Second lecture for Magna

1. Tools and Techniques of
Innovation (Day 2)
Andrew Maxwell Ph.D.
Chief Innovation Officer
Canadian Innovation Centre

2. Agenda
Introductions
Goals of innovation
Innovation objectives
Criteria for innovation
Ideation
Innovation portfolios
Barriers to Innovation
Sources of innovation
Innovate forward
2

3. Revised schedule – Day 2
• Review Day 1 9.00 – 10.00
• Innovation portfolios (discussion) 10.00 – 11.00
• Barriers to innovation 11.00 – 11.45
• Barriers to innovation exercise (inc lunch) 11.45 – 13.00
• Sources of innovation 13.00 – 13.40
• Sources exercise (inc break) 13.40 – 14.30
• Innovation tools (intro) 14.30 – 15.15
• Innovation implementation 15.15 – 15.45
• Implementation exercise (inc break) 15.45 – 16.15
• Innovate forward and wrap up 16.15 – 16.45
3

4. Review of key lessons from week 1
Need to establish innovation strategy and goals
Choices are based on core competencies and market
opportunities
Allows you to choose an innovation strategy that
creates a long term competitive advantage
Establish criteria against which future innovation
decisions can be made – needs to be flexible
Successful ideation requires setting framework,
establishing process and providing feedback
Best practices dictate a process for assessing and
improving submitted ideas
4

5. 5. Barriers to innovation
Organizational causes of innovation failure
Process causes of innovation failure
Failure to understand why innovation is hard
Failure to understand the customer adoption curve
Failure to look at innovation behaviours
Inherent conflicts between maintaining the status quo,
and developing an innovation culture
5

6. Common Causes of Innovation Failure
Organizational Causes
1. Poor leadership
2. Poor organization
3. Poor communication
4. Lack of empowerment of
stakeholders
5. Poor knowledge
management
6. Resource limitations
Process Causes
1. Poor goal definition
2. Poor alignments of goals
and actions
3. Poor team effort
4. Poor monitoring of results
5. Poor communication and
access to information
6. Inappropriate decision
making
6

7. Failure to understand that innovation is hard
Successful innovation involves:
 Changing current procedures
 Adapting leadership role
 Developing new organizational structures
 Abandoning existing customers (and finding new ones)
 Modifying incentives, compensation and recruitment
 Changing the company culture (and attitude to risk)
The reality is that many of the things that have led to your
previous success, may now inhibit future innovation
Making all of these changes
simultaneously is
challenging
7

8. Failure to understand the diffusion of innovative
products
Tech
Enthusiasts
Visionaries
Pragmatists Conservatives Skeptics
• Life cycle of innovations can be described using s-curve - maps
growth of revenue against time.
• In the early stage, growth is relatively slow as the new product
establishes itself.
• As customers begin to increase demand, product growth
increases more rapidly
• New incremental innovations or changes to the
product allow growth to continue.
• Towards the end of its life cycle growth slows
and may even begin to decline. .
8

9. Technology enthusiasts (innovators) play with new technology.
Visionaries (early adopters) see the benefit quickly.
Pragmatists (early majority) want a product that works.
Conservatives (late majority) buy because they have no choice.
Skeptics (laggards) are never going to buy.
Moore, G (1991)
Crossing the chasm.
Failure to understand the adoption of
innovative products
9

10. Category Percent Characteristics Diffusion model
Innovators 2.5% Risk takers,
educated, multiple
info sources
Knowledge - learning about
the existence and function of
the innovation
Early
adopters
13.5% social leaders,
popular, educated
Persuasion - becoming
convinced of the value of the
innovation
Early
majority
34% deliberate, informal
social contacts
Decision - committing to the
adoption of the innovation
Late
majority
34% skeptical, traditional,
less educated
Implementation - putting it to
use
Laggards 16% neighbors friends
main info sources
Confirmation - the ultimate
acceptance (or rejection) of
the innovation
Rogers, EM. (1985) Diffusion of Innovations
The social science of innovation
10

