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					L8 Innovate or Perish

   EC10: Innovation & Commercialisation
Managing the innovation process and remaining
              Marcus Thompson
 L8 Outline: Innovate or Perish

 Why  Innovate
 Ideas & Commercialisation

 The Innovation Process

 Managing Innovation Creativity

            8. Innovate or Perish   2
1. Why Innovate?

  EC10 Innovation &
Innovation in Smaller Companies
Small firms produce 55 percent of innovations. They produce twice as many
product innovations per employee as large firms, including the employees of
firms that do not innovate. This is also true of significant innovations.
Small firms obtain more patents per sales dollar and apparently have more
discoveries than large firms, since research has shown that large firms are
more likely to patent a discovery.
Small research and development (R&D) firms are quite research intensive:
the percentage of employees that are R&D scientists and engineers are 6.41
percent in small firms and 4.05 percent in large R&D firms.
 Large firms receive 26 percent of their research and development dollars
from the federal government; small firms, only 11 percent.
A federal R&D dollar to a small firm is more than four times as likely to be
used for basic research as a federal R&D dollar to a large firm.
                  The Facts about Small Businesses, 1997, Small Business Administration,

                                    8. Innovate or Perish                                  4
 Policy Approaches to Innovation
The rate of return on R&D expenditures is 26 percent for both small and
large firms, but only 14 percent for firms not involved with a University. The
estimated rates of return on total R&D for firms with a university relationship
are 30 percent for large firms and 44 percent for small firms.
Innovations coming from small high-tech firms are expected to increase in
the coming years as a result of the increase in the. Under the Small
Business Innovation Research (SBIR) program, federal agencies with large
R&D budgets must direct a share of their R&D funding to small firms, the
source of 55 percent of innovations and new technologies. Since the
inception of the SBIR program in FY 1983, almost $4 billion in competitive
federal R&D awards have been made to qualified small business concerns
under the program.
Among the important innovations by U.S. small firms in the 20th century are
the airplane, audio tape recorder, double-knit fabric, fiber optic examining
equipment, heart valve, optical scanner, pacemaker, personal computer,
soft contact lenses, and the zipper.

                               8. Innovate or Perish                              5
       European Policy Measures
“Europe has a structural trade deficit in high technology products of over
ECU 10million”.
“It is to hasten the emergence of new technology-orientated
entrepreneurialism in Europe to optimise the participation of SME‟s - both
in research itself and in the exploitation of its results.” Edith Cresson

  Measures being considered:
   –   Tax measures favouring use of stock options
   –   Transfer of pension rights (across Europe)
   –   Rapid improvement of system for protection of knowledge
   –   Facilitation of technology transfer between University & research centres
   –   register of business angels & venture capital network
  Rejected - 5% of all public research expenditure to SME‟s
        Source: EGX111, Role Models For Innovation, Innovation and Technology Transfer, January 1999

                                              8. Innovate or Perish                                    6
The formation and development of high
technology firms have been encouraged
by Governments and other agencies in
developed economies.
– (Oakey, 1984; Malecki, 1991; Oakey, 1991a, 1991b;
  Henneberry, 1992; Garnsey and Cannon-Brookes, 1993;
  Garnsey et al., 1994; Storey and Tether, 1998; Tether and
  Storey, 1998).

                        8. Innovate or Perish                 7
Why Encourage High-Tech?

It is assumed that a growing stock of high
technology firms will:
 – Encourage national economic development.
 – Make less favoured areas more competitive and
 – Broaden the industrial base of regions.
 – Improve the competitive capability of industry.
 – Create jobs and will be associated with wealth

                  8. Innovate or Perish              8
Perceptions of Technology Based

“For twenty years or more, there has been an
abiding perception, with considerable currency
amongst politicians and policy makers in London,
Brussels and Glasgow, that new and small firms
are an important source - perhaps even the source
- of innovation, new technology and employment
creation.” CRIC Project

                   8. Innovate or Perish       9
SME, Innovation & Employment
 Innovative or technology based new and small firms
 are more likely to create employment than similar firms
 in the general population.

