Educating your management team about innovation May 1, 2008

Welcome Our goal for the next hour is to provide an overview of an innovation initiative and how to get started Define what innovation means Align to corporate goals and strategies Examine best practices and success factors Recommendations based on our knowledge

Our goal for the next hour is to provide an overview of an innovation initiative and how to get started

Define what innovation means

Align to corporate goals and strategies

Examine best practices and success factors

Recommendations based on our knowledge

What We Want to Accomplish

Goals for today Move beyond advocacy to action Identify the key goals and outcomes desired Examine best practices and success factors Review the effort involved to gain innovation in all levels of your firm

Move beyond advocacy to action

Identify the key goals and outcomes desired

Examine best practices and success factors

Review the effort involved to gain innovation in all levels of your firm

Key Points Innovation must be presented as a sustaining capability – not as a discrete project There’s simply too much change and risk involved to define it for the short term The management team must walk the talk – actively supporting innovation Innovation isn’t free and isn’t cheap. Your active support and patience will reap benefits Innovation is a journey, not always a destination

Innovation must be presented as a sustaining capability – not as a discrete project

There’s simply too much change and risk involved to define it for the short term

The management team must walk the talk – actively supporting innovation

Innovation isn’t free and isn’t cheap. Your active support and patience will reap benefits

Innovation is a journey, not always a destination

Advocacy to Action Advocacy Your executive team understands that organic growth is important and innovation can get you there Plan They need a pathway to move from advocacy of innovation to action Action Your job is to help them understand the investment and outcomes

Advocacy

Your executive team understands that organic growth is important and innovation can get you there

Plan

They need a pathway to move from advocacy of innovation to action

Action

Your job is to help them understand the investment and outcomes

First, the definitions

Definition of Innovation Innovation has as many definitions as there are people in the room We often use the word assuming other people have the same definition It’s critical that everyone has the same definition for good communication

Innovation has as many definitions as there are people in the room

We often use the word assuming other people have the same definition

It’s critical that everyone has the same definition for good communication

Innovation is people putting ideas into valuable action Innovation is people putting ideas into valuable action Innovation is people putting ideas into valuable action Innovation is people putting ideas into valuable action Innovation is people putting ideas into valuable action

OVO’s Definition Innovation is people putting ideas into valuable action Innovation is not just “creativity” Innovation is not just idea generation Innovation requires putting ideas into action – developing new products and services Those new products and services need to drive value for the business

Innovation is people putting ideas into valuable action

Innovation is not just “creativity”

Innovation is not just idea generation

Innovation requires putting ideas into action – developing new products and services

Those new products and services need to drive value for the business

Your Definition of Innovation When we say innovation, do we mean: Incremental or disruptive or both? Broadly participative or skunkworks? Centralized or decentralized? Open or closed? Directed or suggestive or both? Generating new products or services or business models or channels or all of the above?

When we say innovation, do we mean:

Incremental or disruptive or both?

Broadly participative or skunkworks?

Centralized or decentralized?

Open or closed?

Directed or suggestive or both?

Generating new products or services or business models or channels or all of the above?

Why is innovation important? In a recent Boston Consulting Group survey, over 66% of the CEOs surveyed listed innovation as one of their top 3 priorities Research demonstrates that the financial markets reward firms viewed as innovators with a premium in their stock price over their competitors After years of outsourcing, cost cutting and right sizing, firms need new growth opportunities

In a recent Boston Consulting Group survey, over 66% of the CEOs surveyed listed innovation as one of their top 3 priorities

Research demonstrates that the financial markets reward firms viewed as innovators with a premium in their stock price over their competitors

After years of outsourcing, cost cutting and right sizing, firms need new growth opportunities

What does it take to succeed?

Align to strategic intent We define strategic intent as what you intend to do well Apple – customer experience Google – management of information Most firms innovate best when they innovate around their strategic intent What is the strategic intent of your firm?

We define strategic intent as what you intend to do well

Apple – customer experience

Google – management of information

Most firms innovate best when they innovate around their strategic intent

What is the strategic intent of your firm?

What are your specific goals? What do you want to accomplish? Generate new products, services and business models revenues increase X% Market share increases Y% Profits increase Z% Disrupt the market for other banks Become viewed as the innovation leader What’s your time horizon?

What do you want to accomplish?

