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L8 Innovate or Perish EC10: Innovation & Commercialisation Managing the innovation process and remaining Marcus Thompson

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1 L8 Innovate or Perish EC10: Innovation & Commercialisation Managing the innovation process and remaining Marcus Thompson

2 8. Innovate or Perish2 L8 Outline: Innovate or Perish Why Innovate Why Innovate Why Innovate Why Innovate Ideas & Commercialisation Ideas & Commercialisation Ideas & Commercialisation Ideas & Commercialisation The Innovation Process The Innovation Process The Innovation Process The Innovation Process Managing Innovation Creativity Managing Innovation Creativity Managing Innovation Creativity Managing Innovation Creativity

3 1. Why Innovate? EC10 Innovation & Commercialisation

4 8. Innovate or Perish 4 Innovation in Smaller Companies Small firms produce 55 percent of innovations. They produce twice as many product innovations per employee as large firms, including the employees of firms that do not innovate. This is also true of significant innovations. Small firms obtain more patents per sales dollar and apparently have more discoveries than large firms, since research has shown that large firms are more likely to patent a discovery. Small research and development (R&D) firms are quite research intensive: the percentage of employees that are R&D scientists and engineers are 6.41 percent in small firms and 4.05 percent in large R&D firms. Large firms receive 26 percent of their research and development dollars from the federal government; small firms, only 11 percent. Large firms receive 26 percent of their research and development dollars from the federal government; small firms, only 11 percent. A federal R&D dollar to a small firm is more than four times as likely to be used for basic research as a federal R&D dollar to a large firm. A federal R&D dollar to a small firm is more than four times as likely to be used for basic research as a federal R&D dollar to a large firm. The Facts about Small Businesses, 1997, Small Business Administration,

5 8. Innovate or Perish 5 Policy Approaches to Innovation The rate of return on R&D expenditures is 26 percent for both small and large firms, but only 14 percent for firms not involved with a University. The estimated rates of return on total R&D for firms with a university relationship are 30 percent for large firms and 44 percent for small firms. Innovations coming from small high-tech firms are expected to increase in the coming years as a result of the increase in the. Under the Small Business Innovation Research (SBIR) program, federal agencies with large R&D budgets must direct a share of their R&D funding to small firms, the source of 55 percent of innovations and new technologies. Since the inception of the SBIR program in FY 1983, almost $4 billion in competitive federal R&D awards have been made to qualified small business concerns under the program. Among the important innovations by U.S. small firms in the 20th century are the airplane, audio tape recorder, double-knit fabric, fiber optic examining equipment, heart valve, optical scanner, pacemaker, personal computer, soft contact lenses, and the zipper.

6 8. Innovate or Perish 6 European Policy Measures Measures being considered: –Tax measures favouring use of stock options –Transfer of pension rights (across Europe) –Rapid improvement of system for protection of knowledge –Facilitation of technology transfer between University & research centres –register of business angels & venture capital network Rejected - 5% of all public research expenditure to SME’s Source: EGX111, Role Models For Innovation, Innovation and Technology Transfer, January 1999 “Europe has a structural trade deficit in high technology products of over ECU 10million”. “It is to hasten the emergence of new technology-orientated entrepreneurialism in Europe to optimise the participation of SME’s - both in research itself and in the exploitation of its results.” Edith Cresson

7 8. Innovate or Perish 7 The formation and development of high technology firms have been encouraged by Governments and other agencies in developed economies. –(Oakey, 1984; Malecki, 1991; Oakey, 1991a, 1991b; Henneberry, 1992; Garnsey and Cannon-Brookes, 1993; Garnsey et al., 1994; Storey and Tether, 1998; Tether and Storey, 1998). Consensus?

8 8. Innovate or Perish 8 Why Encourage High-Tech? It is assumed that a growing stock of high technology firms will: –Encourage national economic development. –Make less favoured areas more competitive and self-reliant. –Broaden the industrial base of regions. –Improve the competitive capability of industry. –Create jobs and will be associated with wealth creation.