 The average rate of employment creation within an
 individual innovative or technology based new or small
 firm tends to be modest.
 The third recurrent finding is that growth amongst
 innovative and technology based new and small firms
 tends to be concentrated in a few firms.
 The fourth finding is that even amongst the fastest
 growing innovative and technology based new and
 small firms the absolute number of jobs created over a
 decade tends to be modest.

                     8. Innovate or Perish             10
   2.Ideas &
Innovation & Commercialisation
           Choosing a Direction
“Entrepreneurs are managers. They manage more than just
   organisations, they manage the creation of new worlds.
   This new world offers the possibility of value being
   generated and made available to the venture’s
   stakeholders. This value can only be created through
   change - change in the way things are done, changes in
   organisations and change in relationships.
“Effective entrepreneurs know where they are going, and why.
   They are focused on the achievements of goals.”
“The entrepreneur’s vision is a picture of the new world he or
   she wishes to create. The picture is a positive one. . He or
   she is motivated to make their vision a reality.”

                         8. Innovate or Perish               12
     Making the Vision into Reality
Vision must exist before strategy development and planning
    The vision provides:
     – sense of direction.                           The vision is constantly
     – defines goals and                            refocused:
       objectives.                                         what is source of value to be
     – provides focus when going                          created?
       gets tough.                                         Who will be involved?
     – gives the venture a moral                           Why will they want to be
       content and social priority.                       involved?
     – It communicates and                                 What rewards will they gain?
       attracts venture support.
                                                           What new relations are needed
     – It forms the basis of the
                                                           What is the potential for self
        leadership strategy.                              development?

                 Source: Adapted from, Strategic Entrepreneurship, Wickham, 1998, p107

                                     8. Innovate or Perish                                   13
                Route Adopted
e                                   Directorship
v                                Form a management team

l                                      Licensing
     Commercial arrangement through which licensor of IPR allows licensee to develop
o                      sell or use in return for a royalty payment
C   Sell rights and transfer the ownership of the invention and IPR to third party for lump
o                                            sum
r                     Joint Venture & Partnerships
o   Collaboration with one or more organisations to exploit IPR. Includes sharing of costs
                                       and revenues
                             8. Innovate or Perish                                            14
                  Innovation Process
   Prepare
    –   Evaluate the life cycle of existing services and products.
    –   Set-up is systematic abandonment process.
    –   Estimate the abandonment revenue gap.
    –   Set up separate organisation with reporting line, measures,
        structures and sufficient resources to bridge revenue gap.
   Conduct systematic, purposeful and organised of the seven
    innovation sources (see next slide)
   Perform diagnostic analysis of opportunities.
    – What do the seven sources mean to the organisation’s
      business processes, channels and technologies.
    – Conduct analysis by listening to customers
    – Use focus groups to corroborate the analysis (see Slide 3 for
      analysis criteria)
   Exploit Opportunity
    –   Conduct pilot tests
    –   Commercialised in stages      Adapted from Drucker, P, Innovation & Entrepreneurship
    –   Allocate resources
    –   Evaluate and measure success.
                                   8. Innovate or Perish                                15
        Drucker on Sources of Innovation
   Unexpected Occurrences
     – Unexpected successes existing management find
     – Unexpected failures.
     – Unexpected out side events.
     – Suppliers and customers and competitors.
    Perception-Reality Incongruities.
     – Internal misperceptions.                Adapted from Drucker, P, Innovation
                                               & Entrepreneurship
     – Conflicting internal reality.
     – Customer expectation gaps.
     – Dysfunctional or imbalance at critical point in a business
   Process Weaknesses.
     – Weak links in process.
     – Constraints or vulnerability.
     – Need to improve.

                                  8. Innovate or Perish                         16
        Drucker on Innovation (2)
   Industry and market changes.
    –   Competitive strategies.
    –   Change in players’.
    –   Structure of industry.
    –   Customer value propositions. Technology and operations.
   Demographic Changes
    –   Ageing. Shifts in a wealth.
    –   Urbanisation and globalisation.
    –   Culture and societal changes (environmental).
    –   Changes in buyer’s attitudes.
    –   Changes in mood and perception.
    –   Changes in buying habits.
   New scientific and business knowledge.
    – Application of old innovations into new areas.
    – Expensive innovation with long lead times and risks.

