A Framework for Growth Through Innovation

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Slide 1: A Framework for Growth Through Innovation Christopher W. Miller, Ph.D., NPDP Second City Innovation Focus Founder, Innovation Focus, Inc. Past President, The Product Development and Management Association Ernst & Young Entrepreneur of the Year Award winner cwmiller@innovationfocus.com 717.394.2500 Slide 2: My Biases The purpose of business is to provide the goods and services that bring technology and resource into the service of humanity ̶ we get paid to do this in a meaningfully differentiated way That innovation is an essential survival skill if we are to successfully confront the challenges of the next 100 years Innovation is an innate human skill, and we are good at it That we only fail at innovation when we choose to ignore our better nature innovationfocus.com Slide 3: What You Need to Help Innovation Become Reality Guts ◦ The myths ◦ The reality Knowledge ◦ Four things that make all the difference ◦ It is not about a magic bullet, it is about a few rules in your own way Culture ◦ Types of innovation leadership ◦ Innovation that transcends marketing and technology This presentation will reference data from the Product Development and Management Association’s Best Practices Research; 1989,1992, 1997, 2004. For a more detailed report go to PDMA.ORG. innovationfocus.com Slide 4: Guts If it is launched onto the market, what percentage of new products and services succeed? innovationfocus.com Slide 5: Guts: The Reality What percentage of new product projects succeed? 3,000 Raw Ideas Numbers of Ideas/Projects Success curve for substantially new products, with success rates, idea to launch, stable for the past 40 years and across countries (Research & Technology Management, MayJune, 1997) 300 Submitted Ideas 125 Small Projects/Patent Submissions 9 Early Stage Development Efforts 1.7 Launches 1 Success NPD Stages innovationfocus.com Slide 6: Guts: How Are The Best Different? 3,000 Raw Ideas Numbers of Ideas/Projects How much better are the best from the rest? 300 Submitted Ideas 125 Small Projects/Patent Submissions 9 Early Stage Development Efforts 4 Early stage efforts 1.7 Launches 1.3 Launches 1 Success NPD Stages innovationfocus.com Slide 7: Guts: The Myth of Innovation VS. Innovation Reality 1989 % Success 58% 1995 59% 2004 58% % Sales from NPs 32.6% 32.4% 28.5% % Profits from NPs 33.2% 30.6% 28.7% # of NPs over 5 years 37.5 38.5 74 Based on PDMA 2004 Comparative Practices Assessment Study; self report data from hundreds of companies who have established success metrics for their company and category. innovationfocus.com Slide 8: Guts: The Myth of Innovation VS. Innovation Reality While the % of sales from new products are up by 20%, Profitability is down by 15% % of launches 50 50 40 40 IMPROVEMENTS IMPROVEMENTS 30 30 20 20 10 10 0 NEW LINES LINE ADDITIONS NEW to the WORLD IDEAS 1990 2004 New to the world ideas take more time and resources to develop but they do not seem to have a significantly higher failure rate. innovationfocus.com Slide 9: Guts New to the World Need Shark Bait Due Diligence Technology innovationfocus.com Slide 10: Guts: The Risk Profile Changes 3,000 Raw Ideas Numbers of Ideas/Projects Type 2 error the danger is walking away from a good idea too soon Type 1 error The danger is launching an idea that might fail 9 1.7 Launches 1 Success 300 125 NPD Stages innovationfocus.com Slide 11: Guts: Is New Risky? New Emerging Meeting Current Needs Due Diligence Using Current Capabilities & Technologies Emerging New innovationfocus.com Slide 12: Guts What kind of Chocolate does this make you think of? innovationfocus.com Slide 13: Guts: Once Upon a Time innovationfocus.com Slide 14: Knowledge That Will Help Innovation Become Reality Guts ◦ The myths ◦ The reality Knowledge ◦ Four things that make all the difference ◦ It is not about a magic bullet, it is about a few rules in your own way Culture ◦ Types of innovation leadership ◦ Innovation that transcends marketing and technology This presentation will reference data from the Product Development and Management Association’s Best Practices Research; 1989,1992, 1997, 2004. For a more detailed report go to PDMA.ORG. innovationfocus.com Slide 15: Knowledge Four things that make all the difference • Customercentric • Strategy driven • Agreed to process that can be measured, repeated and improved • Multifunctional team innovationfocus.com Slide 16: Knowledge What are the one or two factors causing failure? N=325 1. Weak process 2. Misunderstanding the customer 3. Poor resource management 4. Insufficient