11. Firm-Related Factors:
• Organizational heritage
• Experience
• R&D team – skills & attitude
• Strategy towards innovation
Project-Related Factors:
• Management style
• Support from the top
• Team skills & interaction
Product-Related Factors:
• Price
• Quality
• Uniqueness
• Technological advancement
Market-Related Factors:
• Target market needs
• Timing of market entry
• Competitive environment
• Marketing
Innovation
Success
Firm factors for innovation
11

12. Focuses on financials &
timelines
Has strict guidelines & control
Had a hierarchical structure
Has multiple bosses & “dotted
lines”
Fosters attitude of “Everyone
is for himself”
Is your organization innovative?
Embraces and learns
from failure
Fosters high energy
activities
Create a “Can do”
environment
Develop support & trust
Is a fun place to work
12

13. Resources
Financial
Technology
People
External
Business Information
Quality Management
Project Management
Decision Support
Processes
Leadership
Incentives
Communications
Risk Tolerance
Culture
Strategy
Product Leadership
Customer Intimacy
Operational Excellence
Disruptive Offerings
Innovation requires context understanding
13

14. Employees
Suppliers &
Partners
Customers
Competitors
Market forces
Product
innovation
Service
innovation
Process
innovation
Revenue
model
innovation
Business
model
innovation
Ideation Evaluation Implementation
Inputs
Outputs
Decision
making
Resource
allocation
Monitoring
Project
management
Process transforms inputs to outputs
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15. Resources
ProcessesCulture
Strategy
Process requires objectives and resources
15
Employees
Suppliers &
Partners
Customers
Competitors
Market forces
Product
innovation
Service
innovation
Process
innovation
Revenue
model
innovation
Business
model
innovation
Ideation Evaluation Implementation
Inputs
Outputs

16. Activities that characterise improvement vs
innovation
Planning then doing vs Doing then planning
Team centred incentives vs Individual incentives
Asking permission vs Seeking forgiveness
Experimenting vs Organizing
Rapid decision-making vs Informed decision-making
Getting the right answer vs Doing the right thing
Trusting others vs Controlling others
Rewarding success vs Rewarding failure
Short term decisions vs Longer-term decisions
16

17. Activities that characterise improvement vs
innovation
Planning then doing vs Doing then planning
Team centred incentives vs Individual incentives
Asking permission vs Seeking forgiveness
Experimenting vs Organizing
Rapid decision-making vs Informed decision-making
Getting the right answer vs Doing the right thing
Trusting others vs Controlling others
Rewarding success vs Rewarding failure
Short term decisions vs Longer-term decisions
17

18. Barriers to innovation – exercise 5
We have identified many barriers to innovation
that are self-imposed processes or policies
• Think of the steps you have to go through in
your organization to start a new project
• Identify one that you think stifles innovation
• Why is that step there and what is its purpose?
• Who benefits from the rule?
• How does it affect people in your organization?
• How does it affect project decisions and outcomes
• Is there a way you could modify step to
preserve original intent but remove
damaging effects?
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19. 6. Sources of Innovation
Where do ideas come from
Innovation as a process
Innovation drivers
Sources of innovation
19

20. Resource
Limitations
Profit
Pressures
Market
Changes
Competitive
Pressures
Pricing
Pressures
Quality
Pressures
External innovation drivers

21. Cash
flow
People
Inertia
Investors
Operations
Talent
Internal innovation drivers

22. Internal Technology
- Product innovations
- Process innovations
- Platform innovations
External Technology
- Embeddable
technologies
- Process technologies
- Value added
technologies
Employees
- Sales
- Operations
- Support
Customers
- Current
- Potential
- Unknown
Supply Chain
- Suppliers
- Distributors
- Integrators
Competitors
- Direct
- Indirect
- Alliance
Sources of innovation
22

23. Sources of innovation – exercise 6
There are many types of innovation (product, process, business model)
& many internal and external factors catalyze innovation opportunities.
There are many current and potential sources of innovative ideas.
Given your thoughts to-date and the specific challenges that are facing
your business – identify the top three sources of innovative ideas.
For each, explain:
• Why you think they will be a leading source of promising ideas?
• What is prohibiting you from sourcing ideas from them now?
• What you can do to encourage them to provide you with ideas?
• How you will develop a system to ensure sustainability?
• How you select the innovative ideas to be further investigated or implemented?
23

