Module 11 Winter 2018 Creativity & Society Experience 18 1 Innovation “Determination all but erases the line between the impossible and the possible”. “You are what you repeatedly do. Excellence is not an event; it is a habit !” Aristotle (384-322 BC) Now that we have covered patents, trademarks, copyrights and trade secrets you should be clear that this is all a prelude to converting the mental creation into a physical reality. In most societies nowadays, even including Communist China but maybe not North Korea, this is done to achieve some goal that usually has an associated financial benefit. This is the process of Innovation. 2 Now while everyone is Creative, not everyone in society has the intestinal fortitude to fight through the Innovation turmoil (remember Steve Jobs of Apple). And it is always a struggle, that can take years of effort. It is clearly much harder than coming up with the idea originally. Here is a quotation to keep in mind. “It is a tremendous act of violence to begin anything ! I am not able to begin. I simply skip what should be the beginning”. Rainier Maria Rilke An excellent move is to find a partner with whom to work. This will help you through the rejections and disappointments that you will almost certainly experience. Think of Bill Gates AND Paul Allen ! But never lose faith in your basic creative idea and remember that its merit is self-defining. 3 That means if you believe your idea is good idea then it is indeed a good idea ! When you contemplate innovation remember the following homily and the need for persistence and never give up ! PRESS ON Nothing in the world can take the place of persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent. 4 Even artists have to battle with the tribulations of innovation and Pablo Picasso advised that “Our goals can only be reached through a vehicle of a plan, in which we must fervently believe, and upon which we must vigorously act. There is no other route to success.” But “Well” you may say, “I am not sure I want to struggle for years to make my idea a reality in society “ Our answer to that is you have a make a living somehow and for sure that is a struggle of sorts to find a place in some societal organization, large or small, and make it secure. Reflect on the stress and strains experienced by those families employed for many years by the US car companies in Detroit and then being laid off because the leaders lacked creativity. 5 In contrast, if you start your own enterprise you will be the boss ! You won’t suddenly be fired due to factors over which you have no control. Your job won’t be outsourced overseas. You can locate the company anywhere you like in the whole world; on the beach or in the mountains. You will be able to work with your best friends as hard as you like and you can take a day off anytime you feel like it. You can build up a company that you can pass onto your kids and retire whenever you wish. But maybe best of all, your work will be FUN everyday ! As Norman Vincent Peale declared “Life’s blows cannot break a person whose spirit is warmed at the fire of enthusiasm” and you will certainly be enthusiastic about working in your own company. Contact Professor Allan by email if you need an idea you can believe in ! 6 Of course, instead of building your own company you can simply sell your idea. There are excellent books that have lots of good advice on how to do this. Again having your idea or creation properly protected is essential before you contact anyone. How to find the person or company that will buy your protected idea is a challenging task that will demand lots of creativity and diligence. For example, a female student at the UW recently created a new type of golf shoe for women. How could this invention be sold into society ? The W5H technique can be used initially to organize your approach. 7 Thus, Who will buy these golf shoes ? Obviously women ! and women that have money, because golf is an expensive game. What will be different about these golf shoes from those now available ? Why would a women buy these golf shoes instead of those made by already existing companies ? Where would these golf shoes be made and sold ? When would the shoes be purchased, at the golf course, in department stores or online ? How can women be induced to consider buying these shoes and how large is the market. (Note the use of W5H again). 8 It is apparent that there are many questions that need to be answered and probably you would want to visit places where golf shoes are sold to get a feeling for what is already out there and at what price. Again you should write down your thoughts in your Creativity Diary. This will demonstrate that you have been diligently pursuing your idea if the need ever arises in the future to prove that you are the inventor of this particular type of golf shoes. A study of the patent literature concerning golf shoes would also be indispensable. You should always make a point of knowing more about the patents related to your idea than anyone else in the entire world. 9 Remember patents are where all the new ideas are spelled out. Often these ideas never get into books or other publications. By this time, you will be a world authority on women’s golf shoes and you are ready to make contact with potential buyers. Again, you can use the powerful W5H system to pull up maybe 5 candidates. But how to contact these possibilities ? The first, most obvious way, is to write a carefully crafted letter to the potential purchaser. But who within the organization ? The President, The Director of Marketing or the Director of New Product Development ? Whoever you select, plan your letter around the everuseful W5H and keep the length to a single page and try to make it become really alive and creative ! 