Innovation; What is Risk? • Benefits of Innovating • Process of Innovation • Opportunities for Innovation • Putting it all together: A disciplined approach 22 October 2013 Dentons Canada LLP 2
  3. 3. 22 October 2013 Dentons Canada LLP 3
  4. 4. What is Innovation? • For such a pervasive element in society, difficult to agree on standard definition • “Something different that has impact” 22 October 2013 Dentons Canada LLP 4
  5. 5. Innovation is Not • Technology • Invention • Creativity • Successful innovation incorporates technology, inventiveness and creativity, but it is distinct from each of those elements. 22 October 2013 Dentons Canada LLP 5
  6. 6. What is Risk? • [Probability of something happening X Resulting Cost or Benefit if it does] • Danger • Hazard • Potential for Loss 22 October 2013 Dentons Canada LLP 6
  7. 7. Benefits of Innovation 22 October 2013 Dentons Canada LLP 7
  8. 8. Game Changing Innovation • Apple (Steve Jobs) • iPod • iPhone • iPad • Microsoft: various software (Bill Gates) • Facebook (Mark Zuckerberg) • Virgin Group: Richard Branson 22 October 2013 Dentons Canada LLP 8
  9. 9. If Innovation Were Linear… • Who was best positioned to invent Facebook? 22 October 2013 Dentons Canada LLP 9
  10. 10. Facebook Innovation • Kodak was famous for memorializing thingsthink photo albums; in hindsight, the next logical innovative step would be to put photo albums online and allow people to connect 22 October 2013 Dentons Canada LLP 10
  11. 11. Benefits • Innovation allows organizations to gain a competitive advantage • Responsiveness to customers needs • Evolution 22 October 2013 Dentons Canada LLP 11
  12. 12. Necessity for Innovation • “Everyone has plan, until they get punched in the face.” - Mike Tyson • Businesses are no different: to remain competitive, need to adapt and be flexible 22 October 2013 Dentons Canada LLP 12
  13. 13. Process of Innovation • Common Approach in many organizations “Innovation Island”corporate retreat, facilitated by others focused on creating. 22 October 2013 Dentons Canada LLP 13
  14. 14. What Happens on Innovation Island? • Brainstorming; • Creativity; • Inspiration; • Problem Solving; • Teamwork; 22 October 2013 Dentons Canada LLP 14
  15. 15. What is Missing on Innovation Island? • Expectations • Deadlines; • Budgetary constraints; • Profit and Loss statements; bottom lines; • Corporate or organizational politics 22 October 2013 Dentons Canada LLP 15
  16. 16. Travel Back from Innovation Island • Turbulent; • Difficult to integrate process into daily work life; • Daily tasks become important and take priority; • Failure to integrate emerging opportunities into established corporate culture 22 October 2013 Dentons Canada LLP 16
  17. 17. Process Redefined • Ideas are only the beginning. • Challenge for managers is to find ways to incorporate innovation into daily rituals and practices of workers; to foster the spirit of innovation 22 October 2013 Dentons Canada LLP 17
  18. 18. Six Steps in Process • Focus • Connect • Tweak • Select • Stealthstorm • Persist 22 October 2013 Dentons Canada LLP 18
  19. 19. 1. Focus • Scientists have repeatedly determined that the majority of ideas generated by humans are bad ideas • Need a process of refining ideas and cultivating the good ones 22 October 2013 Dentons Canada LLP 19
  20. 20. Why are Ideas Bad? • Bias • People are poor judges and overestimate the importance and impact of their ideas, while simultaneously discounting the effect of others’ contributions to projects • Fun Example: How likely are the following individuals to get to Heaven? 22 October 2013 Dentons Canada LLP 20
  21. 21. How Likely to Get to Heaven? • Bill Clinton, former President of the United States of America: People surveyed said he had a 52% chance of getting into Heaven 22 October 2013 Dentons Canada LLP 21
  22. 22. How Likely to Get to Heaven? • Mother Teresa: Saint • People surveyed indicated that she had a 79% chance of getting into Heaven 22 October 2013 Dentons Canada LLP 22
  23. 23. How Likely to Get to Heaven? • YOU? • People surveyed, on average, reported that they personally had an 87% chance of getting in Heaven • BIAS 22 October 2013 Dentons Canada LLP 23
  24. 24. Focus: Example • Lonza: Swiss company, major supplier in the life industry. • In 2011, achieved sales close to $3B, with 8,300 employees. • Experienced price pressure on one of its key products • Lonza had a culture of acceptance of new ideas 22 October 2013 Dentons Canada LLP 24
  25. 25. Lonza Continued • In 2011, management tried to capitalize on ideas, by strategically focusing their generation: challenged employees to provide ideas that would do two things: • (a) improve the manufacturing process of the product in question; and • (b) deliver cost savings of at least 30%. 22 October 2013 Dentons Canada LLP 25
  26. 26. What Happened? • Multiple ideas generated, • Results: - Drastic simplification of the manufacturing process, resulting in increased productivity by a factor of 100, and - Reduction in manufacturing cost by 75% • With the right lens with which to focus, employees were able to generate helpful results 22 October 2013 Dentons Canada LLP 26
  27. 27. How to Assist with Focus? • Clarify objectives • Define the sandbox • Shift the search space 22 October 2013 Dentons Canada LLP 27
  28. 28. 2. Connect • Create opportunities for unexpected individuals to meet, both formally and informally • Encourage free flowing ideas • Design of office space to facilitate interaction
  29. 29. 3. Tweak • Mad scientist who toils away in the lab for hours with no input, “perfecting” the idea, only to have the idea fail spectacularly when it finally sees the light of day.