24. 7. Introduction to Innovation Tools
Business Model Canvas
Risk Mitigation
TRIZ
Critical Factors
Lean Startup
24

25. Business Model Canvas
25
http://www.youtube.com/watch?v=QoAOzMTLP5s

26. Business Models
26
• How a company creates, provides, & captures value!
• The Business Model Canvas is simply a tool to help
visualize and understand business models…
• The canvas is a bit like a fingerprint for a business.
• Business Models can help you understand most
business concepts (e.g., outsourcing) as well as why
some companies are doing really well and some
poorly.
• The Business Plan describes the how and why of the
business model in more depth.

27. Value proposition
27
• Product/services that create value for customers
– Specific / unique for each customer segment
 Newness
 Performance
 Customization
 “Getting the Job Done”
 Design
 Brand / Status
 Price
 Cost Reduction
 Risk Reduction
 Accessibility
 Convenience / Usability

28. Revenue Models
28
• How company makes $$$ from each customer segment
• Several ways to generate revenue:
– Asset Sale (most common) – Selling physical goods. (e.g., Wal-Mart)
– Usage Fee – Charge fees for use of a service (e.g., UPS)
– Subscription Fees - Revenue generated by selling a continuous
service. (e.g., Netflix)
– Lending/Leasing/Renting – Giving exclusive right to an asset for a
particular period of time. (e.g., Leasing a Car
– Licensing - Charge for the use of a intellectual property
– Brokerage Fees - Revenue generated from an intermediate service
between 2 parties. (e.g., Realtor commission)
– Advertising - Charge fees for product advertising

29. Key Resources
29

30. Key Resources

31. • The [most important] activities in executing a
company's value proposition
– Value Chain discussion we have already had goes
deeper than the discussion here (and is more
comprehensive)
– One thing that is interesting is differentiation of
production vs. problem solving / innovation activities
Key Activities

32. • Remember: competition is value system vs. value
system
– Optimization & Economies of Scale
• Focus on doing the things you do well (core competencies)
and hire others for everything else
– Reduce Risk & Uncertainty
• The value / supply chain can do much more than an individual
company
• If you build everything yourself you are taking more risk on
(innovations will disrupt areas of your business and if you are
loosely coupled to partners you may be able to adapt readily)
– Also includes complementary business alliances that
create competitive advantage
Key Partnerships

33. Risk Mitigation
33
• Resources necessary to create value for the
customer.
– Physical (e.g., manufacturing facilities, buildings,
vehicles, machines, IT systems, distribution
networks)
– Intellectual (e.g., brands, patents, knowledge,
information)
– Human (e.g., employees with knowledge, creative
abilities, tacit technical skills)
– Financial (e.g., cash, lines of credit, stock pool)

34. TRIZ has all recorded solutions distilled
into simple lists + effects database =
distillation of the world’s knowledge …
40
Inventive
Principles
for Solving
Contradictions
8
Trends of
Technical
Evolution
for New &
Future Products
76
Standard
Solutions
24 for Harms
35 for Insufficiency
17- for detection &
measurement
2,500 (?)
Effects
The right
questions with
the answers for
HOW TO?
Questions
TRIZ = systematic ways for defining and understanding
problems and then using the lists above to solve them

35. TRIZ (teoriya resheniya
izobretatelskikh zadach)
35
Russian: теория решения изобретательских
задач,
Theory of the resolution of invention-related tasks
Problem-solving, analysis and forecasting tool
derived from the study of patterns of invention in the
global patent literature developed by the Soviet
inventor and science-fiction author Genrich
Altshuller (1926-1998) and his colleagues,
beginning in 1946.

