Making Innovation Work in a Growing Economy Phil Samuel, Ph. D.

$100,000-$350,000 Conventional Ultrasound Customers – Sophisticated hospitals and imaging centers Uses: Cardiology Obstetrics General radiology

In 2002 GE China develops a cheap portable ultrasound machine that utilizes a laptop computer and a probe Portable Ultrasound (2002) $30,000 In 2007 GE China launched a dramatically cheaper model and sales took off. Portable Ultrasound (2007) $15,000 $4 MM 2002 2008 $278 MM

Lessons in Innovation Focus on the jobs customers are trying to get done Think beyond your hot products Identify non-consumption and non-consuming contexts Look beyond your industry for ideas Burn your ladder

1 Focus on the Jobs Customers are Trying to Get Done

“People who want to buy power drills don’t necessarily want to buy a quarter-inch drill. They want a quarter-inch hole” - Prof. Theodore Levitt, Harvard Business School

Customers don’t just buy products or services. Job To Be Done Customers don’t just buy products or services. They hire products or services to get functional and emotional aspects of jobs to be done “Job-to-be Done” “Solutions”

The Job of “Cleaning Clothes at Home” Clean Clothes “Job-to-be Done” “Solutions” Detergent and Washing Machine Zero Detergent Washing Machine

What’s the Job Looking for a Better Solution?

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Structure of Jobs Main Job Category Ancillary Job 1 Functional Jobs Social Jobs Personal Jobs Emotional Jobs Ancillary Job 2 Job Steps Ancillary Jobs .. Process Step 1 Process Step 2 Ancillary Job n Process Step n Process Step ..

Under-Served Jobs

Under-Served Jobs Job Focus Identify jobs to be done where ad hoc or no solutions exist. Customer were trying get the job of “reselling and buying goods efficiently”. Ebay created a solution to achieve this job.

Creating Valuable Brands FedEx Crest OnStar Google eBay Starbucks Blackberry Xerox Kleenex Lunchables Hill-Rom Design a solution that does a job well. Give it a brand that uniquely links that product to that job. As people hire it to do that job and find that it does it well, they learn to trust the brand for that purpose. They begin hiring it whenever they land on that “job space” – and talk about it. Advertising can then remind other people that they, too, land on this job, and that they should hire this branded product when they do.

Over-Served Jobs

Over-Served Jobs Disruptive Growth Bring disruption by entering the low-end or new markets with lower performing, cheaper products to non-consumers Micro Lending Motivation for new and first-time Investors Online Stock Trading DIY, Less cost, Easy to access Insurance Provider Group Creating products to reach the under-served markets White Strips No Skill needed, DIY, Less cost

What Drives Non-Consumption Price Skills What constrains consumption? Access Time

What Drives Non-Consumption Help new customers do a job that others were already doing. Often these jobs couldn’t be done due to high cost or skill required Enable less skilled people to get important/ unsatisfied jobs done in less centralized location

Jobs that are Served Right

Download, Listen to, Organize, Access and Share music Related Market Growth Bringing newer solutions to existing customers get related or ancillary jobs done iTunes Download, Listen to, Organize, Access and Share music

Related Market Growth Job Focus Innovation that enables customers to do related jobs that are underserved.

Outcome Expectations – Job Hiring Criteria Customers define success and failure criteria for hiring solutions for each of these jobs. These criteria are called Outcome expectations There are two kinds of outcome expectations – desired outcome expectations and undesired outcome expectations Jobs and outcome expectations form the basis for identifying opportunities for innovation, growth and new value creation

Outcome Expectations (Hiring Criteria) Desired Outcome Expectations Easy to Clean Efficacy of Cleaning Easy Stain Removal Clothes Smell Fresh Clothes Look Fresh Safety Reliable Cleaning Undesired Excessive Cost Time to Clean Clothes Damaged Clothes Use of Resources (Water, Electricity, etc) Wrinkled Clothes Allergens Special Skills Required “Job-to-be Done” “Solutions”

