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Innovation and the S-Curve


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Ron Neumann's presentation from the 2013 LiFT Conference: Driving Innovation-based Growth

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Innovation and the S-Curve

  1. 1. Innovation and the S-CurvePractical tips for managing innovationwithin your companyRon NeumannMarch 19, 2013
  2. 2. 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
  3. 3. 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
  4. 4. 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.”
  5. 5. 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
  6. 6. 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
  7. 7. 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.
  8. 8. 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‗.
  9. 9. Adoption and the S-Curve
  10. 10. Adoption and the S-Curve
  11. 11. Stages of the S-Curve Point of Diminishing Returns
  12. 12. 4 Stages of the Curve• Startup• Growth - Scale• Maturation - Compete• Decline - Transition• Innovation is different at each stage
  13. 13. Challenges• Startup – Survival, market validation, funding• Scale – Increasing market, expanding to new geography, increased manufacturing, hiring• Compete – Increased number of competitors, lower margins, heads down• Transition – Compromises to stay alive, staff layoffs
  14. 14. Double S-Curve Model
  15. 15. Innovation within a Company - Apple
  16. 16. Technical Innovation in an Industry
  17. 17. Not All Innovations are Successful Zenith – Radio – TV – Zenith Data Systems – HD TV (jumped into it too early) • Bought by LG
  18. 18. New Pressure - Increasing Speed of Adoption
  19. 19. 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
  20. 20. 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
  21. 21. 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
  22. 22. 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
  23. 23. 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.
  24. 24. 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
  25. 25. 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"
  26. 26. 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
  27. 27. Disruptive Innovation
  28. 28. 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
  29. 29. 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
  30. 30. 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
  31. 31. 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
  32. 32. SlipStream - Plan & Outcome Wireless Market Original Plan Dialup Market 4 years
  33. 33. 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
  34. 34. 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
  35. 35. THANK YOU