Sometimes things change… Rotman Gurupalooza 2 November 2006

Invention vs. innovation On improving innovation hit rates W Hotel NYC 2006

Helsinki

Helsinki municipal lighting project

Helsinki municipal lighting project

Roadside assistance

Innovation from the fringe…

Four big ideas, in forty short minutes… Sometimes things change… Leaders must sense when the business fundamentally shifts A fresh look at innovation fundamentals… To innovate it helps to understand what it is—and isn’t The building blocks of effective innovation… What to stop and what to start to innovate reliably Platforms Rule! In an interconnected world, platforms matter most Hmm, let’s rethink innovation…

Sometimes things change… Leaders must sense when the business fundamentally shifts

A fresh look at innovation fundamentals… To innovate it helps to understand what it is—and isn’t

The building blocks of effective innovation… What to stop and what to start to innovate reliably

Platforms Rule! In an interconnected world, platforms matter most

A fresh look at innovation fundamentals Rethinking what innovation is… [ ] . 2

A new discipline is emerging… A discipline of innovation is emerging today because: Operational excellence is no longer enough: every good business does it An increased rate of change has made an ability to change more valuable Methods and tools are emerging to vastly improve innovation success rates Design—used effectively—is now an imperative for competitiveness Companies need new insights to achieve growth Doblin expects it will take 2-4 more years to become a robust, mainstream practice, codified in better business schools

A discipline of innovation is emerging today because:

Operational excellence is no longer enough: every good business does it

An increased rate of change has made an ability to change more valuable

Methods and tools are emerging to vastly improve innovation success rates

Design—used effectively—is now an imperative for competitiveness

Companies need new insights to achieve growth

Doblin expects it will take 2-4 more years to become a robust, mainstream practice, codified in better business schools

Innovation efforts have a pathetic “hit rate” The global innovation success average, across all geographies and all industries… Source: Doblin analysis 0 100

Innovation effectiveness: eyes on the prize… Firms can now reliably get a dramatic increase in innovation success—9 to 17 times the norm… 0 100

Effective innovation blows up many cherished myths… Pursue platforms not products! Think inside the box… Study non-users! Trash the stage gates… Share your patents! Abandon the brainstorming! It isn’t playful, it’s brutal… Use discipline above creativity… Build concept prototypes… Ditch your segmentation… Do financial analytics after prototypes… Apply multiple diagnostics… Use several innovation types

Pursue platforms not products!

10 types of innovation: move beyond products to win Business model Finance Networking 2. Networking enterprise’s structure/ value chain 1. Business model how the enterprise makes money Channel Delivery Brand Customer experience 10. Customer experience how you create an overall experience for customers 8. Channel how you connect your offerings to your customers 9. Brand how you express your offering’s benefit to customers Core process Process . Enabling process 3. Enabling process assembled capabilities 4. Core process proprietary processes that add value 6. Product system extended system that surrounds an offering Product performance Offering Product system Service 7. Service how you service your customers 5. Product performance basic features, performance and functionality

Using innovation types strategically Core competence planning: Offering & process Innovation planning: Business model Customer experience Core process Process . Enabling process Business model Finance Networking Product performance Offering Product system Service Channel Delivery Brand Customer experience

Leading to a shift in value creation… Hi Lo Volume of innovation efforts Last 10 years Source: Doblin analysis Core process Process . Enabling process Business model Finance Networking Product performance Offering Product system Service Channel Delivery Brand Customer experience

Leading to a shift in value creation… Hi Lo Cumulative value creation — Last 10 years Source: Doblin analysis Core process Process . Enabling process Business model Finance Networking Product performance Offering Product system Service Channel Delivery Brand Customer experience Pareto revisited: Less than 2% of projects produce More than 90% of value …

Time to play: Spot the innovation!