9 8. Innovate or Perish 9 Perceptions of Technology Based SME’s “ For twenty years or more, there has been an abiding perception, with considerable currency amongst politicians and policy makers in London, Brussels and Glasgow, that new and small firms are an important source - perhaps even the source - of innovation, new technology and employment creation.” CRIC Project CRIC ProjectCRIC Project

10 8. Innovate or Perish 10 SME, Innovation & Employment SME, Innovation & Employment Innovative or technology based new and small firms are more likely to create employment than similar firms in the general population. The average rate of employment creation within an individual innovative or technology based new or small firm tends to be modest. The third recurrent finding is that growth amongst innovative and technology based new and small firms tends to be concentrated in a few firms. The fourth finding is that even amongst the fastest growing innovative and technology based new and small firms the absolute number of jobs created over a decade tends to be modest.

11 2.Ideas & Commercialisation EC10 Innovation & Commercialisation

12 8. Innovate or Perish 12 Choosing a Direction “Entrepreneurs are managers. They manage more than just organisations, they manage the creation of new worlds. This new world offers the possibility of value being generated and made available to the venture’s stakeholders. This value can only be created through change - change in the way things are done, changes in organisations and change in relationships. “Effective entrepreneurs know where they are going, and why. They are focused on the achievements of goals.” “The entrepreneur’s vision is a picture of the new world he or she wishes to create. The picture is a positive one.. He or she is motivated to make their vision a reality.”

13 8. Innovate or Perish 13 Making the Vision into Reality  The vision provides : –sense of direction. –defines goals and objectives. –provides focus when going gets tough. –gives the venture a moral content and social priority. –It communicates and attracts venture support. –It forms the basis of the leadership strategy. Source: Adapted from, Strategic Entrepreneurship, Wickham, 1998, p107  The vision is constantly refocused : z what is source of value to be created? z Who will be involved? z Why will they want to be involved? z What rewards will they gain? z What new relations are needed z What is the potential for self development? Vision must exist before strategy development and planning

14 8. Innovate or Perish 14 Route Adopted LevelofControlLevelofControl Directorship Form a management team Licensing Commercial arrangement through which licensor of IPR allows licensee to develop sell or use in return for a royalty payment Assignation Sell rights and transfer the ownership of the invention and IPR to third party for lump sum Joint Venture & Partnerships Collaboration with one or more organisations to exploit IPR. Includes sharing of costs and revenues

15 8. Innovate or Perish 15 Innovation Process  Prepare –Evaluate the life cycle of existing services and products. –Set-up is systematic abandonment process. –Estimate the abandonment revenue gap. –Set up separate organisation with reporting line, measures, structures and sufficient resources to bridge revenue gap.  Conduct systematic, purposeful and organised of the seven innovation sources (see next slide)  Perform diagnostic analysis of opportunities. –What do the seven sources mean to the organisation’s business processes, channels and technologies. – Conduct analysis by listening to customers –Use focus groups to corroborate the analysis (see Slide 3 for analysis criteria)  Exploit Opportunity –Conduct pilot tests –Commercialised in stages –Allocate resources –Evaluate and measure success. Adapted from Drucker, P, Innovation & EntrepreneurshipInnovation & Entrepreneurship

16 8. Innovate or Perish 16 Drucker on Sources of Innovation  Unexpected Occurrences –Unexpected successes existing management find counter-intuitive. –Unexpected failures. –Unexpected out side events. –Suppliers and customers and competitors.  Perception-Reality Incongruities. – Internal misperceptions. –Conflicting internal reality. –Customer expectation gaps. –Dysfunctional or imbalance at critical point in a business process.  Process Weaknesses. –Weak links in process. –Constraints or vulnerability. –Need to improve. Adapted from Drucker, P, Innovation & EntrepreneurshipInnovation & Entrepreneurship

17 8. Innovate or Perish 17 Drucker on Innovation (2)  Industry and market changes. –Competitive strategies. –Change in players’. –Structure of industry. –Customer value propositions. Technology and operations.  Demographic Changes –Ageing. Shifts in a wealth. –Urbanisation and globalisation. –Culture and societal changes (environmental). –Changes in buyer’s attitudes. –Changes in mood and perception. –Changes in buying habits.  New scientific and business knowledge. –Application of old innovations into new areas. –Expensive innovation with long lead times and risks.

