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Innovation for Start-ups
Innovation is critical for startups as it provides a competitive advantage over larger established companies. For startups to innovate effectively, they must focus on three key areas: ideas, experimentation, and customer intimacy. Ideas can come from identifying problems, observing waste or discontinuities, or understanding unarticulated customer needs. Experimentation is important to validate assumptions through low-cost, high-speed trials. Customer intimacy involves gaining deep insights into customer experiences and emotions. Startups also need to ensure they capture value from their innovations through continual improvement, product platforms, or legal strategies like patents. Being a first mover provides advantages if it helps build reputation, creates cost advantages, or makes imitation difficult.
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Innovation for Start-ups
- 1. Innovation for Start-ups Rishikesha T. Krishnan November 10, 2012 Professor & Area Chair, Corporate Strategy & Policy, IIM Bangalore
- 2. 2 What is Innovation?
- 3. What is Innovation? 3 Innovation = Invention + Application The Traditional View
- 4. What is Innovation? 4 Problem + Idea + Execution + Benefit Challenge? Novelty Utility Application of new ideas to solve problems resulting in benefits to users
- 5. Solving Problems… 5 How do you provide clean drinking water at low cost? How do you convert an existing car into a hybrid?
- 6. What are thedifferent types of 6 innovation?
- 7. Innovation could be… 7 New to the New to the company country New to the New to the industry world
- 8. Prominent Innovations 8 Petroleum Long-distance I C Engine Refinery telephony Electric arc Information Nylon furnace Technology Semiconductor Microprocessor Internet foundry Do you see a pattern here?....
- 9. Prominent Innovations 9 Product Process “Enabling” Petroleum Long-distance I C Engine Refinery telephony Electric arc Information Nylon furnace Technology Semiconductor Microprocessor Internet foundry
- 10. Prominent Innovations 10 Joint Stock Company What’s special Multi-divisional about Organization these? Global Delivery Model (Software)
- 11. 11 What are the other types of innovation?
- 12. Innovation Typology 12 Product / Offering Business Types of Model innovations Process Customer Experience
- 13. The Six Leversof Innovation 13 Value Product & Proposition Services Business Technology Supply Process Model Chain Technologies Target Enabling Customer Technologies Source: Davila, Epstein &Shelton, 2006
- 14. Incremental vs. RadicalInnovation 14 Incremental Radical Innovation Innovation • Requires new knowledge & • Builds upon existing resources knowledge & resources • Existing competence loses • Competence-enhancing value? • Relatively small changes • Step changes in in performance / utility performance • The lifeblood of innovation? • Relatively rare
- 15. The Power ofIncremental Innovation 15 “There is no genius in our company. We just do whatever we believe is right, trying every day to improve every little bit and piece. But when 70 years of very small improvements accumulate, they become a revolution” From Interview with Katsuaki Watanabe in HBR, July-Aug 2007
- 16. Existing companies aregood at sustaining Innovation, but newcomers are better at disruptive innovation
- 17. 17 Why is innovation critical for start-ups?
- 18. What is theadvantage of a start-up vis-à-vis a large company? 18 As organizations mature over time Bias towards Balance creativity Focus on creativity & value capture value capture Challenge for Challenge for startup companies mature companies Innovation is the critical differentiator for a start-up
- 19. But start-ups inIndia… 19 Tend to fall in “no-man’s land” No breakthrough technological innovation Lack clear understanding of customer domain / application Even if they come up with one good innovation, struggle to come up with another!
- 20. THE RAW MATERIALFOR INNOVATION….
- 21. The Raw Materialof Innovation 21 Ideas Experiments Customer Insights
- 22.
- 23. WHERE DO YOULOOK FOR GOOD IDEAS?
- 24. 24 Gandhiji was asked: What have been the most creative experiences of your life?
- 25. 7 June 1893,Maritzburg railway station 25
- 26. 26 “Why is so much steam getting wasted?” James Watt, 1765 “Are you serious? It means computing will be free” Bill Gates, 1971, at age 16 to Allen on hearing “Moore’s law”
- 27. 3 sources ofitch 27 Pain Wave Waste
- 28. The Four Lensesof Innovation 28 1. Challenging Orthodoxies Question dogmas about what drives success 2. Harnessing Discontinuities Spot trends that could change the game 3. Leveraging Competencies & Strategic Assets Think of organisation as a portfolio of skills and assets, not in terms of products and markets 4. Understanding Unarticulated Needs Learn to live inside the customer’s skin Source: Skarynski & Gibson, 2008
- 29. Buyer Utility Map Stage Purchase Delivery Use Supple- Maint- Disposal 29 Utlility ments enance Customer productivity Simplicity Conven- ience Risk Fun & Image Envir friendli. Another source of ideas is to look for blank spaces on the buyer utility map
- 30.
