The Process of Innovation

Adapted from: Faley, T (2007). Innovation Process. Ann Arbor, MI: University of Michigan Price, J (2007). New Venture Creation. Ann Arbor, MI: University of Michigan

November 2014

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What is “innovation”? It depends…

Innovation is one of the most overused words in business world. As of 2014:

@ 20 million+ ‘innovation’

search results from Google 65,000+ “innovation” books on Amazon.com

It describes everything from incremental improvements in technology to revolutionary changes that impact society.

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Innovation is the “glue” between invention and investment

Invent

• Create new ideas and concepts

Innovate

• Match inventions with people’s problems to form solutions

Invest

• Commercialize solutions via businesses

“Research is the transformation of money into knowledge.

Innovation is the transformation of knowledge into money.”

Dr. Geoffrey Nicholson, 3M

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The process of innovation transforms ideas into businesses

Ad-hoc

Gut-feel

Disorganized

Opportunistic

Fortunate

Individual

Structured

Disciplined

Organized

Purposeful

Planned

Scalable

Invention Innovation Investment

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Is the business proposition strong enough to justify moving forward?

Is the business feasible?

Ideas and Solutions

Business Proposition

Business Feasibility

Business Plan

Is the idea strong enough to justify moving forward?

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Ideas and Solutions

Business Plan

• Persona Mapping

• Technology Mapping

• What is the product or service?

• Who are the users?

• Why will they use the product?

• How does your business make money?

• Industry

• Market

• Product

• Company

• Team

• Investor Pitch

• In-Depth Planning

Step 1) Ideas and Solutions

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Ideas and Solutions

Business Plan

• Persona Mapping

• Industry

• Market

• Product

• Company

• Team

• Investor Pitch

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The first solution is rarely the best solution…

Idea / Invention

Concept

Technology Map People

Personas

Community Map

Affects &

Effects

Perceptions &

Valuations Outcomes &

Results

Potential Solutions

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Deconstruct an idea to discover affects and effects

Idea / Invention

Concept

Technology Map

Describe the idea:

• What does it do?

• What is special about it?

• What does it compare to?

• What is its effect?

• What allows it to do have an effect?

• What is essential for it to do what it does?

• What are the limits of what it does?

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The best “market research” models how people think and choose

People

Personas

Community Map

Describe the community:

• Who are the users, experts, and influencers?

• What are their needs?

• What outcomes do they desire?

• What experiences do they desire?

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Link technology & community to uncover novel solutions to people’s problems

Idea / Invention

Concept

Technology Map

People

Personas

Community Map

Causes &

Effects

Perceptions &

Valuations

• Effects of technology push versus market pull • Results where most value is likely to emerge • Limits of technology and markets • Combinations of multiple technologies and/or markets

Outcomes & Results

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Refine the idea until it is strong enough to merit deeper investigation

Causes & Effects

Perceptions &

Valuations

How can we do “it”?

Who will value what “it” does?

Remember, all innovations begin as inventions, but not all inventions are innovations.

Similarly, commercialization starts with innovations, but not all innovations can be commercialized.

Step 2) Business Proposition

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Ideas and Solutions

Business Plan

• Persona Mapping

• Industry

• Market

• Product

• Company

• Team

• Investor Pitch

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Creating the business proposition is iterative

Crafting the business proposition establishes the path to commercialization

• What is the product?

• Who is the customer?

• Why do they buy?

• How do you make money?

Business Influences

Business Offering

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Formulate an initial Business Proposition for your “solution” What is your product/service?

• What does your business do?

Who are your target customers? • Are their needs compelling enough to justify buying the

product concept? Why will your target customers use your product?

• Value proposition to the user?

How does your company make money? • Company’s value capture mechanism • Is the product pricing consistent with the value created

for the user?