36. TRIZ (40 Design Principles)
36
1 Segmentation 21 Skipping
2 Taking out 22 Blessing in disguise
3 Local quality 23 Feedback
4 Asymmetry 24 Intermediary
5 Merging 25 Self-service
6 Universality 26 Copying
7 Russian dolls 27 Cheap short-lived objects
8 Anti-weight 28 Mechanics substitution
9 Preliminary anti-action 29 Pneumatics and hydraulics
10 Preliminary action 30 Flexible shells and thin films
11 Beforehand cushioning 31 Porous materials
12 Equipotentiality 32 Colour changes
13 "The other way round" 33 Homogeneity
14 Spheroidality - Curvature 34 Discarding and recovering
15 Dynamics 35 Parameter changes
16 Partial or excessive actions 36 Phase transitions
17 Another dimension 37 Thermal expansion
18 Mechanical vibration 38 Strong oxidants
19 Periodic action 39 Inert atmosphere
20 Continuity of useful action 40 Composite materials

37. Principle 1. Segmentation
37
A - Divide an object into independent parts
– Gator-grip socket spanner
– Multi-pin connectors
– Bubble-wrap
– Have a range of different focal length lenses for a camera
– Multiple pistons in an internal combustion engine
– Multi-engined aircraft
– Pocket-spring mattress
– Stratification of different constituents inside a chemical process vessel
B - Make an object easy to assemble or disassemble
– Rapid-release bicycle saddle/wheel/etc fasteners
– Quick disconnect joints in plumbing and hydraulic systems
– Single fastener V-band clamps on flange joints
– Loose-leaf paper in a ring-binder
C - Increase the degree of fragmentation or segmentation
– Use of multiple control surfaces on aerodynamic structures
– 16 and 24 valve versus 8 valve internal combustion engines
– Multi-blade cartridge razors
– Multi-zone combustion systems
– Build up a component from layers (e.g. stereo-lithography, welds, etc)

38. Principle 2. Taking Out
38
A - Separate an interfering part or property from an object, or single out
the only necessary part (or property) of an object
– Locate a noisy compressor outside the building where the compressed air is
used
– Use the sound of a barking dog, without the dog, as a burglar alarm
– Scarecrow
– Non-smoking areas in restaurants or in railway carriages
– Automation removes humans

39. Principle 3. Local Quality
39
A - Change an object's structure from uniform to non-uniform
– Reduce drag on aerodynamic surfaces by adding riblets or 'shark-skin' protrusions
– Moulded hand grips on tools
– Drink cans shaped to facilitate stable stacking
– Material surface treatments/coatings - plating, erosion/corrosion protection, non-
stick, etc
B - Change an external environment (or external influence) from uniform to non-
uniform
– Use a temperature, density, or pressure gradient instead of constant temperature,
density or pressure
– Introduce turbulent flow around an object to alter heat transfer properties
C - Make each part of an object function in conditions most suitable for its
operation
– Freezer compartment in refrigerator
– Different zones in the combustion system of an engine
D - Make each part of an object fulfil a different and/or complementary useful function.
– Swiss-Army knife
– Combined can and bottle opener
– Hammer with nail puller

40. Principle 4. Asymmetry
40
A - Change the shape or properties of an object from symmetrical to
asymmetrical
– Introduce a geometric feature which prevents incorrect usage/assembly of a component
(e.g. earth pin on electric plug)
– Asymmetrical funnel allows higher flow-rate than normal funnel
– Put a flat spot on a cylindrical shaft to attach a locking feature
– Oval and complex shaped O-rings
– Introduction of angled or scarfed geometry features on component edges
– Cam
– Ratchet
– Aerofoil – asymmetry generates lift
– Eccentric drive
– Blohm und Voss observation aircraft
B - Change the shape of an object to suit external asymmetries (e.g.
ergonomic features)
– Car steering system compensates for camber in road
– Wing design compensated for asymmetric flow produced by propeller
– Turbomachinery design takes account of boundary layer flows (‘end-bend’)
C - If an object is asymmetrical, increase its degree of asymmetry.
– Use of variable control surfaces to alter lift properties of an aircraft wing
– Special connectors with complex shape/pin configurations to ensure correct assembly
– Introduction of several different measurement scales on a ruler
http://www.aulive.com/

41. Critical Factors
41
• Technology – Features and Benefits
• Technology – Market Readiness
• Technology – Barrier to Entry
• Market - Adoption
• Market – Channel to Market
• Market - Size
• Management - Entrepreneur experience
• Business Model - Financial viability

