Innovation Storytelling: Nurturing the "Seeds" of Innovation

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There are many models for engaging in corporate venturing and innovation. But how can we expand the models we think of when we think of "strategic partnerships"? And what practices can we engage in so these initiatives aren't conducted as isolated engagements but as ones that can centrally influence the business? Drawing on lessons learned and experiences from PARC today, CEO Steve Hoover will share cases and specific innovation practices we can engage in, particularly for moving ideation to impact, optimizing for timing especially under uncertainty, and for influencing the entire organization.

PARC presented this talk during the "Innovation Storytelling: Nurturing The Seeds of Innovation, Case Study Illustrations" segment at the IBF Corporate Venturing and Innovation Partnering conference on February 7, 2012.

Attended by corporate investors, new business development executives, venture capitalists, private equity investors, mergers & acquisition executives, institutional investors, technology transfer experts, licensing executives, investment bankers, corporate counsel, as well as CTOs, CIOs, CEOs and CFOs of emerging growth companies, this annual International Business Forum event shares strategies to gain a competitive advantage through corporate venturing and innovation initiatives. Over two days, attendees will have an opportunity to share B2B alliance models, investment approaches, strategies to capture technology innovation from external sources, and insights on ways to enhance their corporate venturing initiatives.

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  • invited talk: Corporate Venturing and Innovation Partnering conference – 7 February 2012   about the conference: Attended by corporate investors, new business development executives, venture capitalists, private equity investors, mergers & acquisition executives, institutional investors, technology transfer experts, licensing executives, investment bankers, corporate counsel, as well as CTOs, CIOs, CEOs and CFOs of emerging growth companies, this annual International Business Forum event shares strategies to gain a competitive advantage through corporate venturing and innovation initiatives. Over two days, attendees will have an opportunity to share B2B alliance models, investment approaches, strategies to capture technology innovation from external sources, and insights on ways to enhance their corporate venturing initiatives. context for PARC part: PARC will be presenting during the "Innovation Storytelling: Nurturing The Seeds of Innovation, Case Study Illustrations" from 1:15-2:45pm as part of the "Catalyzing Innovation: The Corporate Perspective on Innovation Purpose, Ideation, Process, & Measurement" conference segment.   abstract: There are many models for engaging in corporate venturing and innovation. But how can we expand the models we think of when we think of "strategic partnerships"? And what practices can we engage in so these initiatives aren't conducted as isolated engagements but as ones that can centrally influence the business? Drawing on lessons learned and experiences from PARC today, CEO Steve Hoover will share cases and specific innovation practices we can engage in, particularly for moving ideation to impact, optimizing for timing especially under uncertainty, and for influencing the entire organization.
  • So before I begin sharing some “stories” as per this conference segment, let me begin by sharing some quick background on where I’m coming from… especially because PARC itself is kind of its own story. PARC today is in the Business of Breakthroughs. That may seem contradictory – “business”… “breakthroughs” – but we’ve figured out how to resolve that seeming paradox… with lots of lessons learned and insights along the way. Many of you may know PARC as Xerox PARC, which was solely an internal R&D center for a single client [first three rows]. But for the last decade [last row] we’ve been practicing open innovation, which involves our working across a much broader set of clients (including global Fortune 500 companies), industries (including cleantech), and application spaces (including networking, healthcare, big data, etc.).
  • Our clients range from Fortune 500 and Global 1000 companies, to startups and government agency partners. This is just a partial list of the companies and organizations we work with, since the confidential nature of our relationships and work prevents us from disclosing most of them.
