1. The Discipline of Innovation

2. Myths of innovation excellence Innovation is driven by creativity and sparks of genius Act like a start-up Innovation has to let a thousand flowers bloom Game-changing programs have to separated from the core business Culture has to change 2Copyright 2013 New Markets Advisors

3. Truths are more subtle Innovation is driven by creativity and sparks of genius Innovation stems from being customer- centric, eager to experiment, and rigorous. These are capabilities that can exist throughout the organization Act like a Venture Capitalist, think carefully about how to balance the innovation portfolio, embrace fast failure The project funnel’s shape totally depends on organizational and strategic factors Act like a start-up Innovation has to let a thousand flowers bloom Game-changing programs have to separated from the core business Culture has to change Separation and integration must be balanced, new ventures may eventually “graduate” Culture is a lagging variable, not a leading one MythsTruths 3 Copyright 2013 New Markets Advisors

4. Four archetypes of innovation Marketplace of Ideas Visionary Leader Innovation through Rigor Collaboration- based Innovation Broad numbers of employees have innovation goals Extensive use of online collaboration tools Industry permits fast experiments in silos Industry has long lead-times for new offerings, requires cohesive vision of the future across functional silos Planning and governance structures may be relatively informal Structured approach to innovation used cross-functionally Approach tied to processes, governance, structure, training, and metrics Organization excels at commercializing innovations created by others Strong business development function Organization adept at rapidly trialing new offerings Source: Wunker and Pohle, “Built for Innovation” Forbes, 2007 4Copyright 2013 New Markets Advisors

5. Responses by systematic innovation firms Pet projects that interested only a few visionaries, e.g. concept “pod” vehicles Herculean efforts that became disconnected from commercial realities, e.g. EV1 Disconnected islands of innovation in a sea of status quo, e.g. NUMMI factory achieving record quality since the 1980s No cohesive strategy, governance, or accountability Very Common, and Unlikely to Succeed 5 Clear process for handling new ideas and new ventures, led by CTO and CEO Portfolio plan for how many ventures are sought, of what size and commitment level Specific strategic priorities, e.g. materials science applications in electric vehicle powertrains Active partnerships to bring novel offerings to market fast Atypical, but Poised for Success Copyright 2013 New Markets Advisors

6. Root causes of failure and success Failure Factors Unclear purpose Capture by pet projects Designed to satisfy only the company’s biggest, most profitable customers (today) Overly influenced by what the industry has been, and not what customers need the industry to be Projects move into “valley of death” after inception but before broad commercialization Too much money thrown at efforts, too quickly Success Factors Competitive strategy guides the process Focused ideation around priority themes Development and commercialization processes Attention paid to HR – staffing, incentives, etc. Governance balances independence with constituency-building Metrics are broad enough to capture the many facets of innovation, but narrow enough to be manageable Bias toward action – get moving quickly 6Copyright 2013 New Markets Advisors

7. Factors that impact program design Will projects be disruptive or sustaining to the core business? Will most innovations come from inside the organization or from the outside? How differently can this new process act from business as usual without triggering “corporate antibodies”? How much ability is there to experiment and iterate with in-market tests? How tightly should efforts be tied to existing functions and business units? 7Copyright 2013 New Markets Advisors

8. Programs may eventually become multi-threaded Procter & Gamble example Dedicated home for new ventures requiring little integration with the core business Example – Mr. Clean Car Wash 8 Facilitation for dedicated brand teams delving into a defined strategic area Example – SWASH fabric refresher for Not Quite Dirty clothes Open door for potential partners, as well as tight collaboration with small network of suppliers and retailers Example – Crest Whitestrips, leveraging trash bag technology from Clorox Mandates and methodologies for individual product areas, along with trainers, facilitators, idea- sharing, competitions, and awards Example – Head & Shoulders scalp examinations at retailers Copyright 2013 New Markets Advisors

9. Variables to work through Mandate – What does this program do and not do? What is its portfolio plan? Process – What process should it follow? How to balance planning with entrepreneurism? Governance – How to balance flexibility with buy-in? Metrics – What is success? How is that measured before programs are scaled up? Staffing – How do we provide incentives to staff throughout the organization to collaborate on innovation? Mechanisms – How do we facilitate idea sharing and outreach? Impetus – What must come first? Where do we direct the energies of the broader organization? Culture – How do we address cultural issues? What are the biggest impediments and the bright spots? 9Copyright 2013 New Markets Advisors

10. Relevant services from New Markets Light-touch counsel on strategy-shaping process Facilitation of consensus-building meetings Deeper involvement in strategy and solution creation Structuring of primary research and interpretation of results Business plan creation 10Copyright 2013 New Markets Advisors

11. Who is New Markets? Experts in reframing market space and generating growth Senior experience Creative and pragmatic First-class consultants, thought leaders, and entrepreneurs Recent Clients 11Copyright 2013 New Markets Advisors

12. Our team’s publications have appeared in: 12Copyright 2013 New Markets Advisors

13. Contact Stephen Wunker Managing Director New Markets Advisors 245 First Street, 18 th Floor Cambridge, MA 02142 USA Tel. +1 617 337 3060 Fax +1 617 337 3070 swunker@newmarketsadvisors.com 13Copyright 2013 New Markets Advisors