funding 5. Lack of senior/middle management support 6. Offering insufficient customer value 7. Lack of clear objectives/strategy innovationfocus.com Slide 17: Knowledge Be customercentric … they are talking, can you hear? Brief Personal Description: Andrew owns a excavating business. He’s been running the business for 9 years. The business used to be bigger, and he had a lot of equipment, but then he got married, had kids, and they took more priority. He didn’t want to worry about chasing after money and worry about the equipment. Now he is on most job sites with less stress. His company name is DNA, short for “do nothing all day.” He owns all his own equipment and runs it himself. He is a selfdescribed average or below average maintenance person who sees his equipment as equipment, not as a beauty contest. Favorite piece of equipment is his grill. Key Quote: “How fanatical can you get, it’s a piece of machinery.” Other Observations/Quotes: • His equipment is his livelihood but not his life. He doesn’t spend all his time cleaning everything. Andrew; May 29, 2003 5:30pm Segment Descriptor – Demographics: • Family priority in business • Feels his employees/contractors don’t care to take care of his equipment • Sees his equipment as a means to an end, but not a showcase • He doesn’t care about the rust on the front of the plow. It’s not supposed to look pretty. • In response to how much WD40 you use, “I like to over do it. Preventative maintenance is well worth the money. I’d rather spend a $1.29 for a can than $5000 for a new piston. I don’t’ have a rule of thumb but I use a whole can.” Compelling needs: • Winterizer for parts in the elements in the winter • Something to breakup dirt buildup and is easy to use • Multipurpose product that works for everything • A product that helps work during all seasons—hot & cold innovationfocus.com Slide 18: Knowledge: Expressing The Obvious… “…what if we put it in a bug spray fogger…” A Case New Holland engineer in a WD40 brainstorming exercise One of 8 new products launched out of a modest effort with an innovation team of 2.5 people innovationfocus.com Slide 19: Knowledge: Be Strategy Driven Profits will come from newtotheworld ideas that significantly impact the customer Miles & Snow Strategy Types • 32% Firsttomarket (down, not significantly) • 37% Fastfollower (up from 27% in 1995) • 23% Niche strategies (down from 30%) • 8% Reactive (down, not significant) Note: Success rates do not appear to vary based on strategic approach Can you describe your strategic approach to innovation management? Based on PDMA and 2004 Comparative Practices Assessment Studies innovationfocus.com Slide 20: Knowledge: Make Innovation Content a Part of Your Strategic Discussion Strategy Should Provide Direction Finding Problems Worth Solving • Hunting for Hunting Grounds • Charter where you want to go • Scout for possible problems to solve • Decide which are your problems to solve • Chart a path studded with tangible projects and products Fiskars® Lawn and Garden thought ahead: • Hunted and found 4 new business areas • Focused and funded 1 • Have launched 3 new lines in ecofriendly: • rain barrels • ecopots (made from renewable plant based materials) • weeders (pesticide free) • Stay tuned, more to come… innovationfocus.com Slide 21: Knowledge: Make Innovation Content a Part of Your Strategic Discussion A Simple Innovation Audit Success Factors Rate 1 to 5, 5 is good – we do this, 1 is bad – we don’t do this. 1. Connected to strategy, solid upfront homework – to define the product and justify the project 2. Voice of the customer – a slavelike dedication to the market and customer inputs throughout the project 3. Product advantage – differentiated, unique benefits, superior value for the customer 4. Sharp, stable and early product definition – before development begins 5. A well planned, adequately resourced and proficiently executed launch 6. Tough go/kill decision points or gates – funnels not tunnels 7. Accountable, dedicated, supported crossfunctional teams with strong leaders 8. An international orientation – international teams, multicountry market research & global or “glocal” products Success Blockers Rate 1 to 5, 5 is good – this does not describe us , 1 is bad – this is us. 1. Ignorance: our people simply don’t know what should be done in a wellexecuted project 2. Lack of skills: we don’t know how to do the key tasks and we underestimate what’s involved in these tasks 3. Faulty or missapplied NP process: missing key elements, bureaucratic, overapplied 4. Too confident: we already know the answers 5. A lack of discipline: no leadership 6. Big