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Innovation in a rapidly changing world (by Len Middleton)

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Power Point from Len Middleton's Leaders Connect presentation on 12/5/14

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Innovation in a rapidly changing world (by Len Middleton)

  1. 1. Professor Len Middleton December 5, 2014
  2. 2. Discussion Points • Innovation Today • Michigan’s Past 12/5/2014 2
  3. 3. Current Environment Medical Innovation Centers Most Centers offer Innovation Conferences. Internal Research. The best models offer education programs and venture funding. Examples: Tech Starts, Y-Combinator, and LA Corporations Gov’t and Foundations Want more applied research. Increased funding for interdisciplinary teams. Incubators LaunchPad. Most started venture firms. CEOs worry internal R&D is slow, and interested in working with Universities. Source: CEOs of large corporations Confidential Venture Capital Firms A lot of funding and can’t do small deals. Billion Dollar Funds Source: NSF executive. Universities Entrepreneurship is increasing and is not a fad. Ross B-School – 21 courses. 12/5/2014 3
  4. 4. U.S. Challenges The US is facing three critical challenges: 1. US national labs and universities concentrate on scientific research stopping at the patent stage and have no development capability or charter to commercialize an innovation. 2. The US Fortune 100 corporations produce over 1,000 patents a year that are never developed. The companies require a greater than 30% ROI in the first year of sales before authorizing the development of a new product which is impossible to achieve. 3. Most Fortune 500 companies have limited or no resources to commercialize new products because they outsourced the development and/or production process to foreign suppliers. The Past Development Cycle (see below), shows how the linkage use to occur between the three processes allowing corporations to find new ideas or additional features from customers, suppliers, and employees during the production phase of the cycle. 12/5/2014 4
  5. 5. Technology Shifts The technology world is moving away from apps, software, and circuit hardware to data collection devices, learning tools, and medical solutions. Another paradigm shift is beginning in the technology development arena. The first “S” curve below shows how the current technological developments are slowing because of the current technologies are limited by new breakthroughs. Technology Development 12/5/2014 Time 5 Existing Technology New Technology Newer Technology “S” Curve 2000 2015 2025
  6. 6. Trend Process Internet Search Industry Experts Blog Search Conferences Journalists Competitors Academics Venture Capitalists 12/5/2014 6
  7. 7. Trend Assessment Research Flow Expanded Interviews • Distillation of Trends Trends Filtration Compilation of Research and Interview Results Subject Journals Web Research Books Identification of Subject Experts Conference Identification Initial Interviews Conference Attendance
  8. 8. Open Innovation model Welcoming Outside Ideas into the Internal R&D Process opening up boundaries to Outside World through licensing, spin-offs & divesting Exit; Exit need not be to Kill the Idea 8 ● Paradigm shift of ● Paradigm Shift of ● Every Idea has an ● Access to Variety of IP & Technology ● Wider Portfolio at a Lower Cost Source: Henry Chesbrough’s work (2003) on Open Innovation and Open Business Models
  9. 9. Open Innovation Model - Benefits 12/5/2014 9 Source: Presentation PDMA 2009, adapted from Henry Chesbrough, Harvard Business School Press, 2006
  10. 10. Open Innovation Cycle Limited Funds Limited Resources Pipelined Products Internal Ideas 10 Broader portfolio leads to increased revenues and reduced risk New ideas and new technologies feed successful product pipeline Focused innovation leverages more resources More resources and collaborators allow access to wider resource base ● Suited for both Revolutionary & Incremental Innovation ● Effective Use of Resources ● Reduces Risk