Generate new products, services and business models

revenues increase X%

Market share increases Y%

Profits increase Z%

Disrupt the market for other banks

Become viewed as the innovation leader

What’s your time horizon?

Inhibitors – 3 C’s The three inhibitors to innovation are: Communication Compensation Culture These factors influence what people do and where they spend their time. They communicate what’s important and what should be discounted or ignored.

The three inhibitors to innovation are:

Communication

Compensation

Culture

These factors influence what people do and where they spend their time. They communicate what’s important and what should be discounted or ignored.

Compensation When innovating, we ask people to take on new roles and work in new processes with risky ideas that may not succeed We must consider how innovators will be: Evaluated Rewarded Recognized Compensated

When innovating, we ask people to take on new roles and work in new processes with risky ideas that may not succeed

We must consider how innovators will be:

Evaluated

Rewarded

Recognized

Compensated

Compensation Evaluated How does the innovation work get recognized or reflected in ongoing evaluations? Recognized/Rewarded How will innovators or people called on to participate be recognized, rewarded or compensated?

Evaluated

How does the innovation work get recognized or reflected in ongoing evaluations?

Recognized/Rewarded

How will innovators or people called on to participate be recognized, rewarded or compensated?

Culture Firms that successfully innovate have a culture that embraces innovation Over the last ten years or so, cost-cutting, right sizing and operational excellence have dominated the strategies in most firms This leads to elimination of variance Avoidance of risk Fear of failure

Firms that successfully innovate have a culture that embraces innovation

Over the last ten years or so, cost-cutting, right sizing and operational excellence have dominated the strategies in most firms

This leads to elimination of variance

Avoidance of risk

Fear of failure

Embracing innovation Move from “not invented here” thinking Change from a “negative bias” to a “positive bias” Encourage many attempts and celebrate wins and failures Change attitudes “ we tried that 10 years ago” “ that’s never been done here before”

Move from “not invented here” thinking

Change from a “negative bias” to a “positive bias”

Encourage many attempts and celebrate wins and failures

Change attitudes

“ we tried that 10 years ago”

“ that’s never been done here before”

Enablers – 3 P’s Just as there are inhibitors, there are enablers for innovation Those are three “Ps” that HR can influence People Process Permission

Just as there are inhibitors, there are enablers for innovation

Those are three “Ps” that HR can influence

People

Process

Permission

People Identify individuals who bring unique skills and viewpoints into the business Identify people within the business with a knack for innovation and capabilities to add to an innovation team Provide training to help people think creatively

Identify individuals who bring unique skills and viewpoints into the business

Identify people within the business with a knack for innovation and capabilities to add to an innovation team

Provide training to help people think creatively

Permission People want to innovate, but they often feel inhibited by the culture or compensation models They need permission to: Take on new projects Add more risk to the portfolio Innovate occasionally Fail without fear

People want to innovate, but they often feel inhibited by the culture or compensation models

They need permission to:

Take on new projects

Add more risk to the portfolio

Innovate occasionally

Fail without fear

Process For any business function to work effectively and sustainably, it must follow a consistent process Innovators need a defined process to generate, manage, evaluate and select the best ideas to become new products and services

For any business function to work effectively and sustainably, it must follow a consistent process

Innovators need a defined process to generate, manage, evaluate and select the best ideas to become new products and services

Strong Leadership A strong, capable innovation team leader makes a significant difference Capabilities/Competencies Vision Commitment Fearlessness Communication

A strong, capable innovation team leader makes a significant difference

Capabilities/Competencies

Vision

Commitment

Fearlessness

Communication

What’s required for success? Top down management commitment Establishing clear objectives and goals for innovation A defined innovation process to convert ideas into new products and services The elimination of sacred cows Adequately funding and resourcing the teams Rewarding success and failure

Top down management commitment

Establishing clear objectives and goals for innovation

A defined innovation process to convert ideas into new products and services

The elimination of sacred cows

Adequately funding and resourcing the teams

Rewarding success and failure

Innovation Requires Leadership Chicken or Pig? At breakfast, the chicken’s involved but the pig’s committed. Too many innovation programs are false starts because of uncertain management commitment At the first sign of financial trouble or innovation failure the teams are disbanded What can you do to demonstrate your commitment to this effort?

Chicken or Pig?

At breakfast, the chicken’s involved but the pig’s committed.

Too many innovation programs are false starts because of uncertain management commitment

At the first sign of financial trouble or innovation failure the teams are disbanded

What can you do to demonstrate your commitment to this effort?

