1. PIE (AIT)1 Principle of Innovation and Entrepreneurship (Lecture 1) Charatpong Chotigavanich charatc@alum.mit.edu

2. PIE (AIT)2 Today.. Instructor Introduction Course Introduction

3. PIE (AIT)3 About Me Charatpong Chotigavanich –Founder of Eyeshake Inc. –McKinsey & Company –Phatra Securities –True Corporation PLC –Orchestra Investor Group –Magnate Capital

4. Introduction to PIE Introduction to the course –Entrepreneurship –Innovation –Innovation and Business Model –Business Plan Development –Financing –Legal Issue PIE (AIT)4

5. This Course and Innovation The goal of this course is to provide students with context in which innovation and entrepreneurship can support one another. Analyze and design organization, business model, and build company focusing on innovation. Learn the challenges on building a long lasting company along the way. PIE (AIT)5

6. Course Organization Lecture Case Discussion, for example: –Southwest Airline –Kodak –Apple –Etc… PIE (AIT)6

7. Class Participation Class participation is not only encouraged but required. PIE (AIT)7

8. Grading and stuff… Assignments (30%) Class participation (20%) Midterm (20%) Final Exam (30%) Please create a bring a name label. –I am going to teach this class in an MBA style. PIE (AIT)8

9. A word on plagiarism Just don’t do it. PIE (AIT)9

10. Innovation Classic definitions include (Wikipedia): –the act of introducing something new: something newly introduced(The American Heritage Dictionary). –the successful exploitation of new ideas(Department of Trade and Industry, UK). –a creative idea that is realized [(FransJohansson)] (Harvard Business School Press, 2004) PIE (AIT)10

11. Innovation Innovation is the entire process by which an organization generates creative new technological ideas (invention) and converts them into novel, useful and viable commercial products, services, and business practices for (potential) economic gain - MIT Sloan PIE (AIT)11

12. Being innovative? 2012 Sep 4thPIE (AIT)12

13. Dimension of Innovation 2012 Sep 4thPIE (AIT)13

14. Innovation in an organization PIE (AIT)14

15. Innovation Challenges PIE (AIT)15

16. How do you solicit innovation? Begin by asking a few questions: –What is the problem you are trying to solve? –How do you propose to solve it? –What is the potential market size for the proposal? –What is the customer’s “pain” you are trying to relieve? –What is the current market situation dealing with that “pain”? PIE (AIT)16

17. Market and Innovation Source: MIT Sloan PIE (AIT)17

18. Typical analysis failed to take into account the dynamics of technology and market. PIE (AIT)18 Source: MIT Sloan

19. Can we forecast the dynamics of technological change? Hard because –We have to predict the future –Require expert knowledge –Hard to get data By looking at other examples –Historically, consumption follows s-curve pattern. PIE (AIT)19

20. Let’s take a look at the innovation of Linux PIE (AIT)20 Source: http://www.franteractive.net

21. S-Curve PIE (AIT)21 Function: S(t) = 1/[1+e^(-t)] Source: MIT Sloan

22. What S-Curve is telling us? 3 stages of growth PIE (AIT)22 1) Steady and slow growth 2) Growing rapidly 3) Reaching limitation (or saturation) The s-curve tells us where we are in a product life-cycle and technology roadmap.

23. What explains the nature of S-Curve? PIE (AIT)23

24. Technology Adoption PIE (AIT)24

25. Adopter Types PIE (AIT)25 Source: MIT Sloan

26. Let’s look at history across several products PIE (AIT)26 Source: New York Times

27. What can we observe in this? PIE (AIT)27 Different products have different S-Curve.

28. What can we observe in this? PIE (AIT)28 Information sharing (the Internet) makes technology adoption a lot faster in the past few decades. And S-Curve becomes steeper.

29. What can we observe in this? PIE (AIT)29 The historical events shape the s-curve and vice versa. (show the attached image)

30. What can we observe in this? PIE (AIT)30 It’s not always smooth. There are dips, cycles. But everyone of them ends up in a plateau.