Jobs To Be Done The Job Map Define Locate Prepare Confirm Execute Monitor Modify Conclude Jobs To Be Done

The Job of Cutting Wood

The Job of Cutting Wood Cut Wood on the Jobsite Define – type of cut, material, length, width, angle, etc… Locate – the saw, cord, wood, tape measure, pencil, straight-edge, clamps, etc… Prepare – unwind cord, plug in the saw, knot cord, clamp wood, etc… Confirm – check measurements, work area, saw function, safety gear, etc… Execute – cut the wood Monitor – observe cut line, surrounding area, etc… Modify – file splinters or burrs, check cut line, re-measure, etc…. Conclude – set saw down, unknot cord, unclamp wood, wind cord, etc… Cut Wood on the Jobsite

Underserved Hiring Criterion (outcomes)

Bosch Circular Saw “Direct-Connect” Cord: Minimizes chances of cord connection snags, offers quick and easy replacement if cord is cut, minimizes saw “prep” time (wrapping/unwrapping cord for storage). Anti-snag lip on the lower blade guard: Minimizes the chances of the lower blade guard interfering with the cut, minimizing the chance of cutting error. Dust port on the rear of the upper blade guard: Directs dust down and away from the cut-line, improving visibility of the cutting line and minimizing the chance of cutting error. Dust blower: blows dust from the cutting line, improving visibility of the cutting line and minimizing the chance of cutting error. “Vari-Torque” clutch: Allows the blade slip on the arbor if the resistance suddenly increases, like when pinched in a board, reducing the chances of kickback and improving the saw safety.

Served-Right Hiring Criterion (outcomes)

Over-Served Hiring Criterion (outcomes)

Mapping the Job of Installing Drywall / Commercial Carpentry Current strength NPD/ New Entrant Acquisition Target 33

2 Think Beyond Your Hot Product

Your Innovation Portfolio Types of Innovation Product/ Service Process Business Model Breakthrough Substantial Incremental Degrees of Innovation

Innovation at Apple Types of Innovation Degrees of Innovation Product/ Service Process Business Model Breakthrough Substantial Incremental Degrees of Innovation Recent study by Kaiser Associates revealed that iPod—along with other Apple products affected by its halo—created $70 billion in shareholder value in just three years.

Doblin Model for Innovation Types Business Model Networks and Alliances Enabling Processes Core Processes Product Performance Product System Service Channel Brand Customer Experience Finance Processes Offerings Delivery Source: Doblin Inc.

Passenger Airline Landscape

Industry Innovation Landscape high low Industry innovation activity Core process Process. Enabling process Product performance Offering Product system Service Channel Delivery Brand Customer experience Revenue model Finance Networking high low Your business innovation activity

3 Identify Non-Consumption and Non-Consuming Contexts

Conventional Ultrasound $100,000-$350,000 Portable Ultrasound $15,000

The World Economic Pyramid Population (Millions) Tier Annual Per Capita Income 75 - 100 1 > $20,000 1,500 – 1,750 2 and 3 $1,500 - $20,000 4,000 4 < $1,500 Tier 1 Tier 2& 3 Tier 4

What Drives Non-Consumption Price Skills What constrains consumption? Access Time

Disruptive Innovations: A driver of failure and the source of new growth opportunities Pace of Technological Progress Incumbents nearly always win Sustaining innovations Disruptive innovations Performance Performance that customers can utilize or absorb Entrants nearly always win Time

Beat Competitors with Asymmetry of Motivation % of tons 25–30% 55% Steel Quality Sheet steel 18% 22% Structural Steel Quality of integrated mills’ steel 12% 8% Angle iron; bars & rods Quality of minimill-produced steel 7% 4% Rebar 1975 1980 1985 1990

