Tools and techniques for enabling innovation in your organization – this presentation describes a systematic approach that involves your entire ecosystem (e.g. employees, customers and suppliers). How to enable the generation of innovative ideas consistent with strategic direction, leverage social software to improve and evolve these ideas, effectively involve customer through a “go broad and then focus” approach to prototyping; manage product development resources to enable growth, free up the resources needed to invest in innovative ideas.

1. Systematic Innovation Miles Lewitt VP Advanced Technology Intuit

2. Outline Why is innovation important? What is innovation? Exercise 1 - Disruptive Innovation Systematic innovation Exercise 2 - Incongruity Horizon Planning (A systematic approach to structuring your investments for innovation) Core and Context (A systematic approach to freeing up resources for innovation) Exercise 3 - Core and Context Involve everyone (In a systematic way) Prototypes (A systematic approach to customer understanding) Exercise 4 - Putting it to work

3. Why is Innovation Important? Trees don’t grow to the sky forever

5. Attract New Realms of Customers

7. Power Reduction

9. What is innovation? "The creative mind is a sacred gift, and the logical mind a faithful servant. We’ve created a society that honors the servant ... and forgotten the gift." - Albert Einstein

10. What is Innovation? Flash of genius Cannot be taught, replicated or learned Most of the time, these ideas are not realizable with the current state of technology Doing something different that represents a new opportunity for satisfying wants and needs Can This Be Done Systematically?

11. One Perspective on theTypes of Innovation Operational innovation Disruptive innovation Visionary innovation Sustaining innovation Offering innovation Disruptive innovation Simple, convenient and less capable offerings that fill a role that the current offerings do not fill Performance and capability improvements enable moving up-market until the market incumbents are displaced Offering innovation - making existing products and services better in order to stay ahead of entrenched competition, entrepreneurial challengers, and demanding customers Operational innovation - improvements to processes, methodologies, and other business fundamentals

12. Disruptive Innovation Disruptors create growth by Bringing a simple cheap solution to the low end of an established market Helping non-consumers solve a problem Types of non-consumers Skill Related (e.g. computers, defibrillators) Wealth Related (e.g. automobiles prior to assembly line) Access Related (e.g. telephone – limited locations) Time Related (e.g. buying and selling of collectibles)

13. Exercise 1 - Disruptive Innovation Which of the following innovations are disruptive? For those that are disruptive what was disrupted? Brownie Camera WalMart A380 (Airbus) Microsoft Office 2007 eBay Internet Banking Share your results with someone next to you

14. Systematic Innovation

15. Innovation Opportunity Indicators Internal The unexpected: the unexpected success, the unexpected failure, the unexpected outside event The incongruity: between reality as it actually is and reality as it is assumed to be or as it “ought to be” Process need Changes in industry structure or market structure External Changes in demographics Changes in perception, mood or meaning New knowledge

16. exercise 2 (part 1) - incongruity You are the CEO of a cargo shipping company in the mid 20th century Costs of ocean freight are rapidly rising Time for delivery is increasing Pilferage is increasing What do you do?

17. exercise 2 (part 2) - incongruity Your investments are delivering results: Faster ships More fuel efficient ships Ships that need a smaller crew In spite of these investments the situation continues to deteriorate (more cost, more time, more pilfering) This incongruity points you to what opportunity for innovation? What do you do to capitalize on this opportunity?

19. Malcolm McLean

20. Systematic Approachto the Scope of Innovation Technology Operational User Experience Product Concept

21. Horizon Planning Systematic Approach to Structuring Your Investment Portfolio for Innovation

22. Horizon Planning Overview H3 Create Viable Options H2 Build Emerging Businesses Profitable Revenue Growth H1 Extend & Defend Core Businesses Time (years)

23. Horizon Planning Characteristics H1 Established: Extend & defend the core businesses H2 Emerging: Businesses that have a promising future H3 Viable Options: Potential for high growth businesses Materiality Outcomes

24. Core and Context Systematic Approach to Freeing up Resources for Innovation

25. Definition: Core and Context Core Activities or investments that increase competitive advantage by making its offerings more differentiated Context All other activities or investments Typically, A Business Has 90% of it’s Resources Allocated to Context Doubling the small fraction of resources invested in core has a dramatic impact on company performance

26. Framework: Core And Context Core Creates differentiation that wins customers Context Mission Critical Process shortfall creates serious and immediate risk Material to Financials Non-Mission-Critical All other processes Competitive Differentiation 23

27. Flow: Core and Context Core Context Mission Critical Enabling

28. Reducing The Cost of Context Centralize: Bring operations under a single authority Standardize: Reduce the variety and variability of processes delivering similar outputs Modularize:Deconstruct the system into its component subsystems and standardize interfaces for future cost reductions Optimize:Cost and resource reduce Instrument: Characterize processes in terms of the variability of key parameters and develop monitor and control systems Outsource

29. Invention Zone Optimization Zone Resourcing Core and Context Use conventional methods to ramp and manage mission-critical processes at scale Deployment Zone Use unconventional methods to create and incubate new core Use the Six Levers to extract resources from context to repurpose for core