Innovation requires clarity Establishing clear objectives helps drive innovation, since the teams have clear, measurable targets Innovation often fails when the objectives aren’t clear, aren’t measurable or innovation doesn’t align to strategic objectives

Establishing clear objectives helps drive innovation, since the teams have clear, measurable targets

Innovation often fails when the objectives aren’t clear, aren’t measurable or innovation doesn’t align to strategic objectives

Innovation requires process Innovation projects are easy. Innovation as a sustaining capability requires a recognized process Every other activity within a business is organized around a clear process Innovators need to understand how their ideas will “flow” and be converted from a concept to a new product or service Without a define process, ideas usually fail

Innovation projects are easy. Innovation as a sustaining capability requires a recognized process

Every other activity within a business is organized around a clear process

Innovators need to understand how their ideas will “flow” and be converted from a concept to a new product or service

Without a define process, ideas usually fail

No Sacred Cows To be truly innovative, the team must eliminate or at least sharply curtail sacred cows Disruptive innovation may mean cannibalization or dramatic changes to the existing industry Innovators need freedom to consider a broad range of ideas Define the “available” scope of work and degrees of freedom broadly

To be truly innovative, the team must eliminate or at least sharply curtail sacred cows

Disruptive innovation may mean cannibalization or dramatic changes to the existing industry

Innovators need freedom to consider a broad range of ideas

Define the “available” scope of work and degrees of freedom broadly

Innovation isn’t free Innovation requires full time focus, just as any other business process has staffing and resources “ Part time” innovators are rarely successful Usually absorbed back into their existing “day job” Funds required for the innovation teams, their infrastructure and work, and to validate ideas

Innovation requires full time focus, just as any other business process has staffing and resources

“ Part time” innovators are rarely successful

Usually absorbed back into their existing “day job”

Funds required for the innovation teams, their infrastructure and work, and to validate ideas

Get what you reward Rewards and recognition systems are important for innovation If we ask people to participate in a new, risky venture, how should their involvement be recognized and rewarded? How should their time in this endeavor be evaluated? Can you reward a failure that leads to even better ideas?

Rewards and recognition systems are important for innovation

If we ask people to participate in a new, risky venture, how should their involvement be recognized and rewarded?

How should their time in this endeavor be evaluated?

Can you reward a failure that leads to even better ideas?

Looking Forward

Recommendations Build a capability to tap the creativity and innovation in everyone to create a consistent stream of ideas Establish a team to focus specifically on disruptive opportunities Build a “foundation” or innovation infrastructure to support these efforts

Build a capability to tap the creativity and innovation in everyone to create a consistent stream of ideas

Establish a team to focus specifically on disruptive opportunities

Build a “foundation” or innovation infrastructure to support these efforts

Incremental and Disruptive Incremental innovation is focused on the next iteration or near term products and services Disruptive innovation is focused on more dramatic change and is generally longer term Your team needs to focus on both Incremental to provide new products in upcoming quarters, and to demonstrate results quickly Disruptive to identify significant change and implement it before someone else does

Incremental innovation is focused on the next iteration or near term products and services

Disruptive innovation is focused on more dramatic change and is generally longer term

Your team needs to focus on both

Incremental to provide new products in upcoming quarters, and to demonstrate results quickly

Disruptive to identify significant change and implement it before someone else does

Incremental Innovation Incremental innovation creates a consistent flow of ideas Generally these ideas are easier to generate Easier to evaluate and implement Many people can be involved, increasing participation and engagement Demonstrates ideas are moving from generation to implementation

Incremental innovation creates a consistent flow of ideas

Generally these ideas are easier to generate

Easier to evaluate and implement

Many people can be involved, increasing participation and engagement

Demonstrates ideas are moving from generation to implementation

Broad, Participative innovation Incremental innovation is best managed through two channels Idea Campaigns Qualified suggestions Idea Campaigns invite a selected group to focus idea generation on a selected topic Qualified suggestion allows individuals to submit an idea but requires they indicate the challenge addressed, the problem solved and the potential benefit

Incremental innovation is best managed through two channels

Idea Campaigns

Qualified suggestions

Idea Campaigns invite a selected group to focus idea generation on a selected topic

Qualified suggestion allows individuals to submit an idea but requires they indicate the challenge addressed, the problem solved and the potential benefit