Dell: innovation assessment Eight types:

Apple music… Seven types:

Spot the innovation! Eight types:

The building blocks of effective innovation… Demystifying processes of innovation [ ] . 3

A root cause of chronic innovation failure is the ridiculous belief in low protocol methods Use proven innovation protocols…

So what’s the deal with stage gate processes? Stages Conception Preliminary investigation Detailed investigation Development Testing and validation Full production and launch Source: adapted from R. G. Cooper Idea funnel Second screen Business case Post-development review Pre-launch analysis Initial screen Gates

Innovation discipline model foster initiatives diagnose situation declare intent set conditions discover invent launch extend author initiatives

New techniques help identify which specific types of innovation others have overlooked On innovation diagnostics…

Doblin has pioneered innovation metrics Ten types of innovation was a major Doblin discovery: Innovation Landscapes ™ use these ten types for assessing industry innovation patterns Has already been used to analyze dozens of industries Scalable, fast, widely respected Published in HBR, September 1999 Patent expected shortly Core process Process . Enabling process Business model Finance Networking Product performance Offering Product system Service Channel Delivery Brand Customer experience

Ten types of innovation was a major Doblin discovery:

Innovation Landscapes ™ use these ten types for assessing industry innovation patterns

Has already been used to analyze dozens of industries

Scalable, fast, widely respected

Published in HBR, September 1999

Patent expected shortly

Computers & peripherals Assessment: Complex—six types in evidence Costly and sophisticated Overly center-weighted

Assessment:

Complex—six types in evidence

Costly and sophisticated

Overly center-weighted

Passenger airline travel Assessment: Significant omissions: performance; experience Business model in play (LCC)

Assessment:

Significant omissions: performance; experience

Business model in play (LCC)

Newspapers

Participative networks

Pharmaceuticals

Key value chain areas --healthcare Patient Physicians and surgeons Hospital systems Health insurance & managed care Medical appliances Medical equipment Pharmaceuticals

Platforms Rule! 4 All the important stuff now cuts across companies and markets

Modern bikes: a system of platforms Component Groups Pedal Systems Shoes Wheels Seat Posts Saddles Stems Handle bars Forks Cranks Tires Tubes Frames Training/Monitoring Support

Most popular consumer platforms…

Most popular B2B platforms…

Building experience breakthroughs Cirque du Soleil’s competence

Top innovations of all time —an arguable list Weapons Mathematics and the number zero Money Printing Free markets and capital markets Domesticated animals and agriculture Property ownership Limited liability Participative democracy Anesthetics and surgery Vaccines and antibiotics Semiconductors The Internet Genetic sequencing Note: All of these are platforms… They transcend enterprises, industries, and political borders.

Weapons

Mathematics and the number zero

Money

Printing

Free markets and capital markets

Domesticated animals and agriculture

Property ownership

Limited liability

Participative democracy

Anesthetics and surgery

Vaccines and antibiotics

Semiconductors

The Internet

Genetic sequencing

Innovation in times of change —some options Health Enlightenment Engaging Smart! Environment Political freedom Security Personal expression Travel Functional Simplicity Entertainment Financial skills Design Relationships Talent Leverage Mastery

Health

BusinessWeek commits to DESIGN…

And to INNOVATION…

Bedrock: some base skills of designers Skilled designers and design teams… Conceive and make stuff Make things, places & messages distinctive Empathize with people in situations Imagine ideal usage experiences Sense and value what is new Simplify and clarify information Dramatically affect preference and value

Skilled designers and design teams…

Conceive and make stuff

Make things, places & messages distinctive

Empathize with people in situations

Imagine ideal usage experiences

Sense and value what is new

Simplify and clarify information

Dramatically affect preference and value

The composition of switched on design teams Cultural anthropologists Linguists Pattern recognition Library scientists Statisticians Market analysts Market researchers Usability analysts Experience architects Graphic designers Design engineers Model makers Information architects Industrial design Brand architects Interaction design Purchasing Contract admin Deal flow Licensing Intellectual property Supplier management Program managers Design methodologists Simulation Innovation management Strategists Discovery Program management Analysis Synthesis Admin Legal

A short summary of innovation effectiveness… You should now expect innovation hit rates between 35 and 70% Know the fundamentals 1 Have an innovation goal 2 Build fewer, bolder concepts 3 4 Implement clearly & swiftly Make customer discoveries Identify changing themes Build an innovation intent Get beyond products Use many types of innovation Diagnostics help here Use clear protocols Have teams author platforms Business development toolkits Prototypes not spreadsheets Focus on hardest challenges Business concept illustrations

Go get ’em! Access to these notes: http:// clientweb.doblin.com login: Rotman password: innovation Access will expire in two weeks One IBM Plaza 330 North Wabash Avenue Suite 1300 Chicago IL 60611 312 443 0800 phone 312 443 0567 fax [email_address] www.doblin.com Doblin Inc. Innovation effectiveness