Fundamentals of Innovation, Quality Management

1. Innovation ManagementIndustry Perspective

2. Topics What is innovation? What are the boundaries, where does it start/stop Where does innovation fit within the overall business context What links do you see to other classes and concepts Is there a function for innovation or is it a process As CEO how do you manage innovation What are key metrics, how are trade-offs managed

3. What is innovation? Primary sources Internal – Marketing, Sales, R&D, Service Tech’s, Phone support, other External – Suppliers, customers, competitors, Universities – mad scientists Is innovation a Product, Process, Service ???? Consider i-Pods – repackaged MP3 technology Amazon ordering process – patented 1-click ordering process CountryWide and WaMu – developed new services in sub-prime mortgage space

4. Boundary Conditions Are there boundaries for innovation? Consider these concepts – types of innovation Semiconductors – Break-through (science project) Tremendous investment in core research – leading edge physics, chemistry, EE i-Pod – Derivative (VOC, music industry market need – DRM) Limited innovation, new ID yet repackaged known technology Post-it Notes – Stumble upon ( were never a VOC topic – sometimes a product leads you to demand

5. Post Its Story In 1968, Dr. Spencer Silver, a scientist at 3M in the United States, developed a "low-tack", reusable adhesive. For five years, Silver promoted his invention within 3M, both informally and through seminars, but without much success. In 1974, a colleague of his, Arthur Fry, who sang in a church choir, was frustrated that his bookmarks kept falling out of his hymnal. He had attended one of Silver's seminars, and, while listening to a sermon in church, he came up with the idea of using the adhesive to anchor his bookmarks.[1] He then developed the idea by taking advantage of 3M's officially sanctioned bootlegging policy. 3M launched the product in 1977 but it failed as consumers had not tried the product. A year later 3M issued free samples to residents of Boise, Idaho. 90% of people who tried them said that they would buy the product. By 1980 the product was sold nationwide in the US and a year later they were launched in Canada and Europe.[2] In 2003, the company came out with Post-it Super Sticky notes, with a stronger glue that adheres better to vertical and non-smooth surfaces.

6. Basis for Innovation Marketing? Sales? Engineering/R&D? Operations? Service?

7. Where does innovation fit? Everyone owns it Sales for customer interaction and VOC Marketing for core research and unserved needs R&D for new ideas, solutions looking for an answer Operations for supplier engagement and new ideas Services for post-sales VOC and understanding use conditions Because innovation has many potential sources and is diffused in the business it’s challenging IdeaStorm from Dell – collaborate on innovation

8. Principles of Innovation Understand the customer and the market Voice of the Customer, Hierarchy of Needs can help Develop and maintain a portfolio of opportunities Front-end opportunities require development Back-end opportunities need to be euthanized Angelow’s Law – Killing a product is twice as difficult as launching a new item No one wants to lose revenue opportunity – there is always one deal on the horizon Generally, no one knows true costs, and killing one product might increase costs of other products because of Overhead Personal investment – it’s fun to create something new, no fun to bury a legacy of success – after all it’s someone’s baby Discipline drives success Discipline in project selection Discipline in stage gate reviews Discipline in project plan execution (Scope, Risk and People Management)

9. Levers of Performance Increase Revenue Decrease Cost

10. What’s the portfolio about? Portfolio Analysis - Investing in the right products at the right time to balance innovative products with lower risk investments Ideas & Money Slide 10

11. Tunnel or Funnel The tunnel effect is what happens when a company doesn’t have an effective stage gate process Everything is built – no killing of ideas May invest resources in things that don’t matter to the market Funnel uses gate reviews to evaluate progress Not only progress on development of the idea Progress of the market – validate the opportunity is still there

12. Innovation matters to CEO’s because of revenue and margin

13. Premise of Product Lifecycle Management – up and to the right Concept Design &Develop Prototype & Pilot Launch & Ramp Service & Support Phase-out & Disposal Production DRIVE MARGINS& REDUCE SUPPLY RISK OPTIMIZE INVESTMENT DECISIONS RAMP TO VOLUME& HIT TARGET COST MITIGATE RISK ASSOCIATED WITH REGULATORY COMPLIANCE REDUCE SERVICE & WARRANTY COSTS GET TO MARKET FASTER DEVELOP PRODUCTS “RIGHT TO MARKET”

14. Stage Gate Reviews What happens in stage gate reviews What’s the intent Who is involved What decisions are made