18 8. Innovate or Perish 18 Innovation Potential Checklist  How does it create new value for customers?  Is price related to value to customer not cost to produce?  A response to unmet customer needs or problems?  Does it delivers attributes not products?  Reasonable speed and access to market?  Simple and focused and does one thing and satisfies one need for one group of customers?  Will it obtains a leadership position in the market quickly?  Not too clever nor too far ahead of market?  Consistent with an organisation’s strength and not too diverse in terms of product? Adapted from Drucker, P, Innovation & EntrepreneurshipInnovation & Entrepreneurship

19 8. Innovate or Perish 19 Adopters of Technology  Innovators –Willing to accept risk. Younger and higher income. Aspirational.  Early Adopter –Often opinion leaders, caution with risk. High discretionary income. Highly independent.  Early Majority –Only willing to accept new ideas when risk is low  Late Majority –Sceptical. Place emphasis on word of mouth and seek security from larger organisations  Laggards –Traditionalists. Tend to be older from lower social groups. Source: Rogers Et al, Diffusion of Innovation,1962, p162

20 3. The Innovation Process How to Stimulate Innovation

21 8. Innovate or Perish21 Sector Innovation ‘ An industrial sector is defined as ‘ technology ’ according to its overall R&D intensity (sum of direct and indirect). The direct intensity corresponds to the ratio of R&D expenditure to value added for each sector and country. For indirect intensity, embodied technology (R&D expenditure) in intermediate and capital goods purchased on the domestic market or imported was taken into account. To calculate indirect intensity, the technical coefficients of manufacturing industries extracted from input-output matrices used. ’ (OECD Fact-book 2005) ‘ An industrial sector is defined as ‘ technology ’ according to its overall R&D intensity (sum of direct and indirect). The direct intensity corresponds to the ratio of R&D expenditure to value added for each sector and country. For indirect intensity, embodied technology (R&D expenditure) in intermediate and capital goods purchased on the domestic market or imported was taken into account. To calculate indirect intensity, the technical coefficients of manufacturing industries extracted from input-output matrices used. ’ (OECD Fact-book 2005)

22 8. Innovate or Perish22 Wal-Mart Innovation network Evaluation & Assessment Evaluation & Assessment Innovation Development & Pre- commercailsiation Innovation Development & Pre- commercailsiation Commercialisation Commercialisation

23 8. Innovate or Perish23 Support in Scotland Scottish Enterprise (SE) Scottish Enterprise (SE) ( ( Smart Successful Scotland (SSS) Smart Successful Scotland (SSS) ( ( Business Gateway Business Gateway ( ( Technology Venture Scotland (TVS) ( Technology Venture Scotland (TVS) (

24 8. Innovate or Perish24 Sources of On-line Information ctbook/ htm ctbook/ htm ctbook/ htm ctbook/ htm nitors/techind.asp nitors/techind.asp nitors/techind.asp nitors/techind.asp m?siblingtoggle=1 m?siblingtoggle=1 m?siblingtoggle=1 m?siblingtoggle=1 eID=496 eID=496 eID=496 eID=496 to-business/ideas-and-innovation.htm?siblingtoggle=1 to-business/ideas-and-innovation.htm?siblingtoggle=1 to-business/ideas-and-innovation.htm?siblingtoggle=1 to-business/ideas-and-innovation.htm?siblingtoggle= hat_we_do/operating-plan.htm hat_we_do/operating-plan.htm hat_we_do/operating-plan.htm hat_we_do/operating-plan.htm

25 8. Innovate or Perish25 Exercise: Support for Technology Based on the web-sites below as your own independent research, report on support structures for technology business in Scotland on-projections.html

26 4. Creative Innovation EC10 Innovation & Commercialisation

27 8. Innovate or Perish27 Types of Creativity  Normative  Original thinking used to solve known problems  Exploratory  Blue Sky to identify opportunities  Serendipitous Creativity  Accidental eg post-it

28 8. Innovate or Perish28 4. Creativity  Conceptual fluency-: the ability to produce many ideas or solutions in a given situation.  Mental flexibility: also known as `lateral problem from an entirely new angle.  Originality: usually evidenced by unusual answers to problems. -  Suspension of Judgment: a willingness to defer judgement of ideas of others.  Impulse acceptance: a willingness to react impulsively to an idea  Attitude towards Authority: a willingness to challenge Majaro (1992)

29 8. Innovate or Perish29 Decision Making ‘The Prescriptive Approach Linear and rational process, starting with where we are now and then developing new strategies for the future. One whose objective has been defined in advanced and whose main elements have been developed before the strategy commences. The Emergent Approach A a corporate strategy, which emerges, adapting to human needs and continuing to develop over time. It is evolving, incremental and continuous, and therefore cannot be easily or usefully summarised in a plan which then requires to be implemented. Emergent corporate strategy whose final objective is unclear and whose elements are developed during the course of its life as the strategy proceeds’. Lynch, Richard – Corporate Strategy, Second Edition (2000)

