Innovating Without an R&D Budget
Transcript of Innovating Without an R&D Budget
Agenda and Outline
I. Essentials of Strategic Planning: What Works, What Doesn’t, and How Can I use my Plan to Drive
II. Case Analysis: Strategic Thinking and Execution—Porter Airlines
III. Competition and Growth in 3 Circles: Building a Growth Strategy
IV. Innovation—Innovating Without an R&D BudgetV. So Many Options, So Little Time, What’s Next—
Frameworks for Project SelectionVI. Strategic Foresight—Getting Future Ready Through
Scenario DevelopmentVII. Application Breakout: Developing Your Future Scenarios
Innovation: Innovating Without an R&D Budget
Need for innovation and the Nonprofit Innovation paradoxDefinition and types of innovationThe Innovation Journey (5 Tools and Perspectives)
1. Innovisits2. Looking in Unusual Places3. Design Thinking4. Positive Deviance5. Flip the Orthodoxy
Agenda
If the only planning you do is planning that enables you to do what you are currently doing more effectively, over time you will become increasingly irrelevant.
The Need for Innovation
Innovation isn’t a fad, it’s the read deal, it’s the only deal. Our future, no less than our past depends on innovation.
‐‐Gary Hamel, What Matters Now
Capturing Cognitively Distant Strategic Positions
1. Spotting: low‐hanging fruits plucked quickly;—superiority requires news lens & mental processes.
2. Acting: combat inertia and guide firm to toward opportunity—particularly difficult if it alters firm’s identity.
3. Legitimizing: persuading external stakeholders that new perspective is viable.
Innovation: R&D Expenditures
‣ In the for‐profit world innovation is unquestioningly accepted as necessary for survival and improved financial performance.
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Company Research & Development Expenditure
General Electric $5.6 billionApple $2.6 billionGoogle $5.2 billionJohnson & Johnson $7.5 billionCapital One Innovation Lab
The Nonprofit Innovation Paradox
‣ Nonprofit Leaders recognize the need for innovation and many (82%) innovate by adding programs.‣ However in a recent Johns Hopkins study, more than 2/3s of nonprofit leaders (68%) reported an inability to pursue innovation that they wanted to adopt. ‣ This gap between those recognizing the need for innovation and actually pursuing it is the nonprofit innovation paradox.
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The Nonprofit Innovation Paradox
‣ Innovation Constraints include:‣ Restrictive funding does not allow discretion‣ Absence of line‐item for R&D‣ Current needs are overwhelming‣ Lack of growth capital‣ Lack of staff time, expertise, and technology
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Defining Innovation
Innovation • A change in a service, product offering, business model, or operations which meaningfully improves the experience of stakeholders.
Importantly, innovation refers to the notion of doing something different (Latin innovare: "to change") rather than doing the same thing better.
Types of Innovation
• New to the Organization—red zone in hospital for pharmaceutical entry, no interruptions to minimize errors.
• New to the Industry—senior living centers implement concierge service from leading hotels.
• New to the World—Apple offers legal digital music downloads from all 5 major record labels.
Meaningful innovation for nonprofits does not have to be entirely new to the world. It may be borrowed from others and innovative for us.
The Innovation Journey (5 Tools and Perspectives)
Learn from other innovators 1. Innovisits2. Looking in Unusual Places3. Design Thinking4. Positive Deviance5. Flip the Orthodoxy
1. InnoVisits
Learn from other innovators • Visit other innovative nonprofits and NGOs
• Visit think tanks and other research organizations
• Visit innovative for‐profits
1. InnoVisits
Learn from other innovators How to:
These can be inexpensive, within a day’s driveAssemble a team, at least one senior executiveArticulate internally why ‘this’ organizationCreate list of questionsWrite‐up learnings and shareSend thank you notes
2. Looking in Unusual and Unfamiliar Places
• Change & Innovation comes from the periphery
• Innovation benefits from COLLISION of ideas, fragments, and hunches. (Steve Johnson, Where Good Ideas Come From)
• Embrace diversity and those that make you uncomfortable—add a ‘freak’ to your team.
• Go to museum, ballet, food truck…
3. Design Thinking
The Deep Dive MethodologyHuman Centered DesignAre you able to drill down into the real customer expectations, experiences and unspoken needs?
Design thinking incorporates constituent or client insights in depth aimed at getting beyond the assumptions that block effective solutions.