31. What work tasks are directly tied to the key reasons that customers buy your product? (Core)

32. What work tasks are not directly tied to the key reasons that customers buy your product? (Context)

33. List three ideas specific to your organization that would reduce you investment in context, thus enabling you to create more coreShare your results with someone next to you

34. Involve everyone In a Systematic Way

35. Drive Grassroots Innovation Invest in Social Computing tools to enable bottom-up innovation. Social Computing tools like wikis and prediction markets to harness the creativity of employees, validate major decisions, and collaboratively shape new strategies Foster “intrapreneurship” by decentralizing decision-making. Best Buy, for instance, empowers its individual store managers to make their own design, supply chain, and merchandising decisions to address regional customers’ needs

36. Aspects of aSuccessful Innovation Program Control Creativity

37. Brainstorm: A Tool Developed by Intuit That Focuses on the Innovators Grow ideasEvolve your idea by capturing notes, to dos, documents, and links to relevant information Build TeamsRecruit from across the company or let them find you Get HelpLocate those with needed skills and reach out to leaders to remove obstacles CollaborateTake advantage of the collective wisdom of the company through comments and discussion

38. Prototypes A Systematic Approach to Customer Understanding

39. go broad lots of prototypes evaluate experiment & iterate go broad, then focus narrowly With rapid prototyping and deep customer feedback

40. 7 Ideas for 1

41. “If your prototype is half-baked, consumers give you better feedback.” -- Claudia Kotchka, P&G

42. Exercise 4 - putting it to work How will you apply what you have learned from this presentation when you get back to work? Share your results with someone next to you

43. Appendix

44. A Second Perspective on theTypes of Innovation New (needs that people don’t yet know) Customer Problem Existing (better mousetrap) New Existing Technology

45. 39 Third Perspective on theTypes of innovation Customer-Driven Innovation Find an important customer problem that we can solve well, and build durable advantage Technology-Driven Innovation Create new or enhanced products, services or experiences based on a deep understanding and use of technology Commercial Innovation Get lots of people to buy and/or use lots of our products and services in a manner that creates trust Business Model Innovation Create and capture financial return by innovating beyond end-user benefits to other areas of the business model such as new me’s or disruptive cost structure

46. The Unexpected Requires admitting that “We were wrong” Discovering what changed is critical, it is much less important to understand why Unexpected success: Follow-up questions: What would it mean to us if we took advantage of it? Where could it lead us? What would we have to do to convert it into an opportunity? How do we go about it? To take advantage of it, the unexpected success will make demands Unexpected failure: Should always be considered as a symptom of an innovation opportunity Go out, look around and listen

47. Process Need Criteria: A self-contained process A clear definition of the objective That the specification for the solution can be defined clearly Widespread realization that “there ought to be a better way” Constraints: Do we understand what is needed? Is the knowledge available or can it be procured within the “state of the art”? Does the solution fit or does it violate the values of the intended users?

48. Industry and Market Structures Industry and market structures appear so solid that people in an industry are likely to consider them certain to endure forever Rapid growth of an industry is a reliable indicator of change. It also motivates complacency by the large incumbents The innovator has a good chance of being left alone

49. Demographics Population, age distribution, educational attainment, occupational segmentation, employment, income, etc. Impacts what will be purchased and in what quantities Incorrectly perceived to be slowly changing over long periods of time Baby boom in USA started in 1949, baby bust in 1960 1973 participation of women in the labor force continues a multi year pattern of declines, by 1983 the labor force participation by women was at the highest level ever (64%)

50. Changes in Perception In mathematics there is no difference between “the glass is half full” and “the glass is half empty” The meaning of these statements is totally different and so are their consequences In spite of statistically significant improvement in life expectancy, Americans are gripped with high levels of collective hypochondria Everything seems to cause cancer, degenerative heart disease or premature loss of memory Created numerous opportunities for innovation (e.g. health information, organic foods, exercise equipment, etc.) It is important to recognize the difference between a fad and a change in perception

51. New Knowledge Longest lead time & highest risk Almost always based on the convergence of several kinds of knowledge Requires careful analysis of all the necessary factors (e.g. knowledge, social, economic or perceptual). Can the not yet available factors be produced? It is critical to focus on value to the user rather than technical sophistication

52. Convergence Example: Computing 17th Century – Binary 1850 – Babbage’s calculating machine 1890 – Hollerith’s punchcard 1906 – Lee de Forest’s audion tube 1913 – Russell & Whitehead’s symbolic logic 1918 – Programmable anti-aircraft guns 1946 – First computer (ENIAC)

53. Example: Federal Express Operational Technology Own Route Network Central Hub User Experience Product Concept Ubiquitous and Easy Overnight Delivery FedEx is the largest air freight carrier in the world. It began its life as a senior thesis written by Fred Smith in 1965, while attending Yale University. Smith wrote that air freight companies should have their own route networks, rather than merely flying over passenger routes. His professor gave him a C for the paper, saying that the idea would never work in real life.

54. References The Innovator's Solution: Creating and Sustaining Successful Growth (Clayton M. Christensen, Michael E. Raynor) The Alchemy of Growth: Practical Insights for Building the Enduring Enterprise (MehrdadBaghai, David White, Stephen Coley) Dealing with Darwin: How Great Companies Innovate at Every Phase of Their Evolution (Geoffrey A. Moore)