hurry: we are in a rush so we cut corners 7. Gridlock: too many projects and not enough resources to get the job done right innovationfocus.com Slide 22: Knowledge Companies who have an agreedto process succeed more often. Phases Included in NPD Process 1. Idea creation 2. Early stage idea screening 3. Early stage market assessment 4. Early stage technical assessment 5. Preliminary operational review 6. Market research 7. Concept testing 8. Value analysis 9. Financial review 10. Design & development 11. Product testing (prebeta) 12. Customer testing 13. Test market/sales experiments 14. Trial production 15. Prelaunch business analysis 16. Production/operational startup 17. Market launch 18. Post launch review process Product Development Institute, 2003 Best 38% 54% 55% 64% 29% 38% 32% 38% 57% 70% 77% 70% 42% 52% 52% 68% 66% 45% Average 19% 31% 36% 44% 21% 17% 27% 17% 26% 59% 56% 52% 27% 44% 28% 57% 36% 22% Worst 12% 15% 35% 23% 12% 8% 15% 4% 23% 24% 29% 24% 10% 20% 16% 35% 24% 8% innovationfocus.com Slide 23: Knowledge s Pr Multifunctional/ crossfunctional team creativity is enhanced by constraints. • Team • Charter innovationfocus.com oj ec t B ou nd ar ie Slide 24: Knowledge th About every 8 team will test, and perhaps escape from, the limits you have set. Savor The Rebellion Professor Gina O’Connor Radical Innovation. innovationfocus.com Slide 25: What You Need to Help Innovation Become Reality Guts ◦ The myths ◦ The reality Knowledge ◦ Four things that make all the difference ◦ It is not about a magic bullet, it is about a few rules in your own way Culture ◦ Types of innovation leadership ◦ Innovation that transcends marketing and technology This presentation will reference data from the Product Development and Management Association’s Best Practices Research; 1989,1992, 1997, 2004. For a more detailed report go to PDMA.ORG. innovationfocus.com Slide 26: Culture: Setting The Stage for Everyday Innovation Innovation is closely held by a few experts Result: Companies desire creative approaches but stifle it in daily practices. Creative skills lapse. Creativity happens in a vacuum, using tired formulaic methods. Everyone studies customer segments. Few, invite customers to cocreate with them. Result: Data trumps insight. Dry analysis fails to compel action. Killer ideas are rare. Idea killers: Dime a dozen Result: Good ideas die. Everyone’s afraid to slaughter sacred cows to make room for change. Openness in addressing legitimate concerns is stifled. Dissent is not diffused. Cynicism takes over. Rinse and repeat! innovationfocus.com Slide 27: Culture Leadership: Innovation requires practice and a desire to be good at it. Soy BioDiesel Several years ago, Crystal Flash Energy President Tom Fehsenfeld announced the company’s vision to achieve 30 percent of its profits from alternative energy sources. In the summer of 2003 this vision began to materialize when Crystal Flash Energy launched its first soy biodiesel product, Soy BioDiesel XC. Today, Crystal Flash Energy continues its leadership in alternative energy and is proud to call itself West Michigan’s largest biodiesel distributor. Crystal Flash offers several premium biodiesel choices. Including Soy BioDiesel Plus and Soy BioDiesel XC. “Is this worth the rest of your working life?” Tom Fehsenfeld, President, Crystal Flash Energy Crystal Flash Soy BioDiesel products are available at the pump or delivered directly to your fleet vehicles and equipment. Soy BioDiesel is offered in the following blends: • B5 (5 percent Soy BioDiesel) • B20 (20 percent Soy BioDiesel) • B100 (neat or 100 percent Soy BioDiesel) To determine which blend is most appropriate for your vehicles or equipment… In the past several years, Crystal Flash customers have shown an increasingly strong affinity for Soy BioDiesel products. innovationfocus.com Slide 28: Knowledge: Categories of Innovation Leadership Customer benefits •Tangible •Intangible Packaging •Visual •Utility Technology •Internal Power •Open Innovation Business Model •Mode of Commerce •Systems •Creativity We can do anything, but we can’t do everything. Harley Every product must meet minimal category standards in all of these and excel in one or two. innovationfocus.com Slide 29: Knowledge: Looking Forward Innovation Pressure Points The full lifecycle of the product opportunity innovationfocus.com Slide 30: Knowledge: Innovation Pressure Points A need exists somewhere that can be identified The full lifecycle of the product opportunity A technology exists somewhere in the world that can meet the need innovationfocus.com Slide 31: Knowledge: Innovation Pressure Points A need exists