30 8. Innovate or Perish30 What is a Learning Organization (Team)? A Learning Organisation is one in which people at all levels, individually and collectively, are continually increasing their capacity to produce results they really care about. (Senge 1990)

31 8. Innovate or Perish31 Why adopt the concept? Organisations have increasingly taken an interest in adopting the learning organisation concept because of the increasing pressure on organisations to change with developments in globalization, changes in customer expectations and technology driving this trend. Organisations need to continuously develop themselves to maintain their competitive advantage and learning is considered the only way of obtaining and maintaining a competitive edge. In the knowledge era, knowledge is regarded as being more important then financial resources, market positioning and other corporate assets. (Marquardt 1996).

32 8. Innovate or Perish32 Benefits of Becoming a Learning Organisation  Learning organizations link individual performance with organizational performance setting clear direction for employees and achieve goal congruence.  provides continuous learning opportunities for all employees and uses learning to achieve organizational goals and objectives.  All employees including managers learn from their experiences rather then being bound by their past experiences  Learning organizations encourage communication and innovation by fostering dialogue, making it safe for people to share ideas and take risks.  Learning organizations seek to learn as much from its failures as from its successes encouraging continuous development and improvement.  A learning organization continuously interacts and responds to its external environment allowing for better customer focus.

33 8. Innovate or Perish33 What do you see?

34 8. Innovate or Perish34

35 8. Innovate or Perish35 The Elephants Legs

36 8. Innovate or Perish36 What am I thinking?

37 8. Innovate or Perish37 Beauty is in the eye of the beholder

38 8. Innovate or Perish38 Dots before your eyes

39 8. Innovate or Perish39 The idea of a lighted flower pot may strike us as pretty humorous, but it was the answer to a lifelong struggle for a Russian immigrant named Conrad Hubert. Hubert came to the United States in 1890 when he was about 35 years old. He was flat broke. He did what he could to earn a living. He worked in a cigar store, ran a restaurant for a while and managed a boarding house. He even tried fanning and repairing watches. Whatever he did, however, he never made much money. All he wanted was to stop worrying about making ends meet. Now Hubert had a friend named Joshua Lionel Cowen who was very interested in electricity. Joshua had invented a flower pot with a battery in it. Electricity from the battery made the flower "light up" when a button was pressed. Hubert decided he would try to sell these flower pots. Meanwhile, Joshua became interested in something new, electric trains and he sold his friend the flower pot idea for almost nothing. Fortunately, Hubert never went ahead with the flower pots because he had had an idea for a modification. He took the battery, the bulb and the paper tube from the pot and remade it into what he called "an electric hand torch." Hubert sold his invention at first as a novelty, but the usefulness of the flashlight soon became apparent. When he died in 1928 it must have seemed to Hubert a long time ago that he was poor. He was worth $8,000,000. Putting a different light on things

40 8. Innovate or Perish40 Would you trust this man?

41 8. Innovate or Perish41

42 8. Innovate or Perish42 Read these allow as fast as you can

43 8. Innovate or Perish43 1.The Need 2. Collect Information 3. Analyse and validate data 4. Develop coping Strategy 5. Implement Strategy The Process of Idea Generation

44 8. Innovate or Perish44 The Moral of the Story If the princess thinks the same as everyone else she would never have lived happily ever after.. and the prince would have remained a frog.

45 8. Innovate or Perish45 Team & Creativity It follows, then, that one common way managers kill creativity is by assembling homogeneous teams. The lure to do so is great. Homogeneous teams often reach “solutions” more quickly and with less friction along the way. These teams often report high morale, too. But homogeneous teams do little to enhance expertise and creative thinking. Everyone comes to the table with a similar mind-set. They leave with the same”. Amabile, T, “How to Kill Creativity”, HBR, Sept - Oct 1998, pp , Amabile, T, “How to Kill Creativity”, HBR, Sept - Oct 1998, pp ,

46 8. Innovate or Perish46 How to Kill Creativity in Marketing Workgroups:  When leadership becomes dominance  When questioning becomes accusation  When assertiveness becomes aggression  When myopia becomes focus  When opportunities become problems  When arrogance becomes confidence  When structures become strictures  When inclusion becomes exclusion  When rules become constraints  When support becomes ownership  When capabilities become impediments  When experience becomes intolerance  When collaboration becomes fragmentation  When identity becomes an excuse