The Strategies for Asymmetric Competition Bring a better product into an established market Performance Time Low-end disruption Address over-served customers with a lower-cost business model Non-consumers or Non-consuming occasions Different measure Of Performance Time New-market disruption: Compete against non-consumption

Disruptive Strategies NON-CONSUMER Core Market Growth Bringing better solutions to existing customers to get the job done better Disruptive Growth Bring disruption by entering the low-end or new markets with lower performing, cheaper products to non- consumers Related Market Growth Bringing newer solutions to existing customers get related or ancillary jobs done New Market Growth Bringing newer solutions to perform jobs for which ad hoc or no good solutions exist CURRENT JOBS Outcome Focus Help new customers do a job that others were already doing. Often these jobs couldn’t be done due to high cost or skill required

Expensive failure always results when disruption is framed in technological rather than business model terms Tabletop Radios, Floor-standing TVs, Computers Performance Time Path taken by vacuum tube manufacturers Different measure Of Performance Portable TVs Pocket radios Non-consumers or Non-consuming occasions Hearing Aids Time

Galanz Enterprise In 1992, developed a new microwave oven for the tiny Chinese kitchens; After winning the Chinese low-end market, moved up-market to serve both local and global markets. In 2005, holds 75% of Chinese market and nearly 50% of global market in microwave ovens. ( >600 patents in microwave technologies) Since 2004, has started to replicate the same strategy by developing air-conditioners for tiny Chinese homes. Within 4 years, became No. 2 Chinese air-conditioner exporter.

Disruption in Business Models Disruption has been the dominant historical mechanism for making things more affordable and accessible Yesterday Ford Dept. Stores DEC Delta Hamilton Xerox IBM Cullinet AT&T Dillon, Read Today Toyota Wal-Mart Dell Southwest Airlines Fidelity Canon Microsoft Oracle Cingular Merrill Lynch Tomorrow Chery Internet retail RIM Blackberry Air taxis ETFs Zink Linux Salesforce.com Skype E-Trade

Examples of Developing Countries’ Disruptors India Tata Group Wipro Infosys NIIT China Galanz BaoSteel Lenovo Groups and Huawei Technologies Haier Brazil Natura AmBev Mexico Cemex Indonesia LNM Group Israel Teva Pharmaceuticals Philippines Jollibee Foods

4 Look Beyond Your Industry For Ideas

Where do Ideas Come From? Nature Outside Industry Industry T Team Individual Team Industry Outside Industry Nature

Russian Lunar Vehicle Light Bulb The Russians launched an unmanned Lunar Probe to the moon’s surface with the intention to transmit TV pictures to the Earth. A projector using a light bulb was designed to illuminate the lunar surface ahead of the vehicle. However, existing light bulbs would not survive the impact of landing on the Moon surface. The most durable bulbs were ones used in tanks, but even those bulbs would crack at the joint between the glass and the screw base during tests. Problem – How to keep the light bulb from cracking at the interface between the glass bulb and the base?

Psychological Inertia REAL BOUNDARY CONSTRAINTS IDEAL SOLUTION EMOTIONAL BOUNDARY PROBLEM SOLUTION EXPERIENTIAL BOUNDARY INTELLECTUAL BOUNDARY BELIEF BOUNDARY

Where do Ideas Come From? Nature Outside Industry Industry T Team Individual Team Industry Outside Industry Nature

Catching Errors in New Car Models GM had a problem. It took GM over 70 days to track an error introduced while assembling a new car model GM used Process Benchmarking and Forced Association techniques to innovate Who is good at catching errors very quickly? Answer: CDC GM had a problem. It took GM over 70 days to catch an error introduced while making a new vehicle.