                            8. Innovate or Perish                 17
    Innovation Potential Checklist
   How does it create new value for customers?
   Is price related to value to customer not cost to
   A response to unmet customer needs or
   Does it delivers attributes not products?
   Reasonable speed and access to market?
   Simple and focused and does one thing and
    satisfies one need for one group of customers?
   Will it obtains a leadership position in the market
   Not too clever nor too far ahead of market?
   Consistent with an organisation’s strength and
         too diverse in terms of product?
    not Adapted from Drucker, P, Innovation & Entrepreneurship
                         8. Innovate or Perish               18
          Adopters of Technology
   Innovators
    – Willing to accept risk. Younger and higher income.
   Early Adopter
    – Often opinion leaders, caution with risk. High
      discretionary income. Highly independent.
   Early Majority
    – Only willing to accept new ideas when risk is low
   Late Majority
    – Sceptical. Place emphasis on word of mouth and seek
      security from larger organisations
   Laggards
                          8. to be older Rogers Et al, Diffusion of Innovation,1962, p162
    – Traditionalists. Tend Innovate or Source: from lower social groups.
                                        Perish                                        19
3. The Innovation Process
  How to Stimulate Innovation
Sector Innovation
• „An industrial sector is defined as „technology‟ according
  to its overall R&D intensity (sum of direct and indirect).
  The direct intensity corresponds to the ratio of R&D
  expenditure to value added for each sector and country.
  For indirect intensity, embodied technology (R&D
  expenditure) in intermediate and capital goods
  purchased on the domestic market or imported was
  taken into account. To calculate indirect intensity, the
  technical coefficients of manufacturing industries
  extracted from input-output matrices used.‟ (OECD
  Fact-book 2005)

                       8. Innovate or Perish              21
Wal-Mart Innovation network

• Evaluation & Assessment
• Innovation Development & Pre-
• Commercialisation

                8. Innovate or Perish   22
Support in Scotland

• Scottish Enterprise (SE)
• (
• Smart Successful Scotland (SSS)
• (
• Business Gateway
•     (
• Technology Venture Scotland (TVS)
                8. Innovate or Perish   23
Sources of On-line Information
•   http://www.scottish-
                          8. Innovate or Perish                24
Exercise: Support for Technology

    Based on the web-sites below as your own
     independent research, report on support
     structures for technology business in Scotland
        www.gro-

                           8. Innovate or Perish                 25
4. Creative
Innovation & Commercialisation
Types of Creativity

  Normative
    Original thinking used to solve known
  Exploratory
    Blue Sky to identify opportunities
  Serendipitous Creativity
    Accidental eg post-it

                    8. Innovate or Perish    27
4. Creativity
  Conceptual fluency-: the ability to produce many ideas
   or solutions in a given situation.
  Mental flexibility: also known as `lateral problem from
   an entirely new angle.
  Originality: usually evidenced by unusual answers to
   problems. -
  Suspension of Judgment: a willingness to defer
   judgement of ideas of others.
  Impulse acceptance: a willingness to react impulsively
   to an idea
  Attitude towards Authority: a willingness to challenge
   Majaro (1992)
                        8. Innovate or Perish            28
Decision Making
„The Prescriptive Approach
   Linear and rational process, starting with where we are now
      and then developing new strategies for the future.
   One whose objective has been defined in advanced and
      whose main elements have been developed before the
      strategy commences.
The Emergent Approach
   A a corporate strategy, which emerges, adapting to human
     needs and continuing to develop over time. It is evolving,
     incremental and continuous, and therefore cannot be
     easily or usefully summarised in a plan which then
     requires to be implemented.
   Emergent corporate strategy whose final objective is unclear
     and whose elements are developed during the course of
     its life as the strategy proceeds‟. Lynch, Richard – Corporate
     Strategy, Second Edition (2000)

                                   8. Innovate or Perish              29
What is a Learning
Organization (Team)?

   A Learning Organisation is one in
   which people at all levels,
   individually and collectively, are
   continually increasing their capacity
   to produce results they really care
   about. (Senge 1990)