47 8. Innovate or Perish47 Creating the synergistic team There is no scientific formula to guarantee that synergism will result. LEAVE YOUR EGO BEHIND. The team project is most important. It's OK to feel honoured to be named as a special team member, but be committed to the work and to working together with other members. COMMUNICATE WELL. COMMUNICATE WELL. Keep others informed of your progress. Be honest about what you can do and what you have accomplished. CO-OPERATE WITH THE TEAM LEADER. CO-OPERATE WITH THE TEAM LEADER. Just as too many cooks spoil the stew, more than one leader can lead to misdirected efforts. Be careful to do what you are assigned. Feel free to express your own ideas, but let the leader decide if they can be used now. RELAX AND BE OPEN TO NEW IDEAS. RELAX AND BE OPEN TO NEW IDEAS. Small groups create a good setting for trying new techniques, so leave your reluctance behind. GET ENTHUSIASTIC, AND GIVE A LITTLE EXTRA. GET ENTHUSIASTIC, AND GIVE A LITTLE EXTRA. That means caring a little more, thinking a little harder, making a little greater effort.

48 8. Innovate or Perish48 Old Clothes Sheet 1 Lots of people have clothes that they have grown out of. How would you use unwanted clothes? Think the Impossible! You can use bits of things or combine them. You can change shape, colour size.

49 8. Innovate or Perish49 Things Can Make Money Sheet 2 Combine with other things Use To Provide A Service Use As A Substitute For Package Differently Alter Size Shape Colour? Use for other People Recycle Or Reuse Use Bits Or Parts RESOURSERESOURSE

50 8. Innovate or Perish50 Sheet 3 SLEEPERS

51 8. Innovate or Perish51 Sheet 4 People Want Things! People Or Interest Groups Want But Doesn’t Exist Seen but can’t find it Out of date or style Not easy to use Quality not good enough It’s too expensive

52 8. Innovate or Perish52 Sheet 5 Problems Worksheet

53 8. Innovate or Perish53 Outrageous Suggestions Shift Attention - Make Better Reduce the problem Substitute Random Word Association Change Perspective Make it unnecessary Problem Problems Means Opportunities Sheet 7

54 8. Innovate or Perish54 ? Provide a Service Which Business? For Business Which People? Making Things Which Businesses? For People For BusinessFor People Which People? What Products? Your Skill Skills Mean Business Sheet 8

55 8. Innovate or Perish55 Score your Idea(s) Factor Score (1-10) Personal fit Degree of risk Funding needed Ease of start-up Short-term potential Level of preparation Competitive threats Other Total Assessment Checkbox Sheet 10

56 8. Innovate or Perish56 Do you know who the customers will be? What will they pay? Roughly how many customers do you need to break-even? Do you know about the competition? For what reasons will people use you rather than them? Do you think you will be able to attract in more customers each season? Can you prevent other people copying your idea, locally? Is There a Market for Your Idea? Sheet 11

57 8. Innovate or Perish57 Have you got the skills to promote your business? Could you make or provide the amount and quality of products or service that the customer wants? Do you know how much you will charge? If you need people to help you provide your product or service, do you know who those people are? Do you know how much money you will require? Do you have access to the money and other resources? How much do you still need to get? Can You Provide What the Customer Wants? Sheet 12

58 8. Innovate or Perish58 Do you know who will buy this from you? How will they find out about you? Do you know of anyone who already sells to these customer groups? Are there any local outlets that would help you sell the service or idea? Can you get the names of customers from any sources? Do you already have people lined up who are interested? Can You Get Your Idea in Front of Customers? Action Points Sheet 13

59 8. Innovate or Perish59 Do you have the option of buying an existing business or can you form an alliance? Could you lease or hire equipment, premises etc. locally rather than buy? Who will help you get sales going e.g. promotional material, selling ? Can you set targets and prepare first-cut financial projections? What information do you still need to prepare a (Business) Plan? What Resources & Support Do You (still) Need? Sheet 14

60 8. Innovate or Perish60 Creativity & Marketing "But the truth is that the winning strategies are smart, innovative and original, and break the rules, and most times there is someone somewhere who has seen through conventions and traditional assumptions to create a new business idea" Piercy 2002, p 269

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