42. Lean Startup
42

43. 8. Implementation of innovation
activities
Implementing the innovation process
Challenges of innovating
Developing a pilot program
Innovation in organizations
Stage Gate and Inno Gate Innovation
43

44.  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
44

45. Many innovation initiatives fail, top ten reasons
 Failure to understand what innovation is, and why it’s important
 Failure to stimulate, capture and select high potential idea
 Failure to resource chosen ideas appropriately
 Failure to recognize conflict between improving & innovating
 Limited view of innovation (includes business model innovation)
 Limited view of where in the organization innovation takes place
 Over reliance on past strengths to overcome future challenges
 Over reliance on existing assets, relationships and resources
 Failure to adapt organizational processes and procedures
 Lack of leadership commitment to creating an innovative culture
45
Innovation Implementation

46. Establish Realistic Innovation Objectives
Ask how the proposed innovation will enhance your
existing business, or lead to a new one
Recognize that “disruptive” innovation is not a function
of the technology, but its impact on the market
Understand the constraints of your organization
Establish financial and impact guidelines
Explore innovation opportunities in products, services,
processes, business models and supply chains
46

47. Establish innovation benchmarks
Need to identify what are your innovation objectives
What are the focus areas for innovation
Establish process for choosing which innovations to
implement
47

48.  No-one has defined what innovation success looks like.
 Organizations are designed to serve current markets
 Current practices stifle innovation:
 Standard processes and policies
 Incentives
 Communication
 Attitude to failure
 Do not fully understand impact of innovation on
organization
 Lack of clarity on how innovation decisions are made
Challenges to innovation
48

49. Developing a pilot program
Meets key objectives
Cross-functional
Short time line
High visibility
Scalable
Communicate decision and expected outcome
Communicate result
Identify next steps for the pilot
49

50. Review and improve process
Review pilot project and establish follow up
Review innovation process and identify opportunities
for improvement
Use pilot project to build innovation awareness,
increase creativity and company innovation capability
Review constraints to see how they can be reduced
Examine and understand failures to see what lessons
can be learned
50

51. Innovation in Organizations
51

52. Example of the Stage Gate
52

53. • The Stage-Gate® Product Innovation Process
– carefully designed business process
– result of comprehensive research into understanding what discriminates product
success and failure
– pioneered and developed by Dr. R. G. Cooper, it is widely implemented and trusted
• A Stage-Gate Process is a Conceptual and Operational Roadmap
– based on research into what discriminates between product success and failure
– pioneered moving a new-product project from idea to launch.
– Stage-Gate divides the effort into distinct stages separated by decision gates.
• Cross-functional Teams
– must successfully complete a prescribed set of related cross-functional tasks
– prior to obtaining management approval to proceed to product development.
The Concept of the Stage Gate
53

54. Use change management to impact
innovation rates
1. Change through Leadership
2. Create a Shared Need
3. Shape a Vision
4. Mobilize Commitment
5. Make Change Last
6. Monitor Progress
7. Change Systems and Structures
8. Change Culture from Control to Trust
9. Communicate
10.Incentivize
54

55. 1. Encourage innovation through changes in leader behaviors
2. Establish the innovation imperative (company wide)
3. Develop a clear strategy and align innovation actions to strategy
4. Mobilize commitment across organization and provide resources
5. Identify which current process and resources limit innovation
and make changes to improve likelihood of success
6. Establish new organizations and metrics for disruptive innovation
7. Establish performance benchmarks and measurement systems
8. Change decision processes, from hidden to open, and from
control to trust
9. Facilitate two way open, timely and accurate communications
10. Encourage innovation through new incentives and hr practices
55
Increasing innovation implementation
success rates