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Create influence diagrams for the business by mapping the market

Causal loop diagram of a model examining the growth or decline of a life insurance company https://en.wikipedia.org/wiki/Causal_loop_diagram

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Business influences define the offering as a Feature, Product, or Business Feature = Licensing or joint ventures are most likely business outcome

• Can’t acquire complimentary assets • Don’t control ancillary IP

Product = Product development effort that gets acquired is most likely business outcome • Market channel is unavailable • “Product” must be sold with other products (i.e. bundled) • Supply chain is non-existent or monopolized

Small / Niche Business = Assets that get acquired by large business the most likely business outcome

• The market small or narrow • Product line extensions non-existent or limited • Limited ability to cross into other markets

Large business = IPO or acquisition is most likely business outcome • Control of Assets • Viable Supply Chain • Growing primary/secondary markets

Feature, Product, Business (Faley, 2007)

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Is the business proposition strong enough to merit deeper investigation?

Perceptions &

Valuations

Causes & Effects

Overlapping the technology, community, and influence “maps” provides a clear picture of the business landscape.

Refine the potential solution and business proposition by iterating through the process, knowing that you may have to revisit the technology and community maps to “regroup”

Step 3) Feasibility Study

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Ideas and Solutions

Business Plan

• Persona Mapping

• Industry

• Market

• Product

• Company

• Team

• Investor Pitch

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Business feasibility from a market, industry, and product perspective

Market Attractiveness

(Potential expansion

to new segments, etc.)

Target Segments, Benefits,

& Attractiveness

(Personas, Needs, & Wants)

Industry Attractiveness

(Porter’s 5-forces,

Sustainable Advantage

(Product

Differentiation, Intellectual Assets)

Market Domain Industry Domain

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Market Attractiveness

(Expanding to new

segments, etc.)

Target Segments, Benefits,

& Attractiveness

(Personas, Needs, & Wants)

Industry Attractiveness

(Porter’s 5-forces,

Sustainable Advantage

(Product

Differentiation, Intellectual Assets)

Market Domain Industry Domain

Business feasibility from a company and team perspective

TEAM DOMAIN

Cohesive value chain

Ability to execute

Missions, aspirations

Step 4) Business Planning

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Ideas and Solutions

Business Plan

• Persona Mapping

• Industry

• Market

• Product

• Company

• Team

• Investor Pitch

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Start with the investor presentation and use the graphics as exhibits in the plan

Leverage the content retention hierarchy to make your presentation memorable

• Generic Text

• Text with clearly marked headings

• Bullet points

• Tables

• Graphs

• Diagrams & pictures

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Key elements of an investor presentation (pitch deck) Solution

• Value proposition / Advantages Business Model

• Value Capture Mechanism / Value Chain Market / Industry

• Users / Size / Segmentation / Growth rate / Stage of development Competition

• Relative comparison and competitive positioning Marketing and Sales

• Go-to-market strategy Operations

• Company-building timeline / Key value-building milestones Finance

• Historical results / 5-year projections / Key milestones / Capital requirements Management

• Bio’s of Key personnel / Org charts

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Key elements of an investor presentation (pitch deck)

Solution Business Model

Business Proposition (Steps 1 & 2)

Feasibility Study (Step 3)

Business “Planning” (Step 4)

Market / Industry Competition

Marketing & Sales Operations Finance Business Management

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The business plan is a living document

Business planning is an ongoing activity. You’re never really done. Keep your plan alive by reviewing it regularly. Start each review by listing the assumptions in your plan and how well they’re holding up. At this stage, the goal isn’t to finish a business plan…the goal is to quickly adjust it as you move forward.

This publication provides general information and should not be used or taken as business, financial, tax, accounting, legal or other advice. It has been prepared without regard to the circumstances and objectives of anyone who may review it; therefore, you should not rely on this publication in place of expert advice or the exercise of your independent judgment.

The author makes no representation or warranties of any kind regarding the contents of this publication, and accepts no liability of any kind for any loss or harm arising from the use of the information contained in this publication.

The views expressed in this publication reflect those of the author and contributors and does not guarantee that the information contained in this publication is reliable, accurate, complete or current. The author and contributors assume no responsibility to update or amend the publication.

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Joel Wenger

The Process of Innovation

Small Business & Entrepreneurship

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