the disciplines of continuous innovation

©2014 FCB Partners. All rights reserved.

Webinar Roundtable Discussion

June 18, 2014

The Disciplines of Continuous Innovation:

Can We Design an Organization to Release A Steady Stream of Breakthroughs?

Brad Power Ted Power Andrew Gaule

1 ©2014 FCB Partners. All rights reserved.

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Today’s Discussion Leader

Brad Power

Experience • Has consulted and conducted research on process innovation and business transformation – 30+ years

• Consulting: recent work with healthcare organizations to define and launch "journeys" to improve their work

• Research: CSC Index, Lean Enterprise Institute, Hammer and Company, and FCB Partners

Passion Stories of companies which embarked on a process innovation program and either kept going, or didn't, and why.

Engage • Blog posts: The Harvard Business Review • Continuous Innovation: LinkedIn discussion


Can You Create an Organization that Embraces Continuous Innovation?

Drivers

Social, mobile, ‘Big Data’, cloud, sensors, cameras

Software is eating the world

Threats

Shorter product lifecycles

Opportunities: Role Models

High-tech disruptor: Google

Retail and high-tech disruptor: Amazon


Google’s Continuous Innovation

Innovation Examples

Driverless car, maps

YouTube

Google Glass

Google Fiber, Project Loon

Google Goggles

Management System

Google[x] (moonshots)

Acquisitions (Makani)

20% time

Quick demos

Run lots of experiments and let the market decide

Fail fast and learn, scale up quickly if it shows promise

Culture of openness, analytical rigor, and respect for workers


Amazon’s Continuous Innovation

Innovation Examples

Kindle

Web services

Amazon Prime

Drones?

Management System

Think big: the everything store

Focus on customer value

Disrupt yourself (used books, Kindle)

Set up lab in Silicon Valley (A9, Lab 126)

Acquisitions (Zappos)

Missionary (relentlessly disruptive) and mercenary (calculating and ruthless)


How GE Stays Young

Process Disciplines

1. Segregate funding and management

– Bet on Durathon battery

2. Rapid product development

– FastWorks at GE Appliances

3. Partnering

– GE Ventures, Local Motors, Quirky, Kaggle, GrabCAD

For more, see my Harvard Business Review post “How GE Stays Young”


1. Segregate Funding and Management

Purpose (Time Frame)

Tune the Engine (0 – 12 months)

Cross the Chasm (12 – 36 months)

Create Future Options (36 – 72 months)

Driving Goal Maximize economic returns - incremental

Become a going concern - sustaining

Create a category - disruptive

Key Performance Indicators

Financial targets (revenue, bookings, margin, share) – faster, cheaper, better

Escape velocity (target accounts, sales, deals, time to tipping point)

Momentum (name-brand customers, deal size, name-brand partners, PR buzz)

Risk: Approach Predictable: LSS Uncertain: Big bets Uncertain: Experiment

Accountable Operating managers Venture managers Corporate managers

Delivery Organization

Hierarchy Temporary, virtually-integrated business unit

Incubator

Scarce Resources Operations people and assets

Time Sales

Customer access Capital

Sources: Geoffrey Moore, Michael Raynor, Clayton Christensen


2. Continuous Product Management

Best Practice Software Development

Cutting Edge Software Management

Hardware Product Management

Release frequency

Cadence: weeks (days) = batch

Continuous: 100s of changes per day = flow

?

Architecture One code base Many small services ?

Testing Sequential testing process (scripts, unit test, system test)

Continuous: Automated test system, “feature gates” (hidden, test, beta, unveil, A/B)

?

Organization Cross-functional teams, meetings

Small teams, responsible for all aspects of services

?

?


Google’s Automated Test Machine

Architecture: Single version of test system

– As developers make changes, they are tested with the most recent version, which includes all changes

– Runs 100 million test cases per day

– If a test finds problems, it tells developers whom to contact – directly, no middle managers

Organization: Built and run by a “test engineering” group

– About 15% of total developers

– Build the automated test systems – they don’t do testing

Performance: Can go from an idea for a software change to release in 48 hours.

Source: Andy Singleton


Amazon’s Continuous Delivery Process

Architecture: Divide big online ordering application into thousands of smaller “services”.