  • About a fourth of our clients are startups. Many of you may already know that PARC has already played a fundamental role in seeding the Silicon Valley ecosystem based on our technology. And we continue to “seed” some such companies – for example: a recent spinout from PARC [at the top of this list], PowerCloud Systems, the leading software platform provider for enabling Networking as a Service (NaaS), just closed its $6M Series B funding round led by Qualcomm’s investment arm, Qualcomm Ventures. [Qualcomm, which wants to access a new market segment for wi-fi chips, benefits from PARC’s investment in validating the technology, which reduces its risk as it tries to expand its offerings.] another company based on PARC technology [also at the top of this list] is a natural search consumer engine startup that was acquired by Microsoft a few years ago to become part of their search division -- now called Bing. [This isn’t just your classic big company acquiring a startup quickly – when they acquired the technology, IP, and talent, Microsoft gained 3 decades of PARC’s research investment in NLP, which drew on diverse disciplines and focused on reducing complex theories and technologies to scalable practice.] But I don’t want to just talk about these kinds of stories. You’re already familiar with these models – they are classic examples of corporate venturing and nurturing mainly the “seeds” of innovation. So the rest of the stories I’m going to share in this talk [about some of the other companies on this slide] focus less on the seeding aspect and more on the “partnering” theme of this conference. Because many of these companies already HAVE the seeds… they need more. And if there’s one thing the story of PARC – and Xerox for that matter – has taught us, it’s this:
  • It’s. Not. Just. About. The. Seeds!
  • It’s about the whole ecosystem. Now this point may seem obvious on the surface, but it really resonates with me when you dig into the story of how even PARC as a company evolved. When we first became an independent business in 2002, we thought our business model would be nurturing the “seeds” – basically, ideas and IP – and that companies would come to us and pay for them. And why not, right, given our track record of setting trends and delivering hits?! But turns out this didn’t work so great. Because while ideas matter, what matters more is connecting these ideas to a mission, a vision, a need, a roadmap, a strategy – that’s where we soon found we had much greater impact. [If you think about it, PARC was most effective for Xerox when it delivered new business options within such a framework, instead of a bunch of options that they did not absorb or which didn’t move their core business…] It turns out that our sweet spot was in offering access to MORE than just the “seeds” or ideas. It was in offering: the deep roots or competencies our people have expertise in, a fertile and nurturing environment, the diversity of the ecosystem both in types of disciplines and types of partnerships, AND the ability to build and grow new businesses for our clients. But this is just an analogy. How do we, as a company, see this innovation ecosystem?
  • This is how we see it – it’s basically our business model. We leverage multiple channels and funding sources to advance our innovation agenda, which our clients leverage to help them achieve their innovation goals. For example: we invest in our own research directions internally we leverage U.S. government funding to explore the really early-stage, risky stuff we draw on commercial enabling partners -- such as materials suppliers, integrators, fab facilities, volume production partners, and others -- to ensure a smoother path from laboratory prototype to scalable reality we engage with commercial clients to provide the market focus and application spaces. Our commercial clients work with us to create new offerings or co-develop existing assets, and they’re the ones who take things to market given their goals. The key is that everyone wins because they’re leveraging all of these experiences and expertise when they work with us – it’s what enables our clients to de-risk and accelerate their own investments in growth directions of interest. I want to emphasize that this isn’t innovation by happenstance (although of course there is some room for that in the exploratory stages of the process) -- it’s a robust, repeatable, engine that provides a big enough lever to really fundamentally move things in a world where things are moving faster, and sometimes only superficially, than before. OK. So that’s PARC’s story. Given our perspectives from both sides of the table – the build side [ working inside our company to advance our own innovation agenda] and the partner side [working with folks like yourself who are looking to source innovation outside their company or create ecosystems of their own], here’s what I’ve seen is top of mind for folks in your shoes…
  • The first and most obvious issue that we’ve seen as top of mind is how to move beyond ideation to impact: We all know how to source ideas – whether crowdsourced from the inside, or sourced from our customers and users, [or better yet sourced through ethnographic opportunity discovery studies] – But how many of you rely on outside partners for CAPABILITIES, not just ideas?? This isn’t about outsourcing or isolating these functions – it’s about reaching outside to augment what you already have or to fill in the gaps. Again, the key here is that you’re leveraging someone else’s investments and experiences to reduce your own risk and accelerate time to market.
