Innovation and the S-Curve

Innovation and the S-CurvePractical tips for managing innovation within your company

Ron NeumannMarch 19, 2013

Agenda

• Innovation– Definitions– Types of Innovation– Invention & Improvement– Adoption

• S-Curve– 4 Stages of Growth– Continual Growth– Innovation within an Industry / Company– Speed of Change

• Managing Your Innovation – Jumping the S-Curve– BEMI – Big Enough Market Insight– Managing Talent– Picking the Right Time– Getting Ideas

• 3 Horizon Growth• Disruptive Innovation• The Role of Culture and Leadership• Case Study – SlipStream• Innovation Assessment

Agenda (cont)

Good Starting Definition of Innovationin•no•va•tion (ĭn´ ə-vā´ shən) n. Significant, positive change. ant: STATUS QUO Not necessarily technological.

Doesn’t have to be commercial.

Not incremental or just different (anymore), but significant.

“Innovation distinguishes between a leader and a follower.”

Innovation – Many Things to Many People

“Innovation is the specific tool of entrepreneurs, the means by which they exploit change as an opportunity for a different business or a different service. It is capable of being presented as a discipline, capable of being learned, capable of being practiced. Entrepreneurs need to search purposefully for the sources of innovation, the changes and their symptoms that indicate opportunities for successful innovation. And they need to know and to apply the principles of successful innovation.”

- Peter Drucker

Many Types of Innovation

1) Product – good or service that is entirely new or has significantly improved characteristics or uses;

2) Process – new or significantly improved method of production or delivery of a service;

3) Organizational – new method of organizing business practices, the workplace, or relations with outside organizations; and

4) Marketing – new developments in the design or packaging of products, the channels for distribution, promotion or pricing.

Oslo Manual of the OECD

Invention & Improvement

Innovation differs from invention in that innovation refers to the use of a better and, as a result, novel idea or method, whereas invention refers more directly to the creation of the idea or method itself.

Innovation differs from improvement in that innovation refers to the notion of doing something different rather than doing the same thing better.

S-Curve & Innovation

• S-Curve is a measure of the speed of adoption of an innovation.

• First used by in 1903 by Gabriel Tarde, who first plotted the S-shaped diffusion curve.

• This process has been proposed as the standard life cycle of innovations can be described using the ‘S-Curve‘.

Adoption and the S-Curve

Adoption and the S-Curve

Stages of the S-Curve

Point of Diminishing Returns

4 Stages of the Curve

• Startup• Growth - Scale• Maturation - Compete• Decline - Transition

• Innovation is different at each stage

Challenges

• Startup– Survival, market validation, funding

• Scale– Increasing market, expanding to new

geography, increased manufacturing, hiring

• Compete– Increased number of competitors, lower

margins, heads down

• Transition– Compromises to stay alive, staff layoffs

Double S-Curve Model

Innovation within a Company - Apple

Technical Innovation in an Industry

Not All Innovations are Successful

Zenith– Radio– TV– Zenith Data Systems– HD TV (jumped into it too early)• Bought by LG

New Pressure - Increasing Speed of Adoption

Jumping the S-Curve

According to Accenture’s research, high performers:• pursue “big-enough” market insights—ones based

on changes in the marketplace that are certain to occur—and sure to shake up the competitive landscape

• resolve the conflicting needs of today and tomorrow—trading some of today’s performance for tomorrow’s gain

• build a hothouse of talent to nurture employees, which then attracts more people with skills and vision

• change top management while business is still thriving

• refuse to scale up for scale’s sake and actively manage the downsides of scale at every turn

BEMI

• Big Enough Market Insight– Big enough (relative term)– Valuable enough– Certain enough

Example: Nintendo understood that if they made video games fun and interactive they could attract a whole new demographic.Creating the Wii

Talent Hothouse

• If you are no longer attracting or developing stars, and your proven players are expectedly leaving, It’s a sign that overall performance has peaked and stagnation is settling in.

• It may also be a sign that your staff sees you have entered a mature market even if your sales have not started slowing down

Picking the Right Time

• It is hard to start investing in the next major change when your company is profitable and growing rapidly

• It is better to use this momentum to grow into a new area or consciously decide it is time to maximize your profits in the current area

• If you are involved with trying to attract a buyer for your company that can further complicate investing in new growth

Managing It

Constant high performance and innovation requires managers to break the future into manageable chunks. Apple moves smoothly from iPod to iPhone to iPad by plotting out cycles, and then working systematically within each one, using past success and resources to fuel market domination.

Where Do Ideas Come From?

• Great ideas do not necessarily come from tech-focused research. They’re often derived by studying demographic, geo-political, societal, economic and other global dynamics

• Brainstorming for ideas does not often work

• Customer centric thinking is ideal, but hard to execute well

Features or Sustaining Innovations

• Continuing to add features to one product is not the same as innovation

• It really just slightly modifies the one single s-curve. (i.e. There are 37 different iPods)

•  a sustaining innovation does not create new markets or value networks but rather only evolves existing ones with better value, allowing the firms within to compete against each other's sustaining improvements. Sustaining innovations may be either "discontinuous" or "continuous"

3 Horizon Growth

• Horizon 1 – current business• Horizon 2 – related business• Horizon 3 – completely new business

• Alchemy of Growth– Simple type of portfolio management– Great starting point– Teaches about the differences of

innovation

Disruptive Innovation

Examples of Disruptive Innovation

Innovation Disrupted Market Details of Disruption

Digital photography

Chemical based photography

First examples of digital cameras were very poor quality and laughed at

LCD CRT LCD were first monochromatic and low resolution

Wikipedia Traditional encyclopedias

Encyclopedia Britannica ended print production in 2012

LED lights Light bulbs Initial LED lights were only strong enough to be indicators, now replacing most lighting

Role of Culture & Leadership

• There is no innovation without leadership• Innovation is a collaborative activity• No single person can manage the innovation for an

organization• Innovation often happens outside of normal process• Essential roles for managers

– Promoting an attitude and expectation of innovation– instituting policies and strategies that makes innovation

real – enabling innovation while engaging in dedicated

obstacle obliteration – Remove obstacles for staff

Case Study

• SlipStream– Professors created compression

technology– Designed solution to accelerate Internet– Eventual target was wireless– Initial market was dialup

– I was hired as CEO in 2001

SlipStream - Plan & Outcome

• Designed the company to sell in 4 years• Horizon 1 & 2 planning– Started in a declining market – Dialup

(to reduce competitors and increase ability to dominate)

– Needed the credibility of many users to move into wireless

– BEMI analysis • Dialup large enough to get started • ISPs needed us

– Wanted to sell during growth phase when we reached the wireless market

Original Plan

Dialup Market

Wireless Market

4 years

SlipStream - Plan & Outcome

5 years

Original Plan

SlipStream - Plan & Outcome

Outcome

• Created a new industry• Execution took an extra year, but

exceeded our plan.• Sold to RIM only a few months

after moving into wireless for > 2x original plan

• Interesting that 2 competitors that started in wireless were out of business when we moved into that market

Innovation Assessment

• What stage are you on your primary project?• How many innovation projects do you have

under consideration?• How would you define a BEMI?

– How would you define a “large market” for your marketplace?

• Do you have the right team available to grow?• What skills are missing?• Do you have a 3 Horizon plan?

This is a starting point to your Innovation Plan

THANK YOU