Innovation for Start-ups

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What is innovation? What are the different types of innovation? Which types of innovation are most important for the success of your enterprise? How do you capture the value of the innovation that you do? How do you build a culture of innovation that will sustain your company in the future?

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Innovation for Start-ups

  1. 1. Innovation for Start-ups Rishikesha T. KrishnanNovember 10, 2012 Professor & Area Chair, Corporate Strategy & Policy, IIM Bangalore
  2. 2. 2 What is Innovation?
  3. 3. What is Innovation?3 Innovation = Invention + Application The Traditional View
  4. 4. What is Innovation?4 Problem + Idea + Execution + Benefit Challenge? Novelty Utility Application of new ideas to solve problems resulting in benefits to users
  5. 5. Solving Problems…5 How do you provide clean drinking water at low cost? How do you convert an existing car into a hybrid?
  6. 6. What are the different types of6 innovation?
  7. 7. Innovation could be…7 New to the New to the company country New to the New to the industry world
  8. 8. Prominent Innovations8 Petroleum Long-distance I C Engine Refinery telephony Electric arc Information Nylon furnace Technology Semiconductor Microprocessor Internet foundry Do you see a pattern here?....
  9. 9. Prominent Innovations9 Product Process “Enabling” Petroleum Long-distance I C Engine Refinery telephony Electric arc Information Nylon furnace Technology Semiconductor Microprocessor Internet foundry
  10. 10. Prominent Innovations10 Joint Stock Company What’s special Multi-divisional about Organization these? Global Delivery Model (Software)
  11. 11. 11 What are the other types of innovation?
  12. 12. Innovation Typology12 Product / Offering Business Types of Model innovations Process Customer Experience
  13. 13. The Six Levers of Innovation 13 Value Product & Proposition ServicesBusiness Technology Supply Process Model Chain Technologies Target Enabling Customer TechnologiesSource: Davila, Epstein &Shelton, 2006
  14. 14. Incremental vs. Radical Innovation14 Incremental Radical Innovation Innovation • Requires new knowledge & • Builds upon existing resources knowledge & resources • Existing competence loses • Competence-enhancing value? • Relatively small changes • Step changes in in performance / utility performance • The lifeblood of innovation? • Relatively rare
  15. 15. The Power of Incremental Innovation15 “There is no genius in our company. We just do whatever we believe is right, trying every day to improve every little bit and piece. But when 70 years of very small improvements accumulate, they become a revolution” From Interview with Katsuaki Watanabe in HBR, July-Aug 2007
  16. 16. Existing companies are good at sustainingInnovation, but newcomers are better atdisruptive innovation
  17. 17. 17 Why is innovation critical for start-ups?
  18. 18. What is the advantage of a start-up vis-à-vis a large company?18 As organizations mature over time Bias towards Balance creativity Focus on creativity & value capture value capture Challenge for Challenge for startup companies mature companiesInnovation is the critical differentiator for a start-up
  19. 19. But start-ups in India…19  Tend to fall in “no-man’s land”  No breakthrough technological innovation  Lack clear understanding of customer domain / application  Even if they come up with one good innovation, struggle to come up with another!
  20. 20. THE RAW MATERIAL FORINNOVATION….
  21. 21. The Raw Material of Innovation21 Ideas Experiments Customer Insights
  22. 22. IDEAS
  23. 23. WHERE DO YOU LOOK FORGOOD IDEAS?
  24. 24. 24 Gandhiji was asked: What have been the most creative experiences of your life?
  25. 25. 7 June 1893, Maritzburg railway station25
  26. 26. 26 “Why is so much steam getting wasted?” James Watt, 1765 “Are you serious? It means computing will be free” Bill Gates, 1971, at age 16 to Allen on hearing “Moore’s law”
  27. 27. 3 sources of itch27 Pain Wave Waste
  28. 28. The Four Lenses of Innovation28 1. Challenging Orthodoxies  Question dogmas about what drives success 2. Harnessing Discontinuities  Spot trends that could change the game 3. Leveraging Competencies & Strategic Assets  Think of organisation as a portfolio of skills and assets, not in terms of products and markets 4. Understanding Unarticulated Needs  Learn to live inside the customer’s skin Source: Skarynski & Gibson, 2008
  29. 29. Buyer Utility Map Stage Purchase Delivery Use Supple- Maint- Disposal29 Utlility ments enance Customer productivity Simplicity Conven- ience Risk Fun & Image Envir friendli. Another source of ideas is to look for blank spaces on the buyer utility map