  11. 11. Innovation Culture • Innovation Culture has to Start with Leadership • Set goals which can Only be Achieved using Innovation • Infrastructure to adopt Innovation as a Corporate Culture • Provide Resources (talent, cash and time) to Support Innovation • Provide training in Innovation Framework • Define and measure Innovation Metrics Leadership Vision & Commitment Innovation Culture Innovation Fund Deal Sourcing Screening Process Portfolio Valuation Portfolio Management “Don’t just talk about innovation, be about it” * * Innovation To The Core by Peter Skarzynski and Rowan Gibson 11
  12. 12. Open Innovation Process Deal Sourcing Innovation Accelerator Open Innovation Collaborators Company Staff Individual s Facilitator s Startups Biotech Universiti es Portfolio Re-Valuation Valuation Valuation Exit / Write-off Addition al Funding Licensing Spinouts M & A Portfolio Management Investment Portfolio Screening Process Financial Fit Analysis Strategic Fit Analysis Quick Fit Analysis Initial Screening Strategic Fit Financial Fit 12/5/2014 12
  13. 13. Open Innovation Fund - Needs ● Current R&D spending is Focused mainly on Incremental Innovation ● Current VC Fund is not aligned with R&D needs ● Goals of Current R&D Spending and VC funds are not aligned for Open Innovation 12/5/2014 13
  14. 14. Open Innovation Fund Angel Investing Venture Innovation Fund Capital Incubator Line of Debt Private Equity Crowd sourcing Joint Ventures Debt Outsourcing Acquisition Research Grants University Grants Investment Investment Equity Co-investments 12/5/2014 14
  15. 15. Open Innovation Ecosystem 15 Exit Add’l Funding Status Report Alliance Mgt Financial Fit Balancing Risk Quick Fit Strategic Fit Other Funding Sources Portion of R&D Budget Leadership Vision & Commitment Innovation Fund Innovation Culture Portfolio Valuation Portfolio Management Screening Process Deal Sourcing
  16. 16. Discussion Points • Innovation Today • Michigan’s Past 12/5/2014 16
  17. 17. Implications for Michigan A profound effect on Michigan’s economy from 1946 to 1972, Willow Run Laboratories in the Ann Arbor area, was one of only six labs existing in the US • Creating hundreds of companies like Merit Systems (internet), KMS Fusion, Sensors Inc., Clarke Instruments, and Irwin Magnetics • Bringing thousands of jobs to Michigan Succumbing to political pressures the facility was closed in 1972 12/5/2014 17
  18. 18. Traditional R&D Cycle Description • Considered as Closed Innovation • Funding Depends on Year-to- year Profitability • Limited to Internal Talent • Essentially a “Make” strategy • Fully Owned and Financed by the Company Key Issues ● Relatively Limited Portfolio with Limited Number of Leads ● Can only fund Limited Projects ● Relatively difficult to get Radical Innovations ● Missing the opportunities to “Collaborate” and “Sell” ● Limited by Internal Processes, Technologies, Time Constraints, and Methodologies 12/5/2014 18
  19. 19. Questions
  20. 20. Books List • The Innovator's Solution: Creating and Sustaining Successful Growth by Clayton M. Christensen and Michael E. Raynor (Sep 2003) • Making Innovation Work: How to Manage It, Measure It, and Profit from It by Tony Davila, Marc J. Epstein, Robert Shelton (August 1, 2005) • Crowdsourcing: Why the Power of the Crowd Is Driving the Future of Business by Jeff Howe (Sep 15, 2009) • The Game-Changer: How You Can Drive Revenue and Profit Growth with Innovation by A.G. Lafley , Ram Charan (April 8, 2008) • The Myths of Innovation : By Scott Berkun (August 2010) • Seeing What’s Next : Using the Theories of Innovation to predict Industry change by Clayton M. Christensen (April 2004) • Innovation To The Core – A blueprint for transforming the way your company innovates by Peter Skarzynski and Rowan Gibson ( March 2008) • Seeing What’s Next – Using the Theories of Innovation To Predict Industry Change by Clayton M. Christensen, Scott D. Anthony and Erik A. Roth (September 2004) • The Other Side of Innovation -Solving the Execution Challenge by Vijay Govindarajan and Chris Trimble ( HBR Press 2010) 20

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