56. Innovation implementation – exercise 7
We have identified the need to innovate, and the different types of
innovation opportunity available.
We have recognized that changing the organization to become more
innovative is hard, and that many of our innovation initiatives fail.
Choose top three challenges to implementing innovation projects in
your company. Explain how they limit innovation implementation.
What might you do to overcome each and increase success likelihood.
• Lack of understanding of innovation
• Lack of realistic goal setting
• Poor understanding of competencies
• Failure to anticipate market trends
• Limited financial resources
• Limited human resources
• Unwillingness to experiment
56
• Lack of infrastructure or expertise
• Conflicts with existing business practice
• Unwillingness to change
• Failure to choose from alternates
• Risk perceptions
• Not in core area of business
• Lack of alignment with existing organization

57. 8. Innovate Forward
Innovation is a social science
Developing innovative people
Developing innovative teams
Creating an innovation culture
57

58. The People Side of Change
1. Leading Change
• Authentic, committed leadership throughout the duration of the initiative
is essential for success. From a project management perspective, there
is a significant risk of failure if the organization perceives a lack of
leadership commitment to the initiative
2. Creating a Shared Need
• The reason to change, whether driven by threat or opportunity, is
instilled within the organization and widely shared through data,
demonstration, demand or diagnosis. The need for change must exceed
its resistance.
3. Shaping a Vision
• The desired outcome of change is clear, legitimate, widely understood
and shared.
4. Mobilizing Commitment
• There is a strong commitment from key constituents to invest in the
change, make it work and demand and receive management attention
58

59. • What works:
– Mentoring and coaching
– Skills & experience development
– Careful matching of complementary skills
– Free information exchange (networking)
– Resource availability
– Free-wheeling opportunity
• What doesn’t:
– Strict personal objectives
– Individual performance over team performance
– The “right” way of doing things
– Restricted information
People development
59

60. • What works:
– Clearly stated expectations
– Well-defined responsibilities & accountabilities
– Complementary skills and personalities
– Open and inquisitive discussions
– Some competition
• What doesn’t:
– Undefined goals – “I’ll tell you once you are done.”
– Unresolved personality conflicts
– Tolerating incompetent people
– Similar and overlapping skills
– Cliques and secretive behaviours
Team structure and dynamics
60

61. • What works:
– Recognition – timely & deserved
– Compensation – rightful and consistent
– Discipline – timely & fair
– Zero tolerance for incompetence
• What doesn’t:
– Insincere praises
– Sub-par compensation
– Tolerating sub-standard performance
– Undeserved rewards
– Canned rewards
Reward systems
61

62. 1. Create buy-in for the need to innovate, as making changes in an
organization culture is hard
2. Establish specific strategic innovation objectives for your company
3. Build a consensus about the selection/rejection criteria
4. Create a process to stimulate new ideas, collect them and then resource
those that meet your decision criteria
5. Engage cross-functional teams to make decisions
6. Provide positive and negative feedback to idea generators and company
7. Monitor performance of projects against milestones, and communicate
outcomes
8. Incent both success and failure
9. Create an environment that learns from failure and knows how to choose
which opportunities to reject
Steps to creating an innovation culture
“When you innovate, you've got to be prepared for everyone telling you you're nuts”
Larry Ellison
Steps to creating an innovation culture
62

63. • What works:
– “Failure is ok” attitude
– High energy
– “Can do” environment
– Support & trust
– Fun at work
• What doesn’t:
– Focus on financials & timelines
– Strict guidelines & control
– Hierarchical structure
– Multiple bosses & “dotted lines”
– “Everyone is for himself”
Culture and values
63

64. • What works:
– Support – commit to the cause wholeheartedly
– Protect the team from conventional rules (financial,
process, etc.)
– Communicate
• There is no such thing as “too much communication!”
• But, you have to communicate in the right context
• What doesn’t:
– Leaving the team on their own
– Applying regular rules to determine a project’s fate
– Keeping it quiet
Leadership commitment
64

65. Take Home Assignment
Review two projects that you have been involved in over the past
year. Evaluate whether they succeeded or failed. If they succeeded,
how could they have been more successful, if they failed identify
why, and what you might do to change this.
1. For each innovation project – define the expected outcome and
motivation
2. Describe what you did.
3. Describe what worked and what did not, from both a
technological and behavioral perspective.
4. Identify lessons learned.
5. Can you suggest how outcomes of similar projects might be
improved in the future
65