1. CHAPTER 3 DISCUSSION QUESTIONS 1) Why does Starbucks exemplify what Drucker considered to be true innovation? 2) What are Drucker's 4 basic questions about innovation? 3) Pick a company that you think is innovative (other than Apple). Why do you consider the company innovative? What are the company's strengths? 4) What is systematic abandonment? 5) What are Drucker's 7 key sources of opportunities? 6) How do the companies, Kimberly-Clark & Peapod, exemplify Drucker's concept of systematic abandonment? 7) For the 7 key sources of opportunities, give an example of how a company exemplifies each opportunity.

2. INNOVATION “ THE BEST WAY TO PREDICT THE FUTURE IS TO CREATE IT.” PETER DRUCKER -A CHANGE IN THE THOUGHT PROCESS FOR DOING SOMETHING, OR THE USEFUL APPLICATION OF NEW INVENTIONS OR DISCOVERIES.

3. INNOVATION IS ABOUT: 1) PARADIGM CHANGE: CHANGING PEOPLE’S MINDSET. -PARADIGM: A STANDARD SERVING AS A MODEL. 2) BREAKING FREE FROM YESTERDAY AND CREATING TOMORROW. 3) MAKING A PRODUCT/SERVICE BETTER. 4) INCREASING VALUE.

4. WHY DOES STARBUCKS EXEMPIFY WHAT DRUCKER CONSIDERS TO BE TRUE INNOVATION?

5. PARADIGM CHANGE STARBUCKS CHANGED THE WAY WE THINK ABOUT THE FAST FOOD COFFEE INDUSTRY. BEFORE STARBUCKS: -COFFEE WAS SOMETHING WE GOT BETWEEN PLACES (HOME TO WORK, WORK TO KIDS’ SPORTS GAMES, ETC.) AFTER STARBUCKS: -COFFEE BECAME A GO-BETWEEN DESTINATION. PEOPLE STOPPED IN STARBUCKS & STAYED.

6. JACK KEROUAC (ON THE ROAD) INTRODUCED THE PHRASE “BEAT GENERATION” IN 1948 TO CHARACTERIZE THE UNDERGROUND, ANTI-CONFORMIST YOUTH GATHERING IN NEW YORK AT THAT TIME. “ BEAT GENERATION” WAS TRANSFORMED TO “BEATNIK” BY THE MEDIA IN THE LATE 1950’S & EARLY ’60’S TO CHARACTERIZE THE ATTITUDE OF THE HIPPIE GENERATION.

8. STARBUCKS PROBLEMS

9. 1) TOO MANY STORES 2) POOR EMPLOYEE TRAINING 3) HONEYMOON EFFECT 4) BETTER COFFEE COMPETITION 5) BRAND CONFUSION

11. POOR EMPLOYEE TRAINING FEBRUARY 26, 2008 STARBUCKS NATIONWIDE EMPLOYEE TRAINING DAY “ I NEED MY STARBUCKS.” “ THEY DON’T SHUT DOWN MCDONALDS FOR TRAINING, OR EVEN, DUNKIN’ DONUTS. TRAINING IS DONE WHEN YOU FIRST START & THEN CONTINUOUSLY ONWARD.”

12. HONEYMOON EFFECT

13. INCREASED COMPETITION

14. WWW.DUNKINBEATSTARBUCKS.COM -A&G RESEARCH, INC. CONDUCTED 2008 TASTE TEST. -54.2% PREFERRED DUNKIN DONUTS -39.3% PREFERRED STARBUCKS -6.3% EXPRESSED NO INTEREST

15. BRAND CONFUSION

16. MYSTARBUCKSIDEA.COM

17. WHY IS IT IMPORTANT FOR COMPANIES TO INNOVATE? OTHER INNOVATIVE COMPANIES?

19. SYSTEMATIC ABANDONMENT -THE DELIBERATE PROCESS OF LETTING GO OF FAMILIAR PRODUCTS IN FAVOR OF THE NEW OR UNKNOWN.

20. ABANDONMENT IS NOT JUST ABOUT ABANDONING A BUSINESS UNIT OR PRODUCT…..IT’S ABOUT ABANDONING ASSUMPTIONS AND MAKING ROOM FOR NEW IDEAS

21. SEEKING OPPORTUNITIES -ORGANIZATIONS NEED TO BE CONTINUALLY ON THE OFFENSIVE (SEARCHING FOR NEW PRODUCTS/IDEAS). INNOVATION TIME OFF: GOOGLE ENCOURAGES ITS ENGINEERS TO SEPND 20% OF THEIR WORK TIME BRAINSTORMING NEW IDEAS.

24. 2 ) INDUSTRY & MARKET DISPARITIES -OCCURS WHEN THERE IS A MISMATCH BETWEEN SUPPLY & DEMAND. -THE COMPANY HAS STAYED CONSTANT WHILE ITS INDUSTRY OR MARKET HAS CHANGED.

25. 3) INCONGRUITIES -A CUSTOMER VALUE INCONGRUITY IS A DISCREPANCY BETWEEN WHAT THE CUSTOMER WANTS & WHAT THE COMPANY THINKS THE CUSTOMER WANTS.

26. 4) PROCESS VULNERABILITIES -REFERS TO SOME PIECE OF THE WORKFLOW OR OPERATION THAT IS MISSING, DIFFICULT, OR NOT WORKING THAT PREVENTS USERS FROM EMBRACING THE PRODUCT.

27. 5) DEMOGRAPHIC CHANGES -CHANGES IN AGE POPULATIONS & THEIR DISPOSABLE INCOME CREATE DEMAND & MISMATCHES WITH HISTORICAL SUPPLIES OF SERVICES.

28. 6) PERCEPTION & PRIORITY CHANGES THAT SHIFT BUYING HABITS -CHANGES IN PERCEPTION DON’T CHANGE THE FACTS, THEY JUST CHANGE THE CUSTOMERS’ INTERPRETATION OF THE FACTS. -PERCEPTION IS REPRESENTED BY BOTH VULNERABILITY & CUSTOMER RECEPTIVITY.

29. 7) NEW KNOWLEDGE -SCIENTIFIC BREAKTHROUGHS TEND TO HAVE LONG LEAD TIMES & ARE BOTH HIGH RISK & HIGH IMPACT

31. FIRST OWNER OF THE SPACE -THE COMPANY THAT POPULATES THE NEW MARKET FIRST WITH THE MOST INTEGRATED SOLUTION. -TEMPORARY BECAUSE IMITATORS WILL FOLLOW.

32. SPACE DEFINER -CREATES SOMETHING (PRODUCT OR IDEA) THAT DEFINES THE NEW SPACE IN SOME FASHION.

33. NICHE PLAYERS PURPOSEFULLY LET THEIR COMPETITORS DEFINE THE OVERALL SPACE & THEN BECOME PROVIDERS TO THESE LEADERS WITH PRODUCTS, COMPONENTS, OR SOLUTIONS

34. -THERE IS A RISK TO JUST STICKING TO WHAT YOU ARE GOOD AT. -IF YOU DON’T INNOVATE/DIVERSIFY THE PRODUCT MAY DISAPPEAR & SO MAY YOUR COMPANY. LAST BUGGY WHIP MANUFACTURERS