Center for Disease Control CDC is able to track down the source of food poisoning within 72 hours of event By adapting the principles from CDC, GM reduced the time it takes to track vehicle errors from 70 days to less than 10 days resulting in savings of billions of dollars from recall expenses

“Someone, Somewhere Already Solved Your Problem”

Innovation principles Patent Research Key discoveries: Problems and solutions were repeated across industries and sciences Patterns of technical evolution were repeated across industries and sciences Innovations used scientific effects outside the field where they were developed Set of system level Innovation principles > 5,000,000 Patents

Eliminating Contradictions Systems often reaches its limits due to contradictions built into the system

RQ-7 Remote Reconnaissance Unmanned Air Vehicle

Patent Research: Contradictions Key discoveries: Progress is hindered due to contradictions in the systems Technical Contradiction Physical Contradictions ~1,250 typical system contradictions ~40 techniques for overcoming system conflicts >200,000 Patents

Leveraging the Knowledgebase Contradiction ? Yes Want to Know How to Do it? Predict Evolutionary Potential? Needs Improvement? Technical Contradiction Physical Contradiction Knowledgebase Tool Yes Yes Yes Contradiction Matrix Separation Principles Effects Solution Tree Trend Analysis

Innovation Is… recognising that the ‘root cause’ of your innovation problem is that your system has hit a ‘yes, but’ limit…

…and that your job is to resolve Contradiction… High Quality or Low Cost Affordable or Customized First Cost or Life Cycle Cost Flexible or Rigid Big or Small High Quality and Low Cost Affordable and Customized First Cost and Life Cycle Cost Flexible and Rigid Big and Small A or B A and B

…using a database describing how other people in other industries already solved similar contradictions What’s stopping you… What you want to improve 15, 17 23, 40 How others solved the problem

Typical Design Compromises - The Bicycle Saddle Saddle must be WIDE to provide comfortable support AND Saddle must be NARROW to permit pedaling action

Contradiction Map – Bicycle Saddle Because Comfortable Support Wide Saddle Successful Saddle AND AND Pedaling Action Narrow Saddle Requires

Conflict Elimination - Bicycle Saddle Improving Factor: Length of Stationary Object Worsening Factor: Shape “divide an object into parts capable of moving relative to each other” “if an object is rigid or inflexible make it movable or adaptable” “Make movable parts fixed and fixed parts movable”

Hobson Adjustable Seat

Leveraging the Knowledgebase Contradiction ? Yes Want to Know How to Do it? Predict Evolutionary Potential? Needs Improvement? Technical Contradiction Physical Contradiction Knowledgebase Tool Yes Yes Yes Contradiction Matrix Separation Principles Effects Solution Tree Trend Analysis

Three possibilities Thinking FUNCTION Direct a variation in PROPERTY. Conflicting PROPERTIES

Engineering Tribology What Are “Effects”? Established rule or principle from wide range of disciplines Effects from many disciplines Physics Rheology Chemistry Biology Geometry Engineering Tribology Acoustics Information Psychology Education Motivation

Why Use “Effects” To figure out how to achieve a result No contradiction exists, but there are no specific solutions Contradiction results in theoretical solution that needs to be made practical Practical solution is unknown

Example -Technology Power plant in Northern California was emitting selenium in waste water Conventional design for water treatment facility would cost more than 50% of the cost of the power plant Look for ways outside conventional water treatment to perform the function “remove selenium from water” Solution: cattails and ragweed are plants that will extract selenium from water, and bind it in their tissues. Create a swamp where plants can purify the water

Example Remove water from glass (Don’t touch the glass) “Solutions change, functions stay the same”

Property Variation for function MOVE LIQUID field pressure surface Electroosmosis Bernoulli’s Theorem Surface Tension Wetting Pascal Law Electrocapillary Effect Pump Coanda Effect Condensation Electrostatic Induction Forced Oscillations pulsation temperature Electrolysis Resonance Shock Wave Electrophoresis Boiling Ferromagnetism Evaporation Inertia Ionic Exchange shape Super Thermal Conductivity Lorentz Force Thermocapillary Effect Thermomechanical Effect Magnetostriction Funnel Effect Ellipse Spiral porosity Thermal Expansion Dessication Brush Constructions Absorption Superfluidity Jet Flow Capillary Condensation Capillary Evaporation Capillary Pressure sound volume Acoustic Cavitation Acoustic Vibrations Archimedes’ Principle Osmosis Ultrasonic Capillary Effect Ultrasonic Vibrations weight Use of foam Gravity

