Managing Innovation and Entrepreneurship Wrap-up

Managing Innovation & Entrepreneurship Wrap Up From Vision… Content removed due to copyright restrictions. See: Gladwell, M. “The Televisionary”. The New Yorker, May 27, 2002. To innovation… “Build a better mousetrap, and the world will beat a path to your door” wrote Ralph Waldo Emerson. Jack Hope found that what Emerson really wrote was: "If a man has good corn, or wood, or boards, or pigs, to sell ... you will find a broad hard-beaten road to his house.” (which might be true!!) but for a better mousetrap…you need more! Innovation as management A Working Definition z Innovation is the entire process by which an organization generates creative new technological ideas (invention) and converts them into novel, useful and viable commercial products, services, and business practices for (potential) economic gain If you are not completely satisfied with the return on your investments in innovation, what are the obstacles you face? Development times too long 32% Who Cares? z z Top managers & entrepreneurs - “competitive advantage lies in the ability to create an economy driven not by cost efficiencies but by ideas and intellectual know-how” (HBR 2007) National Leaders - “economic growth comes from effectively linking the twin powers of the competitive market & the scientific method” (Romer, 2004) 28% Lack of coordination 26% Risk-averse culture 25% Limited customer insight 21% Selecting the right ideas 21% No good way to measure 18% Not enough great ideas 18% Marketing or communication 17% Insufficient Sr. management support Data: Boston consulting group 9% In-market performance is below expectations 8% Competitors are more innovative My Goals designing the course Managing Innovation & Entrepreneurship z Analyze the key elements that together make entrepreneurial organizations more effective at technological innovation z Build on ideas that you have learned in other classes (e.g. teams, leadership, networks etc.) Serve as the foundation for other courses on innovation & entrepreneurship z z Provide “action-relevant” knowledge & skills to go into a firm and diagnose its innovation challenges & to organize your own innovative projects Course Organization Markets Technologies Exploring Innovations Executing Innovations Exploiting Innovations Key processes Key organizational choices Key strategic choices To put it another way z z z Industry dynamics create a wealth of opportunities for entrepreneurs – particularly at the start of Scurves when industries are in “ferment” Full of opportunity for “creative destruction” but full of risk - Detroit saw over 700 auto companies founded between 1900 – 1920! Effective management of technological innovation helps you mitigate & manage those risks Entrepreneurs must first source and refine innovation opportunities Explore opportunity landscape Refine opportunity thru series of focusing devices: -Technology lens - Market lens - Competitive lens Exploring Can we generate novel ideas (technologies & markets) that create new & potentially valuable concepts)? A variety of methods Opportunity identification methods, brainstorming (IDEO) z Idea hunts (BIG) - search versus recognition view of idea generation z Lead user generated opportunities (Innovation @ 3M) & technology-push based opportunities (Aluminum!) z The Bakeoff - pits three alternatives for opportunity generation – dream team vs. expert vs. complementary team KEY – diversity, team composition, incentives, learning, failure z Exploring opportunity landscape Key processes & analyses Refining Can the ideas that we have generated be exploited to make money? Three big questions z Refining opportunity thru series of focusing devices: -Technology lens - Market lens - Competitive lens z z Technology lens – what are the proposed features of the technology, advantages compared to other approaches or to substitutes. S curve for hearts Market lens – what group of customers want this – are lead users representative of larger markets? Chasm Competitive lens - recall that inventor & entrepreneur don’t always capture the value from ideas (Bob Kearns; Pedro & Gaston; Ric) z z Do I control my ideas? Do I control other assets in the value chain? If not, who does, what are the dynamics? Articulate an innovation opportunity Exploring opportunity landscape Key strategic process Refining the opportunity -Technology lens - Market lens - Competitive lens Having articulated an innovation opportunity (business plan) power of an effective entrepreneurial execution is flexibility to explore, test potential and adapt if early plans fail -e.g. TNZ, A123 NOT Iridium Executing Build organization to execute innovation opportunities that accommodates focus & flexibility z z z z z Processes for experimentation & iteration Structures for effective iteration, adaptation & stabilization Incentives for execution- rewards – both financial & intrinsic Boundaries of execution – internal versus external innovators Culture of execution - learning, adaptation & decision-making • Executing single innovation project • Executing asset building to support innovation • Executing portfolio of innovation opportunities to sustain the firm Processes • Iterative experimentation cycles to maximize information generation & learning from the information (Team New Zealand, IDEO, Bank of America) •Design, build, test, learn cycles – not only applied to technology adaptation but also to market learning e.g. daily builds, alpha & beta testing – compare to Iridium • Team-based learning e.g. SCRUM & XP Structures • Milestone-driven execution processes - along technical, market & competitive dimensions (Advanced inhalation research) • Stage-gate versus flexible overlapping innovation structures (Managing on internet Time exercise!!) • Contingency of structure & commercial environment – speed of change • Structure of product/knowledge & its impact on org structure (open-source work on Netscape) • Multiple structures - allowing for both entrepreneurial risky projects & traditional projects (XNE) Incentives • Creating incentives to provide entrepreneurial focus & coordination between different members of an innovation team (GSK ; XNE, GE-IB) • Create incentives to generate & act upon information (as you iterate between exploring and exploiting) • Incentives to participate on innovation projects for those outside – not only money also “challenge” of exciting work • Academics (SpudSpy, A123) • Communities (Linux community, gaming) •Create incentives to execute on b’thru innovation opportunities (GE, Google, DuPont) Boundaries • Role of external versus internal innovators (D-Wave, Intel, Linux, InnoCentive) • Access individuals w/ best talent (InnoCentive) • Design modes of collaboration that align incentives (SpudSpy) • Use multiple modes of external interaction to match with strategic goals (Intel) • Issues •Don’t loose sight of competitive lens (e.g. IP) when working outside boundaries (i.e. GPL restrictions) • Is project sufficiently modular? Executing Build organization to execute innovation opportunities that accommodates focus & flexibility z z z z z Processes for experimentation & iteration Structures for effective iteration, adaptation & stabilization Incentives for execution- rewards – both financial & intrinsic Boundaries of execution – internal versus external innovators Culture of execution - learning, adaptation & decision-making • Executing single innovation project • Executing asset building to support innovation • Executing portfolio of innovation opportunities to sustain the firm Executing asset building to support innovation opportunity Strong Weak Controlling the Ideas Controlling the Assets Tightly held by others Free or don’t yet exist Innovators & Asset holders share profits Innovators in strong position to profit • Strategic decisions over asset building to support innovation opportunity • Interplay of competitive & technology dynamics (A123, semiconductor IP firms; video game studios) • Issues of incentives & processes – can they work across firm boundaries? Hard for innovators to profit TECHNOLOGY Innovators can profit • Building innovation across multiple verticals – economies of scale and scope (Surface Logix; A123) PRODUCT MANUFACTURING MARKETING DISTRIBUTION Executing portfolio of innovation opportunities to sustain firm • Strategic value of portfolios • Balancing risk across types of innovation (LePetit Chef, A123s continued “b’thru” research) • Executing mixed portfolios – incremental vs. b’thru opportunities • Sourcing innovation opportunities- internal versus external research (Intel, PARC etc., A123) • Executing innovation – internal, external, integrated, separate (XNE, corporate venturing, GE IBs) Executing Balancing incremental versus breakthru innovation opportunities Processes Top down vs. bottom up; random or structured processes Structures Distributed throughout firm (e.g. Google, GE IBs) or dedicated units e.g. XNE, IBM-EBO Incentives Metrics & performance evaluations vs. market-based incentives thru stock-options etc. Boundaries Source innovation opportunities (inventions & more formulated opportunities) outside or inside the firm; execute inside or outside Culture Create firm-wide culture for breakthru innovation projects or “protected” organizational space for this culture Building an Engine for Innovation Building an organizational engine for innovation depends upon the strategy & stage of your business z z z z z Equally critical for start-ups & mature firms Focus beyond the technology, the spreadsheets & the business plan Execute thru carefully articulated choices of structures, incentives, & boundaries Dynamic process –revisit choices regularly as innovation challenges & competitive context changes Have fun!!!