Product – iPod, PVR, digital cameras, etc. Process – FedEx, online retail, StarbucksOrganizational – Toyota (kaizen – continuous improvement), creative industries (Google, Amazon, Apple)Marketing – Southwest Airlines, Apple To continuously improve your competitive advantage, you have to focus on all types of innovation – happily, many of them overlap
Innovation and the S-Curve
Innovation and the S-CurvePractical tips for managing innovationwithin your companyRon NeumannMarch 19, 2013
Agenda• Innovation – Definitions – Types of Innovation – Invention & Improvement – Adoption• S-Curve – 4 Stages of Growth – Continual Growth – Innovation within an Industry / Company – Speed of Change
Agenda (cont)• Managing Your Innovation – Jumping the S-Curve – BEMI – Big Enough Market Insight – Managing Talent – Picking the Right Time – Getting Ideas• 3 Horizon Growth• Disruptive Innovation• The Role of Culture and Leadership• Case Study – SlipStream• Innovation Assessment
Good Starting Definition of Innovationin•no•va•tion (ĭn ə-vā shən) n. Significant, positive change. ant:STATUS QUONot necessarily technological.Doesn‘t have to be commercial.Not incremental or just different (anymore), but significant.“Innovation distinguishes between a leader and a follower.”
Innovation – Many Things to ManyPeople “Innovation is the specific tool of entrepreneurs, the means by which they exploit change as an opportunity for a different business or a different service. It is capable of being presented as a discipline, capable of being learned, capable of being practiced. Entrepreneurs need to search purposefully for the sources of innovation, the changes and their symptoms that indicate opportunities for successful innovation. And they need to know and to apply the principles of successful innovation.” - Peter Drucker
Many Types of Innovation1) Product – good or service that is entirely new or has significantly improved characteristics or uses;2) Process – new or significantly improved method of production or delivery of a service;3) Organizational – new method of organizing business practices, the workplace, or relations with outside organizations; and4) Marketing – new developments in the design or packaging of products, the channels for distribution, promotion or pricing. Oslo Manual of the OECD
Invention & ImprovementInnovation differs from invention in that innovationrefers to the use of a better and, as a result, novelidea or method, whereas invention refers moredirectly to the creation of the idea or method itself.Innovation differs from improvement in thatinnovation refers to the notion of doing somethingdifferent rather than doing the same thing better.
S-Curve & Innovation• S-Curve is a measure of the speed of adoption of an innovation.• First used by in 1903 by Gabriel Tarde, who first plotted the S-shaped diffusion curve.• This process has been proposed as the standard life cycle of innovations can be described using the ‗S-Curve‗.
Jumping the S-CurveAccording to Accenture‘s research, high performers:• pursue ―big-enough‖ market insights—ones based on changes in the marketplace that are certain to occur— and sure to shake up the competitive landscape• resolve the conflicting needs of today and tomorrow— trading some of today‘s performance for tomorrow‘s gain• build a hothouse of talent to nurture employees, which then attracts more people with skills and vision• change top management while business is still thriving• refuse to scale up for scale‘s sake and actively manage the downsides of scale at every turn
BEMI• Big Enough Market Insight – Big enough (relative term) – Valuable enough – Certain enough Example: Nintendo understood that if they made video games fun and interactive they could attract a whole new demographic. Creating the Wii
Talent Hothouse• If you are no longer attracting or developing stars, and your proven players are expectedly leaving, It‘s a sign that overall performance has peaked and stagnation is settling in.• It may also be a sign that your staff sees you have entered a mature market even if your sales have not started slowing down
Picking the Right Time• It is hard to start investing in the next major change when your company is profitable and growing rapidly• It is better to use this momentum to grow into a new area or consciously decide it is time to maximize your profits in the current area• If you are involved with trying to attract a buyer for your company that can further complicate investing in new growth
Managing ItConstant high performance and innovationrequires managers to break the future intomanageable chunks. Apple moves smoothlyfrom iPod to iPhone to iPad by plotting outcycles, and then working systematicallywithin each one, using past success andresources to fuel market domination.
Where Do Ideas Come From?• Great ideas do not necessarily come from tech-focused research. They‘re often derived by studying demographic, geo- political, societal, economic and other global dynamics• Brainstorming for ideas does not often work• Customer centric thinking is ideal, but hard to execute well
Features or Sustaining Innovations• Continuing to add features to one product is not the same as innovation• It really just slightly modifies the one single s-curve. (i.e. There are 37 different iPods)• a sustaining innovation does not create new markets or value networks but rather only evolves existing ones with better value, allowing the firms within to compete against each others sustaining improvements. Sustaining innovations may be either "discontinuous" or "continuous"
3 Horizon Growth• Horizon 1 – current business• Horizon 2 – related business• Horizon 3 – completely new business• Alchemy of Growth – Simple type of portfolio management – Great starting point – Teaches about the differences of innovation
Examples of Disruptive InnovationInnovation Disrupted Market Details of DisruptionDigital Chemical based First examples of digital cameras were veryphotography photography poor quality and laughed atLCD CRT LCD were first monochromatic and low resolutionWikipedia Traditional Encyclopedia Britannica ended print encyclopedias production in 2012LED lights Light bulbs Initial LED lights were only strong enough to be indicators, now replacing most lighting
Role of Culture & Leadership• There is no innovation without leadership• Innovation is a collaborative activity• No single person can manage the innovation for an organization• Innovation often happens outside of normal process• Essential roles for managers – Promoting an attitude and expectation of innovation – instituting policies and strategies that makes innovation real – enabling innovation while engaging in dedicated obstacle obliteration – Remove obstacles for staff
Case Study• SlipStream – Professors created compression technology – Designed solution to accelerate Internet – Eventual target was wireless – Initial market was dialup – I was hired as CEO in 2001
SlipStream - Plan & Outcome• Designed the company to sell in 4 years• Horizon 1 & 2 planning – Started in a declining market – Dialup (to reduce competitors and increase ability to dominate) – Needed the credibility of many users to move into wireless – BEMI analysis • Dialup large enough to get started • ISPs needed us – Wanted to sell during growth phase when we reached the wireless market
SlipStream - Plan & Outcome Wireless Market Original Plan Dialup Market 4 years
SlipStream - Plan & Outcome Outcome • Created a new industry • Execution took an extra year, but exceeded our plan. • Sold to RIM only a few months after moving into wireless for > 2x original plan • Interesting that 2 competitors that started in wireless were out of Original Plan business when we moved into that market 5 years
Innovation Assessment• What stage are you on your primary project?• How many innovation projects do you have under consideration?• How would you define a BEMI? – How would you define a ―large market‖ for your marketplace?• Do you have the right team available to grow?• What skills are missing?• Do you have a 3 Horizon plan?This is a starting point to your Innovation Plan