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A great technology and a compelling customer need are necessary but not sufficient to change the world. What is missing? This workshop on failing forward explores common model of innovation, pivoting …

A great technology and a compelling customer need are necessary but not sufficient to change the world. What is missing? This workshop on failing forward explores common model of innovation, pivoting and generating insights and results.

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  • The more outrageous the vision, the more resilient the program:The power of the vision that drives creativity and passion to solve the issues. “Put simply, playing small increases the risk of failure, not the opposite.”

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  • 1. Failing Forward David Matheson, President and CEO SmartOrg, Inc. www.smartorg.com #BEI13 @VirtualDavid © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 2. © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 3. When heroes fail © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 4. A great technology and a compelling customer need are necessary but not sufficient to change the world. What is missing? © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 5. The work of innovation: answering three questions. Winning Opportunities Market/ customer need Does anybody care? Should we do It? Can we Do it? Technology/ Product Solution © 2000-2013 SmartOrg. | Confidential and Proprietary. Strategic and Economic value
  • 6. Our image of innovation © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 7. Stage-Gate focus: Delivery Predictability Efficiency What are some values associated with delivery? © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 8. The reality © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 9. Agile Focus: Learning Uncertainty Ambiguity What are some values associated with learning? © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 10. Failing Forward Workshop Agenda Purpose Introduction Advance real innovations your are working on. A common model of innovation Formulation: the learning plan Incubation: pivoting Advancing your own work Conclusion © 2000-2013 SmartOrg. | Confidential and Proprietary. Explore and develop this important question by comparing notes and experiences. Generate insights and results from our interactions. Create a highly interactive session and great networking environment among peers.
  • 11. David Matheson Dr. David Matheson has helped senior management of firms in the United States and Europe improve their results from portfolio management, product development, innovation, R&D, capital investment and strategy, and is an expert on measuring value and managing uncertainty. His practical experience covers a wide variety of industries, including printing, software development, biotechnology, telecommunications, chemicals, pharma ceuticals, medical devices, manufacturing, electric power and entertainment. He is co-author of the best selling book, The Smart Organization: Creating Value through Strategic R&D (Harvard Business School Press) and has authored numerous articles on innovation, portfolio management and decision making. In addition to SmartOrg, his executive roles include: currently member of the board at Photozini, Inc. and prior to founding SmartOrg in 2000, a principal at Strategic Decisions Group. His Ph.D. is from Stanford University, where he currently teaches on Strategic Portfolio Management and other topics at the Stanford Center for Professional Development © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 12. SmartOrg software and services helps companies find the most profitable projects Life science Aerospace © 2000-2013 SmartOrg. | Confidential and Proprietary. Technology Other
  • 13. Eric McAfee Founder Investor Aemetis, Inc. Solargen Energy Evolution Petrolium Pacific Ethanol Procera Networks Netstream McAfee Capital Cagan McAfee Capital Partners Berg McAfee Companies © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 14. Thought Leader: Rich Duncombe Innovation Catalyst Group 33 Years with HP − − − − − Directly involved in 35+ major innovation projects 70% involve disruptive innovation 60% started during idea inception Founder, HP Sensing Solutions business Founder, GM/VP of Retail Photo Solutions My specific role is innovation catalyst Build the vision, attract the talent and secure necessary resources − Catalyze the innovation from inception through incubation − Come back to the front end − 14 How we make it matter Co-innovation and collaboration is key to a healthy innovation system – my partnerships include: − − − − − − − − Shell Boeing Motorola Intel IBM Oregon State Stanford RPI © Copyright 2012 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice.
  • 15. BIO Ricardo dos Santos Industrial Age • BS, MS Industrial Engineering, LSU • Ford/Volkswagen JV • MBA, MIT Sloan • The Boston Consulting Group Imagination Age • Lecturer SDSU • Mobilocity (Tech Startup) • Qualcomm (Innovation Management) • Biological Dynamics (Biotech Startup) © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 16. Introductions Name, Company, Role What are you working on that you want to advance in this session? Your favorite food © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 17. Failing Forward Workshop Agenda Purpose Introduction Advance real innovations your are working on. A common model of innovation Formulation: the learning plan Incubation: pivoting Advancing your own work Conclusion © 2000-2013 SmartOrg. | Confidential and Proprietary. Explore and develop this important question by comparing notes and experiences. Generate insights and results from our interactions. Create a highly interactive session and great networking environment among peers.