Disruptive innovation Disruptive innovation requires more vision and more risk Seeks dramatic change to one or more factors of the business Usually requires a significantly longer time horizon Uses different techniques and insights

Disruptive innovation requires more vision and more risk

Seeks dramatic change to one or more factors of the business

Usually requires a significantly longer time horizon

Uses different techniques and insights

Disruptive Techniques Disruptive innovation requires Trend spotting and analysis Deep understanding of unmet and undermet needs, as well as unidentified needs Scenario planning New forms of investigation and market research The ability to aggregate and synthesize this information to identify new opportunities

Disruptive innovation requires

Trend spotting and analysis

Deep understanding of unmet and undermet needs, as well as unidentified needs

Scenario planning

New forms of investigation and market research

The ability to aggregate and synthesize this information to identify new opportunities

Innovation Infrastructure To innovate effectively, your teams need a firm foundation to build on We call this the “innovation infrastructure” consisting of Culture Communications Compensation (rewards, recognition) Evaluation Measurement/Metrics

To innovate effectively, your teams need a firm foundation to build on

We call this the “innovation infrastructure” consisting of

Culture

Communications

Compensation (rewards, recognition)

Evaluation

Measurement/Metrics

What’s Required Once the “infrastructure” is in place, innovation needs people and funding: The typical staffing can look like: 3 to 5 full time individuals in a central innovation team, managing the process, acting as coaches and facilitators 20-50 part time innovation advocates or champions working in the product lines or lines of business

Once the “infrastructure” is in place, innovation needs people and funding:

The typical staffing can look like:

3 to 5 full time individuals in a central innovation team, managing the process, acting as coaches and facilitators

20-50 part time innovation advocates or champions working in the product lines or lines of business

Funding Since innovation isn’t free, it needs to be funded effectively Funding in two specific areas: The people necessary (innovation teams, their training, compensation, rewards, etc) The resources to transition ideas to new products and services (money for market research, building a prototype, market concept testing) These funds should reside outside an annual plan

Since innovation isn’t free, it needs to be funded effectively

Funding in two specific areas:

The people necessary (innovation teams, their training, compensation, rewards, etc)

The resources to transition ideas to new products and services (money for market research, building a prototype, market concept testing)

These funds should reside outside an annual plan

Goal Recap Move from advocacy to action Examine innovation definitions and strategic intent Review key success factors Examine recommendations Incremental innovation Disruptive innovation Innovation Infrastructure

Move from advocacy to action

Examine innovation definitions and strategic intent

Review key success factors

Examine recommendations

Incremental innovation

Disruptive innovation

Innovation Infrastructure

About OVO OVO is a consulting and software development firm helping our clients build sustainable innovation capabilities. We work primarily with large, distributed organizations that seek to make innovation a consistent, repeatable capability Our clients include many Fortune 500 and midsized organizations

OVO is a consulting and software development firm helping our clients build sustainable innovation capabilities.

We work primarily with large, distributed organizations that seek to make innovation a consistent, repeatable capability

Our clients include many Fortune 500 and midsized organizations

OVO Capabilities We help firms Innovate on Purpose™ by defining strategic goals and implementing consistent processes Our capabilities include: Facilitated ideation/idea campaigns Innovation process definition Definition of roles and responsibilities Assisting with culture, communication Defining innovation metrics Idea management software

We help firms Innovate on Purpose™ by defining strategic goals and implementing consistent processes

Our capabilities include:

Facilitated ideation/idea campaigns

Innovation process definition

Definition of roles and responsibilities

Assisting with culture, communication

Defining innovation metrics

Idea management software

Hello My Name is Jeffrey Phillips

About Me Jeffrey Phillips One of the lead consultants from OVO Active in a number of innovation projects for Fortune 500 firms Author of the just published book – Make us more Innovative Author of the Innovate on Purpose blog and numerous magazine articles and white papers on innovation

Jeffrey Phillips

One of the lead consultants from OVO

Active in a number of innovation projects for Fortune 500 firms

Author of the just published book – Make us more Innovative

Author of the Innovate on Purpose blog and numerous magazine articles and white papers on innovation

Contact Contact us if you have questions or want more information: Website: www.ovoinnovation.com Phone: 919-844-5644 x789 Email: [email_address]

Contact us if you have questions or want more information:

Website: www.ovoinnovation.com

Phone: 919-844-5644 x789

Email: [email_address]