The document discusses creating an organization that embraces continuous innovation by releasing a steady stream of breakthroughs. It examines the innovation models of companies like Google and Amazon, highlighting practices like rapid experimentation, small product teams, and automated testing. Other topics covered include funding innovation at GE, partnering through incubators and venture funds, and assessing an organization's capabilities for continuous innovation. The webinar leaders aim to continue the dialogue on institutionalizing practices that sustain process innovation and improvement.

1. ©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

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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

4. 3©2014 FCB Partners. All rights reserved.
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

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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

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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)

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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”

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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

9. 8©2014 FCB Partners. All rights reserved.
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
?
?

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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

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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

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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”

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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

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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

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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”

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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”

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What Should You Do?
Resource Allocation
 How are you allocating
resources between
today and tomorrow?
Capabilities
 Do you have the
disciplines for
continuous innovation?

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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%

19. 18©2014 FCB Partners. All rights reserved.
The Disciplines of Continuous Innovation
Product
Management
Partnering
Funding

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Disciplines Assessment
Funding
Product
Management
Partnering
Competitively
Disadvantaged
World-Class
Competitive
Parity
Industry
Leadership
X = Where we are
performing today
G = Goal
X
X
XG
G
G
Performance
Gap

21. 20©2014 FCB Partners. All rights reserved.
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