  • For example: HEXATECH has a team of engineers, since their main product is bulk AlN substrates or materials for creating LEDs. But they know the market opportunity is upstream, towards UVLED devices, so they’re working with PARC to gain that know-how. We’re de-risking this move for them because they’re drawing on over four decades of our optoelectronic experience, with both industry and government partners, and they’re also accessing the infrastructure at PARC that would otherwise be too capital intensive for a startup to get. [That’s a picture of a commercial MOVCD reactor we have on site.] This is not renting equipment: we’re providing expertise to help them troubleshoot the problems they need to solve to get their materials ready for UVLEDs. Unlike universities, we have the experience doing this for both volume and scale, which is where things would otherwise get even more difficult… For the other company mentioned here: GLO-USA has a novel nanowire-based III-V lighting technology. We developed the device processing strategies to help them realize their product vision, and since they need to move fast, it took less than a month for all of us to go from initial contact to signed development contract.
  • In another example: POWER ASSURE -- an energy startup – already had an existing SaaS platform and a set of data center customers. They wanted to expand their offerings, and instead of just going in for typical funding partnerships, they decided to work with PARC to apply for U.S. Department of Energy grants which could help expand its suite of products for large customers’ data center power virtualization needs. PARC also brought expertise they didn’t already have – in this case, a platform of adaptive energy software models based on deep, multi-disciplinary expertise in model-based planning, diagnosis, and control (that was developed for different industry applications such as parallel printing, transportation, factory automation, and aerospace). Technically, the partnership helped PowerAssure resolve tradeoffs they would otherwise have had to make between cost savings OR quality of service for their customers. But strategically, the partnership ensured PowerAssure was just 1 of 14 companies awarded $5 million government funding they could leverage for their commercial goals. They also just closed their series B funding a few months ago. The key to all of these engagements – in the first couple cases we were providing access to capital-intensive infrastructure and specialized expertise, in this case we were broadening their technology capabilities and opening up networks not otherwise available to startups – is that we’re de-risking these companies’ investments in their future growth directions, because we’ve already taken the risks and validated much of what works and what doesn’t.
  • Speaking of risk… Another challenge that we’ve seen as top of mind is how do you get the timing right? Especially given the uncertainty of early-stage technologies or novel markets?
  • Many of you may already know about or use real options analyses to select, evaluate, or gain a view on your portfolio of innovation investments. But I want to emphasize that this is not about the math… it‘s about adopting a MINDSET. And you can apply it to individual projects. With this mindset comes a decision framework that is not driven by NPV calculations or either-or decisions, but by iterative decision cycles about timing and continuing to invest in uncertain innovation activities. Let me show you what I mean.
  • [poker analogy]
  • There’s lots of uncertainty when you don’t know the shape of the curves. The point of a Minimum Viable Product or MVP -- and the real options approach which reduces the MVP to practice – is to adjust and invest more or less as new information comes in and sheds light along the way… Defining the MVP you’re going to enter the market with involves figuring out: what features should your offering have? what’s the minimum required prototype or proof-of-concept for engaging with potential investors and/or customers? Determining this enables you to engage with the market with the least amount of risk and time invested to learn and fine-tune the product-market fit.