– A service might display a web page, or get information about a product.

Organization: A service development team maintains a small number of services

– Release changes as they become ready

Performance: Release a change about once every 11 seconds, adding up to about 8,000 changes per day.

– In the time Staples makes a new release, Amazon has made 300,000 changes

Source: Andy Singleton


GE Appliances’ FastWorks

Based on the’ Lean Startup’ approach of Eric Ries

– Rapid learning cycles

Jan. 2013 challenge: create a working ‘French door’ refrigerator in 3 months and production model in 11-12 months

– vs. model changes every 5 years

Changes in supplier relations, finance, and leadership roles

For more, see my Harvard Business Review post “How GE Applies Lean Startup Practices”


Google’s ‘Moonshot’: Project Ara

Mission: Open hardware modular smartphone

– Swap in different components when it's time to upgrade

– Cheap enough to be accessible to 5 billion people

Organization: Small team of ex-DARPA engineers and Googlers

– Partnered with a dozen partners

– 2-years to saleable product

Technology: Continuous 3D printing – ‘Racetrack’ 50x faster

– Create thousands of unique module shells every day


3. 10 Partnering Moves

1. Technology scouts

2. University collaboration

3. Open R&D campus

4. Incubator units, Accelerators

5. Direct venture funds

6. Indirect venture fund investments

7. Joint opportunities, strategic alliances

8. IP repositories

9. Proprietary crowd ecosystems

10. Open crowd ecosystems Source: Andrew Gaule, Open Innovation


Incubator Example: Y Combinator Success Examples

Since 2005 funded over 630 startups

– Airbnb

– Disqus

– Dropbox

– Reddit

– … and Abacus

Management System

The deal: small investment (rarely more than $20,000) for small stake (usually 2-10%), 3 months in Mountain View, culminating in “Demo Day” – promote to angel investors

Two cycles per year, rapid selection process

Support: Tuesday “dinners”, office hours, Prototype Days, Rehearsal Day

Protect entrepreneurs and angel investors from cram down

Analysis of venture success: gather profile data (e.g., number and type of founders), videotape initial interviews, then review after teams succeed or fail “The most prestigious program for

budding digital entrepreneurs”


Venture Funding Example: AMEX Success Examples

Investments include

– Bill.com Inc ., which automates billing for small businesses

– ShopRunner Inc., which provides membership services for online shoppers and is considering an IPO

– Radius Intelligence Inc., which aggregates data on small businesses to generate leads.

Management System

American Express Ventures (Managing Director based in Silicon Valley) works closely with units to identify needs.

Team leverages relationships to identify start-ups with new technologies that might be relevant.

Senior executives visit and evaluate start-ups as potential partners.

Jointly define use cases and run a pilot.

American Express may invest, depending on strategic importance and financial viability ($100 million fund).

Funding justified on strategic fit first, financial return second.

For more, see my Harvard Business Review post “Leveraging Silicon Valley - From Wherever You Are”


What Should You Do?

Resource Allocation

How are you allocating resources between today and tomorrow?

Capabilities

Do you have the disciplines for continuous innovation?


How Are You Allocating Resources Between Today and Tomorrow?

Stable World

Change Coming

Disruption Now!

You?

Daily Operations

90% 85% 75%

Incremental Improvement

5% 5% 5%

Sustaining Innovation

5% 5% 5%

Disruptive Innovation

5% 15%


The Disciplines of Continuous Innovation

Product Management

Partnering

Funding


Disciplines Assessment

Funding

Product Management

Partnering

Competitively Disadvantaged

World-Class

Competitive Parity

Industry Leadership

X = Where we are performing today

G = Goal

X

X

X G

G G

Performance Gap


Continue the Dialogue

Host Date Subject

October 15 Institutionalizing Operational Excellence: Continuously Improving the Customer Experience Roundtable Discussion

October 16 Process Innovation Research Report and Discussion

October 17 Sustaining Process Thinking Roundtable Discussion

1. Chicago Meetings October 15-17

2. LinkedIn Discussion Group

Continuous Innovation

What are the key processes for an enterprise to deliver continuous innovation – a steady stream of breakthroughs?

3. Research Interview

the disciplines of continuous innovation

Leadership & Management