Design Thinking for Social InnovationTim Brown and Jocelyn Wyatt
1) Inspiration2) Ideation3) Implementation
—Inspiration –problem or opportunity motivation
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Source:
• Based on client’s need‐‐Careful observation• Discover unarticulated needs• Avoid preconceived notions or solutions• Stories—let it unfold, strange experience• Beginners mindset, naïve questions• Observe vs. Interpret• Designed to build empathy, understanding,
and question assumptions and inspire new solutions—it is about depth not breadth!
3. Design Thinking
“Arthritis Glove” (Georgia Tech)
“AGNES” Age Gain Now Empathy System (M.I.T.)
“Pot‐in‐Pot” RefrigeratorKeeps food cold with no electricity$100,000 Rolex Award winner
3. Design Thinking Inspiration: Gaining Empathy
—Ideation
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• Share stories and observations distill into themes and areas for opportunity
• Many ideas to get a good idea• Co‐design, bring participants into the design
process. (pet adoption)
3. Design Thinking
—Ideation
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• The best way to get a good idea is to get a lot of ideas
Linus Pauling
• Divergent Thinking vs. Convergent Thinking
3. Design Thinking
1. Defer Judgment2. Build on the ideas of others3. Stay focused on the topic4. One conversation at a time5. Encourage wild ideas6. Go for quantity7. Be visual
IDEO’s Rules for Brainstorming
—Implementation
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• Rapid prototyping– Models, story boards, role play, diagrams
• Experiment—does not need to be entire organization
• Unintended Consequences• Develop and test revenue model• Mini‐pilots –get “market” feedback• Identify capabilities needed to deliver
solution
3. Design Thinking
PrototypingDe‐risk innovationQuick, dirty, cheapFacilitate small experimentsMake visual, Make tangibleFind problems earlyNot finished product
Your Member Stories
Mock Shop for personal care items in Ghana from local and international brands at range of price points. Observe decision‐making in action
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STORIES SOLUTIONS
OBSERVATIONS IMPLEMENTATION PLANS
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4. Positive Deviance and Reverse Engineering
Positive Deviance–in every community there are individuals whose uncommon behaviors and strategies lead to superior solutions than peers in similar conditions.
Positive Deviance—power of extreme examples in the tail
Richard Pascale, Jerry Sternin, Monique Sternin
4. Positive Deviance and Reverse Engineering
“Create Far From Home, Win Everywhere”
Reverse Innovation‐ innovation that trickles up from developing markets, innovate for the tails of the distribution and win everywhere.
5. Challenge Orthodoxy
Orthodox—conforming to the established doctrine, conventional. The well accepted and unquestioned way things are done.
Challenging the orthodoxy:• Explicitly question tacitly accepted rules• Search for breakthroughs rather than incremental improvements in status quo
• Engage in ‘Flip the Orthodoxy’ exercise
Sharing Economy / Collaborative Consumption—Obtain value from untapped potential residing in goods that are not entirely exploited by their owners.
Source: Forbes/Entrepreneurs, Chris Myershttp://www.forbes.com/sites/chrismyers/2015/05/13/decoding‐ubers‐50‐billion‐valuation‐and‐what‐it‐means‐for‐you/#66a2a8681885
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Uber’s Global Gross Revenue, ($ billions)
Source: estimates http://www.latimes.com/business/la‐fi‐0822‐uber‐revenue‐20150822‐story.html
Projected
Why has Uber been so successful?
Is ridesharing a value‐creating innovation or a scheme disguised to allow illegal moves of an unregulated entrant?
Uber
The change in the value (utility) of a good or service as the number of users of that good or service increases.
Positive Network Effects
Externality—when decision/activity causes costs orbenefits to stakeholders other than the one making the decision.
Network Effects can be positive or negative but often in technology businesses we can speak of positive network effects where the value to users increases as others use the good or service.
Uber’s Satisfaction Cycle
Makes drivers happier…attracting even more drivers…
More Drivers…
Create more satisfied
passengers…
Attracts more riders…
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UberPlatform
Multisided Platforms
• Cross‐side network effects—change in value of network as number of users on the network’s other side grows.
(Cross‐side network effects are generally positive.)• Google’s advertisers benefit as there are more searchers• Ebay sellers benefit as there are more buyers looking on Ebay.
• Same‐side network effects—change in value of network as number of users on the same side of network grows.
(Same‐side network effects can be either positive, negative, or neutral)
• Negative (EBAY, Google advertisers, Video game developers)• Positive (Blu‐Ray, Windows)• Neutral (credit card users)
Multisided Platforms
MerchantsMerchantsCredit CardCompaniesCredit Card Companies
BuyersBuyers
MerchantsContent Providers
Amazon Kindle
BuyersReaders, Film Watchers
MerchantsRetailers/ Sellers
BuyersBuyers