somewhere that can be identified An idea emerges that is accepted by the organization The full lifecycle of the product opportunity A technology exists somewhere in the world that can meet the need innovationfocus.com Slide 32: Knowledge: Innovation Pressure Points IDEA A need exists somewhere that can be identified Commercialization ++ $$$$$ Development $$$ A technology exists somewhere in the world that can meet the need innovationfocus.com The full lifecycle of the product opportunity Slide 33: Knowledge: Innovation Pressure Points IDEA A need exists somewhere that can be identified Commercialization ++ $$$$$ Development $$$ A technology exists somewhere in the world that can meet the need innovationfocus.com The full lifecycle of the product opportunity Slide 34: Knowledge: Innovation Pressure Points IDEA 1. Get further front; half your product’s potential useful life is here innovationfocus.com Slide 35: Knowledge: Innovation Pressure Points IDEA 1. Get further front; half your product’s potential useful life is here 2. Use due diligence tools to extend your product’s lifecycle innovationfocus.com Slide 36: Knowledge: Innovation Pressure Points IDEA 1. Get further front; half your product’s potential useful life is here 2. Use due diligence tools to extend your product’s lifecycle 3. Don’t over engineer your innovation/development processes innovationfocus.com Slide 37: Knowledge: Innovation Pressure Points IDEA 1. Get further front; half your product’s potential useful life is here 2. Use due diligence tools to extend your product’s lifecycle 3. Don’t over engineer your innovation/development processes 4. Practice defensive NPD, you own every product you sell forever innovationfocus.com Slide 38: And last … If not you…who? As innovators our goal is to be fearless in replacing what we do with a better way for our customer. innovationfocus.com Slide 39: Resources PDMA ToolBook Series (1,2,3), Hunting for Hunting Grounds, Wiley, 2002; Getting Lightning to Strike: Ideation and Concept Generation, Christopher W. Miller, Wiley, 2004; The Voice of the Customer, Ethnography, Wiley, 2007 2003 PDMA International Conference Presentation (Cooper, Edgett & Kleinschmidt, AQPC Benchmarking Research) PDMA.ORG, The Product Development and Management Association • Please note: you can have your company data run as a comparison to the PDMA 2004 comparative practice data or by companies in your category. Also note the new data should be out in a few months. (2004 study is available for $150) • Consider NPDP Certification (New Product Development Professional) for selected team members) innovationfocus.com Slide 40: Partial Client List innovationfocus.com Slide 41: cwmiller@innovationfocus.com 717.394.2500 CHRISTOPHER W. MILLER, Ph.D., NPDP Biographical Sketch Christopher W. Miller is Founder of Innovation Focus, a customer research and new product discovery firm in partnership with Second City Communications. He is a past President of the Product Development and Management Association, on two nonprofit boards and a 2003 Ernst & Young Entrepreneur of the Year Award winner. Chris’s primary focus is to inspire deep customer understanding and meaningful innovation. Early in his career he was a Director with Phillips Electronics, Nurse Call & Hospital Video Systems Group. He received his Ph.D. from Case Western Reserve University where he studied the Life Long Learning patterns of technical professionals. Chris’s User Centered Design and Focused Innovation and Hunting for Hunting Grounds approaches are documented in scores of significant articles, chapters, manuals, and workbooks. Chris has been recognized for his series of Growth Forum articles for the PDMA publication Visions. He has written for Food Engineering, Concurrent Engineering, Project Management Monthly, Food Technology Intelligence and The Journal of Product and Innovation Management. He is a coauthor of Creating the Customer Connection: Anthropological/Ethnographic Needs Discovery, Chapter 8 in The PDMA Tool Book to be published by Wiley in August of 2004. Dr. Miller developed the Focused Innovation Technique™ based on highly successful personal problemsolving styles. The Focused Innovation Technique has been credited with a diverse set of service and business solutions within organizations such as American Pharmaceutical Association, Fiskar’s, Kraft, SC Johnson, AARP, Chase Banking Services, Honda, as well as DuPont, Merck, Johnson & Johnson, Kimberly Clark, Bristol Myers, AstraZenica and many others. His approach is to coach and to show teams that they can create their own fact based successful processes. innovationfocus.com