  30. 30. EXPERIMENTATION
  31. 31. 31 What is an experiment? Activity that validates assumptions
  32. 32. 32 What kinds of assumptions does an experiment validate?
  33. 33. Improve the Idea Velocity33 Experiment with Low Cost at High Speed
  34. 34. 34 Feb 2004 Sep Nov Apr 2004 2003 2003 impact demo idea itch Feasibility Loop Viability Loop 2 months 3 months 2 months
  35. 35. Will people use Internet? NeedCan we 4 types of Do we have the Commerci-monetize lization assumptions Technology technology of every to create Internetthis? risk idea apps? Production Can we scale this?
  36. 36. Iterate on the Business Model36
  37. 37. Google’s search sandbox37 Guess how many experiments were carried out in 2010? 20,000! How many went live? 500 Source: “How Google makes improvements to its search algorithm?”, YouTube video
  38. 38. Create a Climate for38 Experimentation  Have a high trial rate: fail fast, learn fast  Can you do the “last” experiment first?  Failure plays a critical role in innovation  Post-It Notes & failed adhesives  Nylon: a lab experiment that went wrong  TVS Spectra failed, but Victor succeeded
  39. 39. Avoid the “Failure Fallacy”39
  40. 40. CUSTOMER INTIMACY
  41. 41. Source: H. Rao, Stanford GSB, 2007 Importance to customer High Disguster Delighter Low Annoyance Frills Negative PositiveA Relentless Focus41on User Experience is Critical Emotions
  42. 42. 42 Big Bazaar: India’s Largest Hypermarket Chain  Part of the Future Group (Kishore Biyani) Philosophy: Rewrite rules, retain values India: Confidence & Change → Consumption  But consumers here demand ideas and solutions that are uniquely Indian Inspired by Saravana Stores, Chennai  Low margin, high turnover model  Possible to operate on multiple floors  Has to be located in the city, near transport points  People come shopping in families – meet needs of entire family
  43. 43. HOW DO YOU MAKE SUREYOU “APPROPRIATE” THEVALUE OF INNOVATION?
  44. 44. The Problem44  Google created a powerful search engine, but couldn’t monetise it until it created its advertising model…  Mobile VAS applications is a popular area for start-ups in India, but its difficult to squeeze money out of mobile operators (remember Porter’s 5- forces?)…  In financial services, innovations can be copied almost overnight…
  45. 45. Innovation Value Appropriation How do you appropriate value? Product-Market Continual Legal (IP) Actions Innovation Strategy Standards Continual Improvement Patents Barriers to Imitation Cannibalization Copyright Collaborative Product Platform Trade Secret Agreements Radical Innovation Trademarks45 Adapted from Grant
  46. 46. Inimitability/Complementary Assets Framework Holder of complementary High Difficult to resources makes make money Money Ease of Imitation (Coke) Party with Low Inventor Innov .+ Compl. makes resources makes money Money (Pixar vs Disney) Freely available Tightly held or unimportant and important46 Complementary Assets Source: Afuah, 2004
  47. 47. WHEN DOES BEING “FIRST-MOVER” HELP?
  48. 48. FIRST MOVERADVANTAGES
  49. 49. Being first succeeds when…49 1. Pioneering helps build a firm’s reputation and image with buyers 2. Early commitments to new technologies, channels, etc. can produce an absolute cost advantage 3. First-time consumers remain strongly loyal to pioneering firms in making repeat purchases 4. Moving first constitutes a pre-emptive strike making imitation more difficult
  50. 50. FIRST-MOVERDISADVANTAGES
  51. 51. Late movers benefit when…51 1. Pioneering leadership is more costly than imitating followership and only negligible experience benefits accrue to the leader 2. Products of the pioneer do not live up to buyer expectations so that a follower can win customers away from the pioneer 3. Technology is advancing rapidly so that followers can leapfrog pioneers with second or third generation products
  52. 52. LIMITATIONS OFPATENT STRATEGY
  53. 53. Robert Kearns & the Intermittent Wiper53  Kearns invented first intermittent wind- shield wiper for cars in the early 1960s  Filed patent application in 1964  Tried to license his technology to auto majors but, no one took a licence  Majors introduced their own wipers 5 years later  Kearns filed patent suits against Ford, Chrysler  Won suits only in early 1990s…divorced…almost went mad  See 2008 movie Flash of Genius
  54. 54. 8 Steps to Innovation Excellence:Building a Systematic Innovation Capability 3 Improve Batting Avg 1Build apipeline 2 Improve idea velocity Forthcoming book by Vinay Dabholkar & Rishikesha T. Krishnan
  55. 55. http://jugaadtoinnovation.blogspot.in55
  56. 56. THANK YOUrishi@iimb.ernet.in +91 98450 22710
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