                8. Innovate or Perish      30
Why adopt the concept?
 Organisations have increasingly taken an interest in
    adopting the learning organisation concept because of
    the increasing pressure on organisations to change
    with developments in globalization, changes in
    customer expectations and technology driving this
 Organisations need to continuously develop themselves
    to maintain their competitive advantage and learning is
    considered the only way of obtaining and maintaining a
    competitive edge.
 In the knowledge era, knowledge is regarded as being
    more important then financial resources, market
    positioning and other corporate assets. (Marquardt
    1996).               8. Innovate or Perish            31
Benefits of Becoming a
Learning Organisation
  Learning organizations link individual performance with
   organizational performance setting clear direction for
   employees and achieve goal congruence.
  provides continuous learning opportunities for all employees
   and uses learning to achieve organizational goals and
  All employees including managers learn from their
   experiences rather then being bound by their past
  Learning organizations encourage communication and
   innovation by fostering dialogue, making it safe for people to
   share ideas and take risks.
  Learning organizations seek to learn as much from its
   failures as from its successes encouraging continuous
   development and improvement.
  A learning organization continuously interacts and responds
                           8. Innovate or Perish                32
   to its external environment allowing for better customer
What do you

              8. Innovate or Perish   33
8. Innovate or Perish   34
       The Elephants Legs

8. Innovate or Perish       35
What am I thinking?

   8. Innovate or Perish   36
 Beauty is in the eye of the beholder

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       Dots before your eyes

8. Innovate or Perish          38
                                       Putting a different light on things

The idea of a lighted flower pot may strike us as pretty humorous, but it was
the answer to a lifelong struggle for a Russian immigrant named Conrad
Hubert. Hubert came to the United States in 1890 when he was about 35
years old. He was flat broke. He did what he could to earn a living. He
worked in a cigar store, ran a restaurant for a while and managed a boarding
house. He even tried fanning and repairing watches. Whatever he did,
however, he never made much money. All he wanted was to stop worrying
about making ends meet. Now Hubert had a friend named Joshua Lionel
Cowen who was very interested in electricity. Joshua had invented a flower
pot with a battery in it. Electricity from the battery made the flower "light up"
when a button was pressed. Hubert decided he would try to sell these flower
pots. Meanwhile, Joshua became interested in something new, electric
trains and he sold his friend the flower pot idea for almost nothing.
Fortunately, Hubert never went ahead with the flower pots because he had
had an idea for a modification. He took the battery, the bulb and the paper
tube from the pot and remade it into what he called "an electric hand
torch." Hubert sold his invention at first as a novelty, but the usefulness of
the flashlight soon became apparent. When he died in 1928 it must have
seemed to Hubert a long time ago that he was poor. He was worth

                                8. Innovate or Perish                               39
        Would you trust this man?

8. Innovate or Perish               40
8. Innovate or Perish   41
Read these allow as fast as you can

            8. Innovate or Perish     42
      The Process of Idea

                                       1.The Need

                    2. Collect Information

         3. Analyse and validate data

     4. Develop coping Strategy

5. Implement Strategy
               8. Innovate or Perish                43
The Moral of the Story

 If the princess thinks the same as everyone
    else she would never have lived happily
    ever after . . and the prince would have
    remained a frog.

                  8. Innovate or Perish   44
Team & Creativity
 It follows, then, that one common way managers kill creativity
     is by assembling homogeneous teams. The lure to do so is
     great. Homogeneous teams often reach “solutions” more
     quickly and with less friction along the way. These teams
     often report high morale, too. But homogeneous teams do
     little to enhance expertise and creative thinking. Everyone
     comes to the table with a similar mind-set. They leave with
     the same”.

    Amabile, T, “How to Kill Creativity”, HBR, Sept - Oct 1998, pp 77 - 85,

                               8. Innovate or Perish                          45
How to Kill Creativity in Marketing
         When leadership becomes dominance
         When questioning becomes accusation
         When assertiveness becomes aggression
         When myopia becomes focus
         When opportunities become problems
         When arrogance becomes confidence
         When structures become strictures
         When inclusion becomes exclusion
         When rules become constraints
         When support becomes ownership
         When capabilities become impediments
         When experience becomes intolerance
         When collaboration becomes fragmentation
         When identity becomes an excuse
                          8. Innovate or Perish      46
Creating the synergistic
 There is no scientific formula to guarantee that synergism
   will result.
    The team project is most important. It's OK to feel honoured to be
      named as a special team member, but be committed to the work
      and to working together with other members.
    Keep others informed of your progress. Be honest about what you
      can do and what you have accomplished.
    Just as too many cooks spoil the stew, more than one leader can lead
      to misdirected efforts. Be careful to do what you are assigned. Feel
      free to express your own ideas, but let the leader decide if they can
      be used now.
    Small groups create a good setting for trying new techniques, so
      leave your reluctance behind.
                    8. Innovate or Perish                                        47
    That means caring a little more, thinking a little harder, making a little
                                                Sheet 1