  30. 30. Tweak Example • Pixar: “Dailies” • Concept of daily sharing of concept, no matter what stage it is at. • Continuous feedback and input • Don’t invest money in something that will not be wellreceived
  31. 31. Wheeled Luggage Example • 1972: Bernard Sadow struggled through the Puerto Rico airport with wife, two kids and 2 27 inch suitcases • He saw an employee stroll by with a cart that facilitated carrying goods
  32. 32. Wheeled Luggage Cont’d • The wheel existed since 3500 BC- no new techonology • In 1987, Robert Plath improved on the Sadow concept by adding a telescopic pole to the luggage, to facilitate dragging, and became a multi-millionaire as a result of the simple innovation
  33. 33. 4. Select • Much like the Lonza example, after the ideas have been generated, focused and tweaked, choose one or more that will be worthwhile pursuing. • Human experience is the greatest of persuaders: encourage hands on experience in refining and selecting an idea.
  34. 34. Stealthstorming • Refers to the hidden politics that the new product must navigate in order to emerge from within the corporate ranks. • Story telling is a powerful tool to adopt a product.
  35. 35. Persist • Persistence on a daily basis. • Find ways to incorporate innovation into daily routines, don’t reserve it for Innovation Island on rare occasions.
  36. 36. Opportunities for Innovation • Spend time with your customers • Study your customers: how they use the products, and how they interact with the products • Two moments of truth: (1) when the customer selects the product; and (2) when the customer uses the product
  37. 37. Finding Opportunities • Opportunity lies where the customer experiences pain points with the current products; wherever frustration is felt when interacting with a product lies an innovative opportunity
  38. 38. Seven Opportunities 1. Unexpected occurrences; 2. Incongruities; 3. Process Needs; 4. Industry and Market Changes; 5. Demographic Changes; 6. Changes in Perception; and 7. New Knowledge.
  39. 39. Unexpected Occurrences • Ford Edsel example • Many companies dismiss unexpected occurrences, meaning that there is an opportunity for those paying attention.
  40. 40. Incongruities • Cataract surgery was incongruous for many years due to one old fashioned step around slicing the enzymeAlcon Laboratories capitalized on innovating around this incongruity.
  41. 41. Process Needs • Development of Linotype, coupled with the social innovation of advertising allowed the growth of today’s media.
  42. 42. Industry and Market Changes • Critical figure suggests that approximately 40% change within a decade provides real opportunities to reconfigure the market place structurally.
  43. 43. Demographic Changes • Japan is ahead of the world by at least a decade in the field of robotics as a result of having paid attention to demographic shifts where other countries (subject to the same shift) ignored it.
  44. 44. Changes in Perception • In 1983, despite recent advances in healthcare, resulting in fewer diagnosed diseases, the fastest growing company in the US was a company providing indoor exercise equipment.
  45. 45. New Knowledge • Slowest of all opportunistic areas to develop innovative technologies- with a lead time of approximately 50 years.
  46. 46. How to Innovate Responsibly • Change the environment for the would-be innovators • Don’t innovate in isolation • Tolerate risk in a responsible manner- work towards improvements, and identifying resources to match opportunities.
  47. 47. Painkillers vs. Vitamins • Venture Capitalist choose to invest in “painkillers”, that remove pain points, over “vitamins” that enhance existing concepts or products • Invest in painkillers- find out where the pain exists for consumers
  48. 48. Peter Drucker: •“In innovation, as in any other endeavour, there is talent, there is ingenuity, and there is knowledge. But when all is said and done, what innovation requires is hard, focused, purposeful work.”
  49. 49. Be Disciplined in Your Approach • Be disciplined in your approach and persevere in the face of obstacles Heather Barnhouse, Partner Dentons Canada LLP 780-423-7215 heather.barnhouse@dentons.com
  50. 50. The preceding presentation contains examples of the kinds of issues that businesses dealing with innovation and risk taking could face. If you are faced with one of these issues, please retain professional assistance as each situation is unique. 50

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