  • 18. Asking executives what worked and what didn’t: • • • What have you tried in the last ten years or so? What worked really well and should become (or remain in) the innovation canon? What did not work well, was significantly oversold or under delivered, and should fade from memory? © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 19. The five must-do’s of innovation management: 1. 2. 3. 4. 5. Use iterative, learning-based processes. Make uncertainty and ambiguity your allies. Allow innovation to challenge strategy. Experience your customers. Find and support committed innovators. Go to www.smartorg.com and search for “assessing the state of innovation” to download a whitepaper and view a webinar. PDMA Visions © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 20. Making Innovation Soar. Ideate Formulate Incubate Accelerate Reformulate Committed Innovators with actionable insight Aligned Learning Plan © 2000-2013 SmartOrg. | Confidential and Proprietary. Proven Opportunity Scalable Business
  • 21. Ideation: finding the committed innovator with unique insight. © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 22. Niccolò Machiavelli on Innovation: “It ought to be remembered that there is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things. Because the innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may do well under the new.” © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 23. A common misconception: “People think ideas are the input to the process. This is wrong. Ideas are the byproduct of the committed innovator.” Alberto Savoia Serial Entrepreneur Currently at Google © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 24. In every field, HHMI grants generated the most important and innovative research. Funds projects based on rating proposals on multiple criteria. Funds researchers and encourages them to explore interesting topics. Source: Jonah Lehrer, author of How We Decide, from his blog “The Necessity of Funding Failure.” © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 25. Having committed innovators is not enough; your innovator needs actionable insight. Market Customer Technology © 2000-2013 SmartOrg. | Confidential and Proprietary. Trend Etc.
  • 26. Formulation: aligning on a learning plan. © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 27. Success Factors internal Shelter the project from 1 metrics and processes 2 Banish supplier / procurement thinking 3 Internal Have the tough conversations up front 4 Negotiate based on principles Security/Access Partner 6 Never over estimate your knowledge of your partner Every decision needs to improve risk adjusted value 7 Market Disruption 8 9 Climate monitoring Home automation Home security Water/Gas Market disruptions are often driven by technology innovation New businesses fail for commercial reasons Real-time traffic conditions Communicate your vision (prepare the market, build your brand) 5 Value Creation Infrastructure health 10 The more outrageous the vision, the © 2000-2013 SmartOrg. the program more resilient | Confidential and Proprietary.
  • 28. © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 29. Aspirations are low © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 30. Can we distribute motor oil in a cardboard box? © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 31. Frost & Sullivan wrote up a best practice guidebook for the Formulation Phase. See a webinar or download at: www.smartorg.com/hpguidebook © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 32. How to develop a DVD burner that writes its own label? (circa 2002) A feature in our computers © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 33. Multiple strategies – need to learn which is best. A feature in our computers License out A consortiumbased inside brand © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 34. Laying out your strategic choices Brand HP Branded HP Business Model HP Branded drives and discs Market Scope HP Contribution PC's Ingredient License on Drives All MS and Apple IP and certification Drive and Discs PC's Consumer Brand Standard Drive Industry Standard Ingredient Brand Consumer Strategy Consumer Software HP Branded PC's Optical drive design, HP works with select partners HP drives demand HP exclusive software Only disc coating material to build HP specific solution as a proprietary feature and consumer feature software application Harvest IP White Label License on Drives All MS and Apple IP Only and Discs HP's Role in Optical Drive Industry License on Drives All MS PC's, all and sales of Disc aftermarket Coating Material drives and replicators IP, disc coating material and certification HP provides licenses to all industry participants -- HP does not develop solution Disc Brands drive Open development consumer demand platform for all optical drive software HP works with all suppliers to Create industry build standard solution standard and trademark Open development platform for all optical drive software HP works with all suppliers to Create industry build standard solution and standard and becomes the exclusive trademark supplier of LightScribe coating material Open development platform for all optical drive software © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 35. Which uncertainties matter? Future disc usage? Strong growth supported by multiple third-party experts. Team not concerned. © 2000-2013 SmartOrg. | Confidential and Proprietary. Bill of Materials Cost? Detailed engineering estimates and contracts show BOM within 5%. Team very worried estimates might be 10% off.
