Foundations of Business Innovation

Andrew Maxwell

Agenda Explain who we are Get to know you Provide an outline of the course Provide an introduction to innovation concepts Deal with any administration issues

Text - Managing Creativity and Innovation – Harvard Business Press Web site – U of T portal and CIC Downtown course

Expectations and registration Class 6 – 9 pm Mondays at IB 270

• Director Business Partnerships CIC • Professional engineer and MBA• 15 years with tech. multinationals• Cofounded several technology businesses

• Created U of T’s technology incubator • Teaches technology entrepreneurship• Completing Ph.D. in innovation and new

venture creation at University of Waterloo• Industry advisor CBC Dragons’ Den.

Who are we:Andrew Maxwell

1. Understand the innovation imperative

Definition of InnovationMacro-economic impactMicro-economic impactInnovation imperative

Country levelRegional levelFirm level

The Economic Conception of Innovation Joseph Schumpeter

Innovation is:• Introduction of a new good, or a new quality of a good• Introduction of a new method of production (need not

need include new technologies)• The opening of a new market • The securing of a new source of supply• The creation of a new organization

Canada lags at innovation & gets worse

Canadian Council Of Academies

Innovation in the news

2. Importance of Firm-Level Innovation In a knowledge based economy, organizations that

are able to do more with less, outperform competitors

In the private sector, higher productivity makes you the acquirer, rather then the acquiree

In the public sector, exceeding benchmarks is encouraged, while falling behind has negative repercussions

“In the road to the future, there are drivers, passengers and roadkill” Gary Hamel

3. Recognize different types of innovationInnovation is often confused with invention and

specifically research and development leading to new technologies. In fact innovation includes:

a. Product Innovationb. Process Innovationc. Supply chain Innovationd. Service Innovatione. Business model Innovation……….. And can be applied to all areas of an organization

a) Product innovation Technology

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b) Process innovation

A change in the way a product or service is manufactured, created, or distributed

Process innovation involves implementation of new or improved production or delivery method.

Process innovations can be intended to decrease unit costs of production or delivery, to increase quality, or to produce or deliver new or significantly improved products.

What product/service will be delivered to customers What components or services will be acquired

externallyHow you will add value internally This involves consideration of:

Core competencies necessary for long term success Availability of partners in supply chain Strategic risk management of relationship

c) Supply Chain Innovation

• New raw materials• Alternate suppliers• Outsource manufacturing• Third party distribution• Sales agents or on-line sales Consider:

Risk management Financial implications Market issues

Supply Chain Innovation Opportunities

Majority of individuals in Canada (and US) work in service industry

Even where people work in manufacturing, many of these individuals provide support services

Service innovation is biggest opportunity to increase competitiveness

Improvements in service innovation can be measured in terms of increases productivity and value added

d) Service Innovation

Contributes to competitive advantageRequires specific social and technical skills Involves development and new technology applicationCostly to develop needed specialist and generalist skillsRequires integrated thinking and agile environmentCan be implemented in all service areasMost significant possibilities in financial and medical

services

Opportunities for Service Innovation

“An automobile is actually art, entertainment and mobile sculpture, which, coincidently, also happens to provide transportation.” Robert Lutz, Chairman, GM

Can you change your product into a service?

“Make sure I don’t run out of cash”

“Product, service or experience”

“The customer rarely buys what the company thinks it is selling him” - Peter Drucker

e) Business Model Innovation The goal of innovation is to increase competitivenessNew ways of doing business can also increase

competitiveness and productivity by: Creating enhanced utility for the customer Enabling a different pricing strategy Providing alternate purchasing options

Sometimes a technology innovation requires a business model innovation to achieve commercial success

Xerox Developed photocopying technology Initial capital costs of machines perceived as

excessive Introduced pay per copy business model

Some Innovative Revenue Models

Google Automated search-engine technology Provided free to end users Revenues generated by advertising

4. Need to identify what innovation success looks like

Improve top line, bottom line or market shareStrengthen balance sheetStrengthen brand/reputationIncrease workforce retention (incent stakeholders)Enhance community engagementImprove environmental performanceAttract investors/acquirers

Establish specific innovation goals Improve quality of

processes, products and services

Create of new markets Extend product range Reduce labour costs Improve production

processes

Reduce use of raw materials

Reduce environmental damage

Reduce energy consumption

Conform to regulations

If you don’t have specific goals, your chance of reaching them are small

5. Need to find a way to create and capture innovation opportunities

Communicate vision and innovation imperativeStimulate creativity and idea generation Develop innovation decision-making process that:

Captures ideasMakes decisionsActivate resources

Implements projects and encourages accountability

Yes ……I know we are meant to be more innovative … can you give me some guidelines

Internal drivers1. Unexpected event2. Contradiction3. Change of work process4. Change in industry structure

External Drivers5. Socio-economic changes6. Political changes7. Technology changes

Drucker‘s Innovation Framework

Identify sources of innovation Internal sources1. Research2. Shop floor3. Sales/service4. Customer service External Sources5. Customers6. Suppliers7. Competitors

6. Recognize that innovation is a process Innovation is a management process the requires

specific tools, techniques and discipline Innovation involves the development of organizational

processes and procedures for generating, considering and acting on innovative ideas

Innovation research focussed on technology; but real challenge is to understand innovation process and the cognitions and behaviours of people in that process

Innovation failures due to lack of understanding people

“Stage Gate” Innovation Process

Stage-Gate Institute (Bob Cooper)

Identify innovation imperative and establish objectives Create innovation framework Assess current resources (Business Analysis) Analyze current environment and external trends Source and capture innovative ideas Create an innovation decision system Compare each opportunity to agreed criteria Implement pilot project Measure performance Scale up or cancel

Implementing The Innovation Process

7. Establish innovation resourcesTimePeopleMoneyProcesses

8. Understand innovation constraintsSuccessful innovation usually involves:Changing current processes and proceduresModifying management style and communicationsDeveloping new organizational structuresAbandoning existing customers and finding new onesModifying incentives, compensation and recruitmentChange company culture and attitude to riskImportant to raise questions and ask how far you will go

Focuses on financials & timelines

Has strict guidelines & controlHad a hierarchical structureHas multiple bosses & “dotted

lines”Fosters attitude of “Everyone

is for himself”

Is your organization innovative?Embraces and learns

from failureFosters high energy

activitiesCreate a “Can do”

environmentDevelop support & trustIs a fun place to work

Change management approach can help an organization become innovative

1. Change through Leadership2. Create a Shared Need3. Shape a Vision4. Mobilize Commitment5. Make Change Last6. Monitor Progress7. Change Systems and Structures8. Change Culture from Control to Trust9. Communicate10.Incentivize

Focus on the people issuesWhat works:

Mentoring and coachingSkills & experience developmentFree information exchange (networking)Resource availability

What doesn’t:Strict personal objectivesIndividual performance over team performanceThe “right” way of doing things

• Process & tools that support idea generation & experimentation

• Disciplined approach to building innovation

• Desire to do things better

• Collaborative & open culture.

• Incentives that reward challenging the status quo

• Company leaders and organization aligned to achieve a vision

Leadership and

Organization

Culture and

Values

Processand

Tools

Peopleand

Skills

Architect an innovative environment

Creating an Innovation CapabilityThe

organization’s reputation for

innovation

Attraction of creative people

Organizational encouragement of

creativity & innovation

Development of innovative

products

A willingness within the organization to accept new ideas

Motivates people within the organization and reduces frustration

High morale and retention of

creative people

Develop an Innovation Culture Create an innovation-friendly organization, that embraces

a culture of “risk” and “rewards failure” (and success)Develop a “ project and portfolio management” approach

to innovation around decision-making and implementationDevelop a cross functional “matrix organization” to

embrace innovation across organizationFocus on “communications” and “engagement”Design “incentives” to support innovation

Common Causes of Innovation Failure Organizational Causes

1. Poor leadership2. Poor organization3. Poor communication 4. Lack of empowerment of

stakeholders 5. Poor knowledge

management 6. Resource limitations

Process Causes

1. Poor goal definition2. Poor alignments of goals

and actions3. Poor team effort4. Poor monitoring of results5. Poor communication and

access to information 6. Inappropriate decision

making

Assignments

1. If you haven’t done register for courselearn.utoronto.ca/bps/innt.htmwww.slideshare.net/andrewmaxwell/innovate-or-die-

91903542. Find someone else you think might be interested and tell

them to watch the videohttp://vimeo.com/29112717

3 Identify a key innovation challenge you are willing to share

Thank you

“I don’t mind failure. I’ve always thought that schoolchildren should be marked by the number of failures they’ve had.” – James Dyson

Thank you

“Innovation comes from saying no to 1,000 things to make sure we don’t get on the wrong track or try to do too much.” – Steve Jobs

Thank you

“If the people running Amazon.com don’t make some significant mistakes, then we won’t be doing a good job for our shareholders because we won’t be swinging for the fences.”- Jeff Bezos

Thank you

“You have three choices…. Innovate, find a partner who you can innovate with… or wait to be innovated by someone else….” – Andrew Maxwell.