  • So now let me tell you another story about a company we’re working with: They’ve been in business for a while making printed memory, and we’ve been working on the materials, processes, and systems for printed electronics for many years. We decided to couple our transistor technology and printed electronics expertise with their product and commercialization expertise, and together we recently announced a working prototype of the *world’s first* printed, non-volatile memory device (addressed with complementary organic circuits -- the organic equivalent of CMOS circuitry). We developed this MVP together. So what? Well, the technology is a significant milestone towards mass producing the low-cost, low-power ubiquitous devices that are a key component of the "Internet of Things". As you may know, the "Internet of things” denotes a world where everything is connected via a smart tags that require such electronic devices to become ubiquitous. [SCALE STATS -- To give you an idea of the potential impact, think about this: While cell phones scale by number of people in the world, and internet connectivity scales by number of people with power in world, this technology scales not by quantity of people using it, but by number of objects in the world. That’s huge!! If you have an NFC or RFID tag on every single package of one of the world’s major shippers, that's trillion packages a year… with just 1 company. For a single car, there are about 3000 component parts that could be tagged And for toys and games, there may be 1 base unit, but there are 10 interactive memory cards for every base unit… so 300,000 units really becomes 3 million just from one base pack (that’s not even counting all the aficionados who will buy more cards). The scale is orders of magnitudes larger than the original technology itself.] This is a classic disruption case, because our joint MVP is the “enabling technology” that allows Thinfilm to enter with printed memory for toys and games, where they are now, before marching upmarket towards more mainstream applications. This was a huge lesson for us, because when we first started thinking about printed electronics technologies, we thought the killer app would be displays. But the market wasn’t ready for that. But the other key is that the partnership means none of us have to play the timing game by ourselves. Each of us can meter our future investments in such applications based on printed electronics with each joint milestone.
  • The final challenge I want to address today is this – how do you overcome the inertia of operating on the *periphery*, to ensuring your corporate venturing and innovation partnership efforts have traction for the *core* business? It’s the difference between playing the wait-and-see game and catching the same opportunities that everyone else is seeing at the same time – versus proactively creating or architecting those opportunities. Let me share a couple examples of what I mean.
  • So I mentioned that printed electronics work with Thinfilm. Now I want to share the broader context in which that work takes place, because it illustrates what I mean about architecting opportunities. In the printed electronics space, there are a ton of materials, process, equipment vendors; component and device manufacturers; as well as companies big and small that want to realize opportunities and product concepts based on printed electronics. But there is NOT a streamlined path from lab to market or from device to application. Because it’s an early-stage, emerging technology space, the value chain for novel printed electronics isn’t mature yet. In a mature value chain you could move from R to D to production pretty smoothly. Since we engage with many companies at many industry events, we heard over and over again that they want all of the players to “ work together with each other so these companies can come to us to get what they need ” instead of having to connect the dots themselves. PARC is playing a role here to fill a few of these gaps by partnering with specific players. These are the kinds of partnerships that need to happen if you want to move things. This way, companies that have an idea for printed electronics -- for example, a consumer packaged goods companies that doesn’t have electronics capabilities but wants realize a printed electronics application such as disposable self-diagnosing bandaids or something -- now has a direct path from concept to market. And in the process we help create a mature ecosystem for printed electronics applications to become a more mainstream reality. [And while it’s early days yet, our strategy in playing an architect role is to ensure we can strategically position ourselves and reap value from this ecosystem as it evolves towards maturity.]
  • Let me share one last story with you: IPS, an end-to-end hardware and software product solutions company, has licensed PARC intellectual property in the area of Collaborative Virtual Augmented Reality (CVAR). PARC is working with IPS to support their product development/commercialization efforts for a next generation Remote Field Service Application that will be deployed on the Golden-I platform – the headset computer technology from Kopin, a micro-display technology company, and Motorola Solutions. PARC, IPS, and Motorola are also working together to research and explore future technology applications. That’s all I can say right now without revealing more. But the point of this story isn’t about all these companies working together or what they’re working on. It’s that the person at Motorola who connected all these players together could envision impact on the core business. She could think big but acted small by knitting together the different players required to fill in the gaps from technology to product. The key behind this is that this is the only way to move the core business, by creating a big enough lever and connecting it back into the ecosystem. It’s the only way to move things in a big and impactful way.