31. Business Challenges Across Life Cycle PIE (AIT)31 Source: Innovation Lifecycles by Soren Kaplan

32. Measurement Matrix PIE (AIT)32 Source: Innovation Lifecycles by Soren Kaplan

33. Factors that affect the adoption Progressive development of complimentary assets and complimentary products –Classic externalities –Word of mouth –Process improvements –Vintage effects (e.g. machine tools) –Supply constraints –Development of new uses for the same product –General shift in the needs of the population (lifestyle effects) –Progressive development of skills –Pricing strategies PIE (AIT)33 Source: MIT Sloan

34. Now that we know the S-Curve… The hard part still… –How do we predict the future? –How do you know how steep or not the curve should be? PIE (AIT)34

35. Moore’s Law In 1965, Intel co-founder Gordon Moore saw the future. His prediction, now popularly known as Moore's Law, states that the number of transistors on a chip doubles about every two years. PIE (AIT)35 Source: MIT Sloan

36. Impact of Innovation on S-Curve PIE (AIT)36 Source: MIT Sloan All three “purple boxes” would constitute a new S curve but only one is labeled “radical”

37. What has innovation to do with S-Curve? Usually, when there is innovation, there is a new way of doing things (disruptive technology). And the innovation begets another set of S-Curve PIE (AIT)37 Source: Innovation Lifecycles by Soren Kaplan

38. Innovation of “Typewriter” PIE (AIT)38 Source: Innovation Lifecycles by Soren Kaplanc - Innovation creates a leap forward and produces a new set of S-Curves which push the productivity frontier even higher. - And the old technology gradually becomes irrelevant and fades out of the memory.

39. Disruptive Technology The innovation which starts the new s-curve is usually called “disruptive technology” or “disruptive innovation”. PIE (AIT)39 Source: Innovation Lifecycles by Soren Kaplan

40. Innovation and Advance of Civilization “Information sharing leads to innovation.” There is a theory that the reason why the European were more advanced than the African in the past 10,000 years is because of information sharing. Historically, human settlers move across areas with similar weather condition. Since European countries lies in the more similar latitude than those in Africa, so this made people more mobile and created more information sharing. PIE (AIT)40

41. Short exercise Where are we on the technology adoption curve for the following industries? –Mobile phone from home phone to mobile phone –Electric car Horse carriage to gasoline car to electric car –Recordable Compact Disk (CD) or mobile data storage From punched cards to tape to disk to CD to DVD to thumbdrive to etc… –Personal Computer PC to laptop to tablet PIE (AIT)41

42. More example What is the disruptive technology which affects the following: –Camcorder –Digital camera (some technology disrupts more than 1 product) –Dialup modem –Fax machine Think of something you use as a child (or your parents were using) that you are not using anymore. PIE (AIT)42

43. Failure Points So why do organizations fail to identify emerging s-curve threats and opportunities, let alone transition from one curve to the next? The causes are simple. Getting it right is challenging. The top reasons for missing S-Curve shifts include: Not focusing on or investing in the new technologies or applications Not effectively defending an existing business and technology Not effectively creating new markets and technologies to recreate the business Cultural inertia that hinders the ability to play two games at once (e.g., managing the existing business while investing in and driving the new) Lack of Industry Foresight, Customer Insight, or the organizational support and processes (Strategic Alignment) required for superior execution PIE (AIT)43 Source: Innovation Lifecycles by Soren Kaplan

44. Name failure examples Kodak –Filed bankruptcy Encyclopedia Britannica –Halted publication and update in March 2012. What technology replaced those two above? PIE (AIT)44

45. Revival of products There are some products that were thought to die but finally did not: –Analog watch vs digital watch Analog watch is still viewed as luxury. Anything else? PIE (AIT)45

46. Key Points Use technology S curve to answer the following questions: –What are the dimensions of performance in our industry? –Are there natural limits to performance improvement? –Where are our competitors on the S-Curve? Which dimensions of performance are they working on? –What does the available data tell you about what stage the industry is at and how much further it can go? How reliable are your estimates & what are the key assumptions that justify your opportunity definition? S-Curve is a useful tool to “estimate” the future not the “accurate scientific reality”. PIE (AIT)46

47. Can you predict the next failure? If you were the CEO of those companies, what would you do? PIE (AIT)47

48. Can you predict the next failure? If you were the CEO of those companies, what would you do? –INNOVATION!!! PIE (AIT)48

49. PIE (AIT)49 Question? Question ?