Why Innovation Always Trumps Invention Thomas Kuczmarski President, Kuczmarski & Associates

For over 28 years, Kuczmarski & Associates has helped organizations drive growth through innovation Innovation Expertise Co-Founders of the Chicago Innovation Awards Diverse Client Base Executive Education Creating and Leading a Culture of Innovation Managing New Products and Services for Strategic Competitive Advantage 2

Invention Versus Innovation Innovation As A Growth Strategy Member-Centric Innovation Leading Innovation 3

Innovation is a lot more than just new products New Business Models New Services Live Intellectual Property Auctions CTA Bus TrackerCrowd Sourced Retail Multi-Language Prescription Labels 4 languages 17

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Ginger Tata Nano New Acquisition Tata Housing Tata Swach 6

MYTH: “Innovation is a fad and too high-risk for our organization” REALITY: Innovation solves member problems, issues, and needs MYTH: “Individuals drive innovation” REALITY: Innovation provides relevancy and increases the value proposition Innovation Myths and Realities MYTH: “Innovation equals brainstorming” MYTH: “Innovation is purely a creative process” REALITY: Innovation requires a systematic and disciplined process REALITY: Innovation is a team sport 7

Often, organizations face a unique set of innovation challenges Fear of Focus Member Needs Not Understood Limited People Resources Leader and Volunteer Turnover Short Term Financial Needs Lack of Systematic Development Process 6 Common Innovation Hurdles 8

Innovation always trumps invention Inventors create a product with the dream of success 9 Invention generates new ideas, patents, and designs Innovation transforms inventions into commercial products, services, and businesses An invention, no matter how inspired, will not be valued if nobody wants to buy it Innovations, which solve customer wants and needs, will attract customers creating new revenue and growth InventionInnovation Innovators bring a product or service that solves real needs

Invention Versus Innovation Innovation As A Growth Strategy Member-Centric Innovation Leading Innovation 10

Successful innovation provides a path to growth and creates new value Successful innovations are… Creating something new that… Bring your strategic plan to life Offers New Benefits Is Differentiated from Other Offerings Is Valued by Members Yields Relevancy and Value New Products New Business Models New Services New Programs New Processes Allowing you to… Grow your association 11

Explore 2 Vision Strategic Roles Financial Growth Goals Screening Criteria Innovation Strategy Member - Centric Innovation Process Culture Organizational Structure ResourcesRewardsMetrics Innovation Mindset Best Practice innovation companies take a “disciplined-freedom” approach to innovation Define 1 Solve 3 Analyze 4 Develop 5 Prepare 6 Execute 7 Governance Process and Training 12

The Innovation Strategy is comprised of Vision, Strategic Roles, Financial Growth Gap, and Screening Criteria An Innovation Vision and Strategic Roles specifically address how innovation will be used to drive growth over time 13 The Innovation Strategy Vision Who do we want to be? Strategic Roles Screening Criteria Growth Gap How will innovation support our vision? What are our financial expectations? How will we measure success?

Culture: Zapponians and Culture of “Happiness” Vision: Building Customer Service Empire Beyond Shoes Tony Hsieh, CEO Customer Service: Free Shipping/Returns/24 hour Call Center 14

15 Pablo Picasso: Released ~13,000 paintings Created over 250,000 original paintings Babe Ruth: 714 Home Runs 1330 Strikeouts

Motivating Rewards and Recognition Dedicated Resources Visible and Vocal Top Management Commitment Timely Research Conducted with Members Language and Reinforcement of Values Innovation is sustained through Culture and Mindset 16 Innovation Strategy and Metrics

Invention Versus Innovation Innovation As A Growth Strategy Member-Centric Innovation Leading Innovation 17

Create an innovation portfolio 30% Line Extensions 18% Improvements 17% 22% New to the World New to the Company 39% “New Products and Services” 39% “New Products and Services” The Rest 23% “New Products and Services” 23% “New Products and Services” The Best Cost Reductions 8% 15% 31% 42% New to the Company NTW Cost Reductions Repositionings Improvements Line Extensions Source: Kuczmarski & Associates Winning New Products Survey Repositionings 18

An member-centric process enables organizations to deliver product, service, and value propositions that are continually relevant to end users Develop Prepare Launch 7 Create the Project Strategic Plan Identify Problem/ Opportunity Areas Generate and Screen Solutions Develop, Shape, and Test Concepts Shape and Test Prototypes and Develop Business Cases Build Market Implementation Strategy Launch Product/ Service into Market Member touch point Explore Solve Analyze Expand Ideas Focus Concepts Define 1 19

Play in cross-functional teams Faster Successful Commercialization The Result What It Does Effective Team Dynamics Consistent Team Members Creates buy-in Shortens communication Gains critical inputs early in the process “The most successful launches (in terms of overall profitability and/or competitive measures) were related to having cross-functional teams make decisions.” Journal of Product Innovation Management 20

21 Invention Versus Innovation Innovation As A Growth Strategy Member-Centric Innovation Leading Innovation

Kuczmarski’s Top 10 List of Innovation Best Practices Strategy Process Culture 1. Set Expectations 3.Uncover Customer Problems and Needs 4.Use a Systematic and Disciplined Process 6.Play in Cross-Functional Teams 7.Keep Score 8.Reward and Celebrate Success 9.Accept Failure 5.Provide Adequate Funding 2.Create a Portfolio 10.Create an Innovative Culture 22

Peopleship model and 6 values Collaboration Inclusiveness Compassion Peopleship Values- Based Decisiveness Humility Transparency Innovative and progressive organizations will require a new kind of leader in the future “Importantly, managing and motivating people with compassionate, collaborative, transparent and inclusive leadership not only positively affects the traditional bottom line, it also gives a boost to hard measures including ROI, stock price and operating earnings.” 23