  • 36. The team was focusing on the wrong factors. Lightscribe sensitivity analysis (Tornado Diagram) NPV given launch success If mp3 players take off, then business is small Loss Small OK Good Great If copyright favors disc distribution, then business is great BOM uncertainty has limited impact on business © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 37. Incubation: delivering on the proof points. © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 38. Work vs. proof: HP’s idea for the “ATM of photo printing.” • What is the biggest source of risk? • Supply Chain ― Very difficult to set up, very complex ― Large source of schedule and budget variance. © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 39. Work vs. proof: HP’s idea for the “ATM of photo printing.” • What is the biggest source of risk? • Supply Chain = needs work ― Very difficult to set up, very complex ― Large source of schedule and budget variance. ― HP is world class at this! • Behavior change = needs proof ― Will someone encountering a station on the street pull out their camera card and print? ― To get evidence, saturate an area with prototypes.
  • 40. Common plans: morale building, strength focused A risky project. The overall probability of technical success is the probability of overcoming all the hurdles in all the phases. Technical Phase Cost ($M) Product Development $ 2 Uncertainty Performance Reliability Channel Partner Trials Scale -Up $ 10 Ease of Use Business Model Validated Channel Partner Commitment Total Cost Expected Cost $ $ 12 Million 10.9 Million Big questions left unanswered until late in the project—an expensive way to fail. Note Expected Cost and Total Cost are close. © 2000-2013 SmartOrg. | Confidential and Proprietary. Probability of Success 47% 95% 90% 55% 8% 25% 35% 90% 4%
  • 41. Learning plans: manic anxiety, uncertainty focused Revised Project Plan Technical Phase Cost ($M) Product Development $ 2 Uncertainty Ease of Use Business Model Validated Channel Partner Trials Scale -Up $ 10 Peformance Reliability Channel Partner Commitment Total Cost Expected Cost $ $ 12 Million 2.48 Million © 2000-2013 SmartOrg. | Confidential and Proprietary. Probability of Success 5% 25% 35% 55% 77% 95% 90% 90% Reordering plan to “fail fast” radically reduces expected cost. 4%
  • 42. Fast 4x6 Print Engine Addressing the needs of incumbents Print Engine “Dry” Photofinishing lab Semi-Attended Environs Low Volume Stores “Can I get the printer part of the kiosk” “Just chop the head off, add an Ethernet, and I’ll write you a check!”
  • 43. Acceleration: growing up. © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 44. What is the best first major account for your new business? You have launched a business. • Customers are enthusiastic about the product. • You are making money (gross margin), but still require investment to grow. • The product is in version 1.0. • Manufacturing is ramping up. OR © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 45. Adolescent businesses need adult challenges in a safe environment. Need P&L discipline without crushing pressure. Require the flexibility to adjust. Have lots of awkward issues that need to be worked through. Metrics that transition to full P&L accountability. © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 46. Beware the kill zone External Reality Internal Treatment Upstart / New Accelerate Phase (transitional metrics from proving to P&L) Established Business (on commit plan of executives in a significant way, routine part of corporate strategy) KILL ZONE = 100% failure © 2000-2013 SmartOrg. | Confidential and Proprietary. Established
  • 47. Making Innovation Soar. Ideate Formulate Incubate Accelerate Reformulate Committed Innovators with actionable insight Aligned Learning Plan © 2000-2013 SmartOrg. | Confidential and Proprietary. Proven Opportunity Scalable Business
  • 48. Where is your organization strongest? Most in need of improvement? Ideation Formulation Incubation Acceleration © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 49. A culture shift in innovation. © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 50. How companies increase innovation project risk and what to do about it. Norm for Creates innovation risk Resolved by Predictability Failure Frame Learning Frame Urgency Kill Zone Taking time to accelerate Reasonableness Mediocrity Formulate boldly Fitting in Incrementalism Courage © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 51. Failing Forward Workshop Agenda Purpose Introduction Advance real innovations your are working on. A common model of innovation Formulation: the learning plan Incubation: pivoting Advancing your own work Conclusion © 2000-2013 SmartOrg. | Confidential and Proprietary. Explore and develop this important question by comparing notes and experiences. Generate insights and results from our interactions. Create a highly interactive session and great networking environment among peers.