  • So that brings me to the end. And since all good stories have a tidy little “moral” at the end, here’s my attempt at summarizing some takeaways for you. My call to action for you is this: Don’t just think in terms of portfolios, but ecosystems. Given incredibly fast speed -- and variety of mediums and models -- for innovation today, it’s actually hard for anyone to individually come up with a big enough lever to move things. This where ecosystems come in. Don’t just be the broker, be the architect. Don’t just analyze – decide!! The focus isn’t so much on sourcing and reacting to new ideas from the outside as it is on proactively driving – and helping execute -- new ideas inside. And in the end, isn’t it always about the people?? The people working to build a lever big enough to move things, like [X] at Motorola, or many of you here who strive for greater impact from your corporate venturing and innovation partnering efforts… Be sure to talk to me about how PARC can help.
  • Innovation Storytelling: Nurturing the "Seeds" of Innovation

    1. 1. Innovation Storytelling: Nurturing the seeds of innovation Stephen Hoover, CEO
    2. 2. The Business of Breakthroughs ® laser printing Ethernet PC workstation Alto WYSIWYG, GUI corporate ethnography multi-beam laser diodes ubiquitous computing collaborative filtering AI/ model-based systems socio-cognitive computing cleantech printed & flexible electronics content-centric networking incorporated 2002 founded 1970 content-centric networking
    3. 3. Just some of the company we keep…
    4. 4. About 25% of our clients are startups…
    5. 5. It’s NOT just about the “seeds”…
    6. 6. … it’s about the whole ecosystem.
    7. 7. How we practice open innovation: PARC’s business model government internal R&D commercial clients Fortune 500 Global 1000 startups PARC | commercial enablers
    8. 8. How to move beyond ideation to impact Access capabilities – not just ideas – to accelerate time to market and reduce risk
    9. 9. Getting access to expertise not otherwise available Getting image from Mickey, Chris, or Suk
    10. 10. Getting access to funding not otherwise available
    11. 11. Getting the timing right given uncertainty Embrace a “real options” mindset to execute on – not just evaluate – innovation efforts
    12. 12. Real Options definition: re  al op  tions Phased approach where investments are gradually increased (or decreased) over time as one learns new information for different types of risk, about the expected returns, and probabilities of success [ ree - uh’l , op - shuh’ns ] e e (rē’ l ŏp’sh ns)
    13. 13. Trading off value and risk: theoretical curves $ risk Cumulative spending Amount of risk time Value of technology
    14. 14. … in reality time $ risk Proof of concept completed Prototype completed Product completed and tested Amount of risk Value of technology Cumulative spending Research Engineering
    15. 15. … and it’s even worse time $ risk Proof of concept completed Prototype completed Product completed and tested Amount of risk Value of technology Research Engineering The shape of these curves are unknown at beginning of project. Cumulative spending
    16. 16. Minimum Viable Product (MVP) strategy time $ risk Proof of concept completed Prototype completed Product completed and tested Amount of risk Value of technology Research Engineering Design/QA MVP MVP MVP MVP MVP Use Real Options mindset: Start small. Define key technical milestones and test MVP hypotheses. If information is positive, “double down” on investment.
    17. 17. Partnering to develop the MVP … and disrupt the market
    18. 18. On impacting the core business Build a big enough lever by architecting the ecosystem
    19. 19. Filling in gaps for an immature ecosystem Production Ramp Research Establish feasibility <ul><li>Opportunity discovery </li></ul><ul><li>Product concept </li></ul>Development Lab scale prototypes Product Realization Manufacturing prototypes <ul><ul><li>Materials </li></ul></ul><ul><ul><li>Process </li></ul></ul><ul><ul><li>Equipment </li></ul></ul>gap gap
    20. 20. Connecting the players to architect the solution
    21. 21. PARC | <ul><li>Some takeaways… </li></ul><ul><li>Think ecosystems, not only portfolios </li></ul><ul><li>Be the architect, not just the broker </li></ul><ul><li>Remember that it’s all about the people </li></ul>
    22. 22. Steve Hoover | [email_address] slides will be posted at: www.slideshare.net/parcinc www.parc.com www.parc.com/subscribe Twitter: @PARCinc

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