  Old Clothes

Lots of people have clothes that they
have grown out of.

How would you use unwanted clothes?

                                        Think the Impossible!

                                        You can use bits of
                                        things or combine them.
                                        You can change shape,
                                        colour size.

                8. Innovate or Perish                    48
              Things Can Make Money                          Sheet 2

                 Combine with other

Use As A                   R                     Use To
Substitute                                       Provide
  For                      E                    A Service
                                                Alter Size
Package                    O                     Shape
                           U                     Colour?

  Use for                  S                     Recycle
   other                                           Or
  People                   E                     Reuse

                   Use Bits Or Parts

                        8. Innovate or Perish                      49
                              Sheet 3


      8. Innovate or Perish         50
                                                                             Sheet 4

                     People Want Things!

                         Want But Doesn‟t Exist

                                                      Out of date or style
Seen but can‟t find it

                              People Or
                           Interest Groups

     Not easy to use                               Quality not good enough

                           It‟s too expensive

                           8. Innovate or Perish                                   51
                               Sheet 5

Problems Worksheet

       8. Innovate or Perish         52
                     Problems Means                                         Sheet 7


    Substitute            Shift Attention -            Outrageous

Reduce the problem                                     Make Better

Change Perspective    Make it unnecessary         Random Word Association

                          8. Innovate or Perish                             53
                                                                         Sheet 8

                         Skills Mean Business
 What Products?                                           What Products?

Which Business?                                            Which People?

         For Business                                For People
                           Provide a Service

                                   ?                        Your Skill

                            Making Things

          For Business                               For People

Which Businesses?                                         Which People?

  What Products?                                          What Products?
                             8. Innovate or Perish                            54
                                                                  Sheet 10
                  Assessment Checkbox
                       Factor                      Score (1-10)

        Personal fit

        Degree of risk
Score Funding needed
your Ease of start-up
        Short-term potential

        Level of preparation

        Competitive threats



                           8. Innovate or Perish                     55

 Is There a Market for Your Idea?
Do you know who the customers will be?

What will they pay?

Roughly how many customers do you need to

Do you know about the competition?

For what reasons will people use you rather than

Do you think you will be able to attract in more
                  8. Innovate or Perish                56
  customers each season?

 Can You Provide What the Customer Wants?

Have you got the skills to promote your business?

Could you make or provide the amount and quality of products or service that
the customer wants?

Do you know how much you will charge?

If you need people to help you provide your product or service, do you know
who those people are?

Do you know how much money you will require?

Do you have access to the money and other resources?

How much do you still need to get?

                            8. Innovate or Perish                              57
                         Can You Get Your Idea in Front of Customers?Sheet

                                                       Action Points
Do you know who will buy this from you?

How will they find out about you?

Do you know of anyone who already sells to these customer groups?

Are there any local outlets that would help you sell the service or idea?

Can you get the names of customers from any sources?

Do you already have people lined up who are interested?
                                    8. Innovate or Perish                   58
                                                Sheet 14

What Resources & Support Do You (still) Need?

Do you have the option of buying an existing
business or can you form an alliance?

Could you lease or hire equipment, premises
etc. locally rather than buy?

Who will help you get sales going e.g.
promotional material, selling?

Can you set targets and prepare first-cut
financial projections?

What information do you still need to prepare
               8. Innovate
a (Business) Plan? or Perish                59
Creativity & Marketing

 "But the truth is that the winning strategies
   are smart, innovative and original, and
   break the rules, and most times there is
     someone somewhere who has seen
     through conventions and traditional
   assumptions to create a new business
              idea" Piercy 2002, p 269

                  8. Innovate or Perish      60