  • 52. Quick survey What are your innovation aspirations? What is your innovation delivery? $1M in new revenue annually $1M in new revenue annually $5M $5M $10M $10M $50M $50M $100M $100M $500M $500M $1B $1B © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 53. Table exercise What is the inspiring vision for your innovation project? Select one at the table for further focus and discussion. © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 54. Success = delivering an Exploitable Business Asset. What would you want to know before mortgaging your house to pay for your company to launch the product? • • • • • • • Technology Market Partnerships / Suppliers Customer / Patient Cost / Reimbursement Regulatory … © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 55. Table exercise What are the most important proof points for the focus project? Select the most problematic and decisive at the table for further focus and discussion. © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 56. The best proof points are… Problematic © 2000-2013 SmartOrg. | Confidential and Proprietary. Decisive
  • 57. Proof points: what would cause you to stop (or significantly redirect) the project? DO – a good list DON’T – a bad list Focus on evidence needed Focus on tasks needing lots of work Take the full business perspective Stay in your comfort zone Creates something exciting and worthwhile Fulfills the stage-gate requirements Create developable, Create mushy proof clear and objective proof points points Include only material issues: • Problematic • Decisive © 2000-2013 SmartOrg. | Confidential and Proprietary. Pile on: • If it is 90%+, omit it.
  • 58. DILBERT © (1999) Scott Adams. Used By permission of UNIVERSAL UCLICK. All rights reserved. © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 59. Table exercise What activities would advance learning and deliver on the proof? © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 60. What is your gap between proof and work? 1 = project is focused on delivering work 2 3 4 = project is balanced between work and proof 5 6 7 = project is focused on delivering © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 61. Failing Forward Workshop Agenda Purpose Introduction Advance real innovations your are working on. A common model of innovation Formulation: the learning plan Incubation: pivoting Advancing your own work Conclusion © 2000-2013 SmartOrg. | Confidential and Proprietary. Explore and develop this important question by comparing notes and experiences. Generate insights and results from our interactions. Create a highly interactive session and great networking environment among peers.
  • 62. Three questions How do you know it is time to pivot? What can you do to pivot? How does pivoting go wrong? © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 63. Rotation Exercise Each Thought Leader takes a station. Divide into groups. Work question for 10 minutes. Rotate to another station. Repeat. At end, each Thought Leader gives a five minute report on five biggest insight. © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 64. Failing Forward Workshop Agenda Purpose Introduction Advance real innovations your are working on. A common model of innovation Formulation: the learning plan Incubation: pivoting Advancing your own work Conclusion © 2000-2013 SmartOrg. | Confidential and Proprietary. Explore and develop this important question by comparing notes and experiences. Generate insights and results from our interactions. Create a highly interactive session and great networking environment among peers.
  • 65. Individual worksheet What is your compelling vision? What are the most important proof points? What can you do to learn about them as quickly as possible? What are potential pivots? What are you personally committed to? © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 66. Pair up & discuss One person speaker, the other listener. Speaker describes their situation and ideas – 7 minutes • The listener’s job is to support the speaker. The more safe space provided by the listener, the more direct and authentic the speaker. Listener provides feedback to speaker in support of their commitments – 3 minutes Rotate (I’ll keep track of time) © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 67. Failing Forward Workshop Agenda Purpose Introduction Advance real innovations your are working on. A common model of innovation Formulation: the learning plan Incubation: pivoting Advancing your own work Conclusion © 2000-2013 SmartOrg. | Confidential and Proprietary. Explore and develop this important question by comparing notes and experiences. Generate insights and results from our interactions. Create a highly interactive session and great networking environment among peers.
  • 68. What are your top five commandments for failing forwards? Thou Shalt… Thou Shalt Not… Write on index cards. Vote using the “like” method: • Circulate and review others’ cards. • Vote on your favorite two (or fewer). • When you reach five votes on a single item, bring card up to be read. © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 69. Don’t settle for safety and mediocrity. “As this is your proposal, Cosgrove, its failure could mean the end of your career. I think, however, that is an acceptable risk.” © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 70. Formulate your projects for greatness. © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 71. and execute. © 2000-2013 SmartOrg. | Confidential and Proprietary.
  • 72. About SmartOrg SmartOrg® provides software and services to help companies evaluate their opportunities and make the best decisions about where to invest, especially when the future is clouded with uncertainty. Customers use SmartOrg® to build their capability in driving innovation from idea to commercial results and in selecting projects, improving returns in their portfolio. SmartOrg® helps companies to attain the highest value from projects and portfolios. 855 Oak Grove, Suite 202 Menlo Park, CA 94025 USA T: +1.650.470.0120 info@smartorg.com www.linkedin.com/company/smartorg @smartorginc 72 © 2000-2013 SmartOrg. | Confidential and Proprietary.