DAY: SESSION: PRESENTER: What Do Innovation Projects Fail? Lecture 1 Friday 1:00-4:00pm Dr Shannon Colville Contact Details Dr Shannon Colville Joyce Ackroyd (37 Bldg.), Room 519 First contact always through email: firstname.lastname@example.org Consultation: by appointment Course Materials Lecture notes and any extra readings will be on Blackboard Course Profile Assessment Assignment 1: Reflective Essay on Disruptive Innovation Assignment 1 Play BackBay Battery Simulation Part 1 20 marks What have you learnt about managing new products from this simulation? What were the challenges that you faced in trying to grow a profitable business? How do these challenges relate to Christensens theory of disruptive innovation? (1000 words) Part 2 10 marks Give a recent example from the past 5 years of disruptive innovation in an industry. Use Christensens theory to explain why it is disruptive. (500 words) Assignment 2: Photo Essay Example The task for this assignment is to create a photo essay describing an innovation. It will consist of photos along with captions (up to 100 words per photo). The essay should be structured as follows: Part 1: Take a picture of an innovation that is not a product or a service. In the presentation, briefly describe the innovation, what is innovative about it, and its importance. Internet Banking Example Part 2: Take 3-5 pictures of other parts of the economy that had to be in place to support this innovation. These are meant to be things without which the innovation you are looking at could not exist. In the presentation describe the roles these things play in supporting your focal innovation. The Internet Web Browsers Internet Security Part 3: Take 2-4 pictures that show who or what benefits from this innovation. In the presentation describe the benefits that they derive from the innovation. BPAY Ltd BPAY Ltd Paying the Vet and the dog food delivery man yumyum) Commonwealth Bank Commonwealth Bank Part 4: Take 2-4 pictures of other parts of the economy that are disrupted or threatened by this innovation. In the presentation describe the threat that your focal innovation poses to these things Bank Tellers Australia Post Objectives Make some of these intangible ideas tangible Learn to present without bullet points Be creative in thinking broadly about how your innovation fits into the economic network Have fun! Resources Slideology by Nancy Duarte, and her blog: http://blog.duarte.com/ Presentation Zen by Garr Reynolds and his blog: http://www.presentationzen.com/presentati onzen/ Invention vs Innovation Invention vs Innovation Invention refers to the creation of a brand new product or device. Innovation is an act of making changes to the existing product or the process by introducing new ways or ideas. Basis for Comparison Invention Innovation Concept An original idea and its working in theory. Practical implementation of new idea. Skills required Scientific skills Set of marketing, technical and strategic skills. Occurs when New idea strikes a scientist. A need is felt for a product or improvement in existing product. Concerned with Single product or process. Combination of various products and process. Activities Limited to R & D department. Spread across the organization. Invention and Innovation Control of Fire Idea to market short path Life of inventor was simple Risk Invention and Innovation Paper Currency Previous forms precious metals, coins, raw materials, livestock Vital step in a new monetary system Invention and Innovation Electric Illumination Idea to market 4 years Dividing big problem into a series of small problems Edison unique qualities Invented: 23 times before Edison! So why do we say that Edison invented the light bulb? Its Edisons Innovation Due to Idea Diffusion Spreading ideas (Seth Godin) He had a strategic commercialisation focus in his innovation efforts: E.g.. innovating an enabling technology platform Electric power distribution Networking and collaboration: Sophisticated laboratory operations, employing some of the best and brightest people in the world. Linked with most influential people of the time as well as largest investors. Innovation is More than Just New Products Schumpeters Theory of Innovation Book: The Theory of Economic Development. Schumpeters Forms of Innovation Schumpeter argued that innovation comes about through new combinations made by an entrepreneur, resulting in a new product, a new process, opening of new market, new way of organizing the business, new sources of supply Products and Services Production New Markets Changing the Structure of an industry New Source of Supply Why is Innovation Important? Prime motive is enhanced competitiveness through creation of value and efficiencies Innovation is not an end in itself. It is a means to an end. Innovation enables firms to survive and grow Empirical Evidence IBM investment of $1 billion in complementary metal oxide semiconductor (CMOS) technology in early 1990 estimated return was $19 billion between 1997 and 2001 (Gerstner 2002) Why is Innovation Important? Research in firms shows innovation leads to: higher profits over longer periods better credit ratings higher exports higher market value greater productivity higher survival rates higher wages more rapid employment growth greater value added better return on assets improved corporate image Innovation Failure Almost all firms do attempt to innovate at some time but many fail Significant or radical innovations are highly unusual Whether an idea succeeds or fails depends largely on the company. Blackberry MySpace Blockbuster (1985-2010) Kodak (1889-2012) Reason 1: Wrong Decisions Management sets wrong course in innovation projects Wrong decisions affect the prioritisation of ideas/projects, product strategies for new products, selection of variants in development, etc. E.g. products no body wants, selling products without making profit, making profits without scaling The reasons behind this are: Lack of corporate and innovation strategy as a basis for decision-making. insufficient information as a basis for the decision. Reason 2: Low Priority The day-to-day business takes priority Budget constraints Fear of killing projects Lack of managements commitment runs through all levels of the organisation innovation can cause insecurity and resistance No reward for employee innovation No innovation culture Reason 3: Lack of Market Orientation product does not offer a true and convincing customer value or differentiate itself from existing products. The lack of market and customer orientation has multiple causes: Too much focus on technology Limited time for customer analysis Rely on assumptions rather than facts Reason 4: Slow Structures Larger the organisation, the slower the processes become Long decision making cycles can be a death sentence for innovations Interface and communication problems No everyone is on-board Vision got lost What do these failures Tell Us? The organisation itself influences success Smaller organisations are less complex more agile No hierarchies or bureaucracies act quickly Interlocked and networked collaboration accelerates processes Open culture of innovation Strategies for Overcoming Failure 1. Strategic: how well the project aligns with the businesss strategy, and how strategically important it is. 2. Competitive and product advantage: whether the product is differentiated, offers unique customer benefits, and represents a compelling value proposition to the user. 3. Market attractiveness: how large and growing the market is, and whether the competitive situation is positive (not intense, few and weak competitors). Strategies for Overcoming Failure 4. Leverage: whether the project leverages the businesss core competencies, such as marketing, technology, and manufacturing/operations. 5. Technical feasibility: the likelihood of being able to develop and manufacture the productis this new science and a technically complex project? Or a technology re-package? 6. Risk and return: the financial prospects for the project (for example, NPV [net present value], IRR [internal rate of return], Payback Period) versus the risk. Video Seth Godin from TED http://www.ted.com/talks/seth_godin_on_sl iced_bread.html Discussion What does this tell us about the innovation process? Conclusion Invention is not innovation There are many different forms of innovation Even simple products have a degree of innovation Executing ideas is more important than having them Conclusion Too many innovators and entrepreneurs think if they just find the right idea everything else comes easy. They got it the wrong way around. 1) The idea is easy. 2) The search and iteration for a value proposition and business model is hard. 3) Execution and scaling is where winners are decided (Alexander Osterwalder, Tweet)
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