- 31. 31 What is an experiment? Activity that validates assumptions
- 32. 32 What kinds of assumptions does an experiment validate?
- 33. Improve the IdeaVelocity 33 Experiment with Low Cost at High Speed
- 34. 34 Feb 2004 Sep Nov Apr 2004 2003 2003 impact demo idea itch Feasibility Loop Viability Loop 2 months 3 months 2 months
- 35. Will people useInternet? Need Can we 4 types of Do we have the Commerci- monetize lization assumptions Technology technology of every to create Internet this? risk idea apps? Production Can we scale this?
- 36. Iterate on theBusiness Model 36
- 37. Google’s search sandbox 37 Guess how many experiments were carried out in 2010? 20,000! How many went live? 500 Source: “How Google makes improvements to its search algorithm?”, YouTube video
- 38. Create a Climatefor 38 Experimentation Have a high trial rate: fail fast, learn fast Can you do the “last” experiment first? Failure plays a critical role in innovation Post-It Notes & failed adhesives Nylon: a lab experiment that went wrong TVS Spectra failed, but Victor succeeded
- 39. Avoid the “FailureFallacy” 39
- 40.
- 41. Source: H. Rao,Stanford GSB, 2007 Importance to customer High Disguster Delighter Low Annoyance Frills Negative Positive A Relentless Focus 41 on User Experience is Critical Emotions
- 42. 42 Big Bazaar: India’s Largest Hypermarket Chain Part of the Future Group (Kishore Biyani) Philosophy: Rewrite rules, retain values India: Confidence & Change → Consumption But consumers here demand ideas and solutions that are uniquely Indian Inspired by Saravana Stores, Chennai Low margin, high turnover model Possible to operate on multiple floors Has to be located in the city, near transport points People come shopping in families – meet needs of entire family
- 43. HOW DO YOUMAKE SURE YOU “APPROPRIATE” THE VALUE OF INNOVATION?
- 44. The Problem 44 Google created a powerful search engine, but couldn’t monetise it until it created its advertising model… Mobile VAS applications is a popular area for start-ups in India, but its difficult to squeeze money out of mobile operators (remember Porter’s 5- forces?)… In financial services, innovations can be copied almost overnight…
- 45. Innovation Value Appropriation How do you appropriate value? Product-Market Continual Legal (IP) Actions Innovation Strategy Standards Continual Improvement Patents Barriers to Imitation Cannibalization Copyright Collaborative Product Platform Trade Secret Agreements Radical Innovation Trademarks 45 Adapted from Grant
- 46. Inimitability/Complementary Assets Framework Holder of complementary High Difficult to resources makes make money Money Ease of Imitation (Coke) Party with Low Inventor Innov .+ Compl. makes resources makes money Money (Pixar vs Disney) Freely available Tightly held or unimportant and important 46 Complementary Assets Source: Afuah, 2004
- 47. WHEN DOES BEING“FIRST- MOVER” HELP?
- 48.
- 49. Being first succeedswhen… 49 1. Pioneering helps build a firm’s reputation and image with buyers 2. Early commitments to new technologies, channels, etc. can produce an absolute cost advantage 3. First-time consumers remain strongly loyal to pioneering firms in making repeat purchases 4. Moving first constitutes a pre-emptive strike making imitation more difficult
- 50.
- 51. Late movers benefitwhen… 51 1. Pioneering leadership is more costly than imitating followership and only negligible experience benefits accrue to the leader 2. Products of the pioneer do not live up to buyer expectations so that a follower can win customers away from the pioneer 3. Technology is advancing rapidly so that followers can leapfrog pioneers with second or third generation products
- 52.
- 53. Robert Kearns &the Intermittent Wiper 53 Kearns invented first intermittent wind- shield wiper for cars in the early 1960s Filed patent application in 1964 Tried to license his technology to auto majors but, no one took a licence Majors introduced their own wipers 5 years later Kearns filed patent suits against Ford, Chrysler Won suits only in early 1990s…divorced…almost went mad See 2008 movie Flash of Genius
- 54. 8 Steps toInnovation Excellence: Building a Systematic Innovation Capability 3 Improve Batting Avg 1 Build a pipeline 2 Improve idea velocity Forthcoming book by Vinay Dabholkar & Rishikesha T. Krishnan
- 55.
- 56. THANK YOU rishi@iimb.ernet.in +9198450 22710