The Job of “Cleaning Clothes at Home” “Job-to-be Done” “Solutions”

OBJECTIVE: To sell more washing powder OBJECTIVE: To sell more ‘cleaned clothes’

Working Backwards from Perfect Current Situation Ideal Innovation 1… 2… 3…. n.… Generation …. Current Design Intermediate solutions Function achieved without resource Cleaning without external agent Detergent and Washing Machine Re-usable washing method Clothes that clean themselves

Classification of Effects by FUNCTION CLEAN

Function: CLEANS LIQUID

"Wash with Ultrasonic Waves and Electrolysis" washing machine. By combining Electrolyzed Water's dirt dissolving and bacteria-removing properties with the cleansing power of Ultrasonic Wave technology SANYO has brought to realization the World's first "Zero-Detergent course" washing machine.

Where do Ideas Come From? Nature Outside Industry Industry T Team Individual Team Industry Outside Industry Nature

Biomimicry (a.k.a. Biomimetics) Biomimicry is the science that studies nature’s models and then imitates or takes inspiration from these designs and processes to solve human problems. Nature runs on sunlight Nature uses only the energy it needs Nature fits form to function Nature recycles everything Nature rewards cooperation Nature banks on diversity Nature demands local expertise Nature curbs excesses from within Nature taps the power of limits

Why Learn from Nature? If you put the history of the planet on a calendar year, bacteria arrived in March. Other species followed. The human species came at 11:45 pm on the last day of the year. Therefore, other species have been evolving and doing “R&D” a lot longer than we have; let’s learn from them. Nature has experience from 3.8 billion years of R&D generating 10-100 million survivors of well adapted solutions. These are extremely well matched to the types of problems we have and need to solve.

How does Nature Create Materials High Temperature High Pressure Chemical Treatment Process In nature, designs are organic, they are very small (only as big as they need to be to fit the function). Human designs are very geometric and our inventions are very brittle, stiff and most of them depend on wheels for mobility. Nature manufactures its materials under life-friendly conditions -- in water, at room temperature, without harsh chemicals or high pressures

Kevlar vs Spider Webs VS

Cricket Inspired Speakers Imagine  making high-end audio speakers based on a cricket that uses its burrow to amplify sound. New Kilpsch speakers are created by studying how Egyptian mole crickets amplify sounds

Termite Inspired Building A termite mound can seem eerily like a skyscraper, especially when you consider the mount’s efficient regulation of air flow, temperature and humidity.

Solving World’ Water Problem Namibian Beetle Pill Bug

Tardigrades and Vaccines There are serious issues with shipping worldwide due to breakdown of refrigeration. Tardigrades can deal with extreme dehydration, vacuum and UV radiation Researchers from University in Sweden shipped two species of tardigrades aboard a 2007 European Space Agency mission that reached160 miles up in low orbit. Some of the water bears were exposed to the vacuum of space only, while others were exposed to vacuum and ultraviolet radiation. Researchers reported that the tardigrades survived vacuum-only conditions quite well.

Natured Inspired Business Models The Land Institute is studying prairies as a model for an agriculture that features edible, perennial polycultures and that would sustain, rather than strain, the land Various researchers in Industrial Ecology are looking for ways to apply nature's lessons of economy, efficiency, cooperation, and rootedness to the marketplace.

5 Burn Your Ladder

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“The Stone Age didn't end because they ran out of stones…” - Sheikh Yamani Contact Information Dr. Phil Samuel Phil.Samuel@bmgi.com (303)-827-0010 www.bmgi.com

- Lucius Annaeus Seneca If one does not know to which port one is sailing, no wind is favorable. - Lucius Annaeus Seneca