10 Often you can pick the best person to contact by reading the annual report of the company or maybe reading an item in the business section of the newspaper where promotions are announced. A newly appointed Director of Marketing might be especially receptive to a novel idea; he or she will certainly have to find some if he or she is to make a success of the new position. A recent example that is really impressive, is that of a young man who wished to get a job with the Disney Co. in Vancouver, Canada. The product he was selling, of course, was himself. All his repeated applications and letters were ignored. This discourteous behavior is a common occurrence that you will certainly experience when you try to sell your creations. Ultimately, the persistent applicant sent a shoebox with a single shoe inside and a note saying he was keeping the other shoe for when he could get his foot in the door. 11 This creative approach got him an interview and the job he sought. Don’t ever forget that as much as we wish, sales don’t just happen and everyone has to be a salesperson, whether we like it or not. The statistical facts of sales are that; 48% of sales people make one call and quit 24% of sales people make two calls and quit 20% of sales people keep calling 80% of sales are made after the fifth call Of course, many consider that letters are old-fashioned and ineffective ! However, making telephone calls is not easy either. Who do you call ? When ? What do you say ? How do you get your message across in a short time ? 12 You, yourself, probably are not particularly receptive when someone calls you at home to sell you some service, such as TV cable or Vacation packages, even when a “free gift” is proffered. The use of email is not inspiring as a means of communicating with a potential buyer because of the huge daily volume of spam. This must be a tough barrier to surmount for young persons trying to start a career with an online job application and making it stand out from all the other applications. If you are in this jobseeking category you will certainly need some creative ideas ! If you can somehow contrive to meet face-toface with a real live person then you have a better chance of looking into their eyes and spiritually connecting with them. This may take some creativity ! 13 The Director of Research of a major US company once said that he always looked for the tiny flame of creativity in the eye of each job candidate he was interviewing. Would an interviewer see that flame when he looks into your eye ? Now, when you find some entity in society that is willing to buy your creative idea, you will then be confronted with a whole series of challenges that will require lots of creativity to meet. The first of these will be how much will you be paid for your idea. You must have heard the saying. “Ideas are a dime a dozen”. The further you have taken your idea towards reality the greater is its value. 14 A good recommendation is not to be too greedy. But what is greed ? Your aim is to get your idea accepted and worked upon so that it may move onto significant success. If you can arrange an initial payment that recognizes the effort that you have already expended this is a good place to start. Perhaps you could ask for $50,000 to $100,000. If you are dealing with a company it is worth recalling that at each management level there is a figure that can be authorized and paid at that level without question. The larger the payment you demand at the outset, the higher up the company approval will have to be sought. Whatever the figure agreed upon, you should definitely require that the buyer of your idea assumes all the legal costs of prosecuting patents and maintaining these after issue. 15 This could be a large financial burden for you that you should not accept. You should also ask for a royalty. A royalty is a payment based on the commercial success of your idea. Always try to have this calculated on the value of the total sales and not on the profit. Why ? Because the total sales value is an unambiguous number whereas profit can be modified by all sorts of charges that may not be entirely appropriate and that can lead to a series of disputes. The magnitude of the royalty, however based, will be between 1 and 10% with the latter at the very highest end. More commonly, royalties are in the 2-5% range. Unfortunately, some large companies don’t want the bother of keeping track of sales and royalties and prefer just to have a one-time payment for the outright purchase of your idea. 16 This places you on the horns of a dilemma. If the idea goes on to make millions and millions for the buyer you will kick yourself for having sold it for a paltry $100,000. But remember the old saying “A bird in the hand is better than two in the bush”. You should also appreciate that you will generate many ideas in your lifetime that will be better than the one you sold. If you decide that you want to form your own company to promote your idea rather than sell it then you will be embarking on an exciting voyage. Think of Bill Gates as an undergraduate, dropping out of Harvard University to push his ideas. To follow this course you will probably have to raise some money. In societies, there are always people with money who want to see it grow. 17 So these people are on the lookout for young people with attractive ideas that they can support financially in exchange for part ownership of the idea. The danger here is that ultimately you may end up owning only a tiny part of the company you created. You may even end up being fired by the majority owners. In starting your company you probably should start by seeking finance from your family and relatives initially. If they can’t help, you can talk to people you know who have made some money. Pillars of society such as doctors, dentists, stockbrokers, lawyers or builders are good candidates to invest in your company. 18 Fortunately in the US society, the government has a wonderful program specifically intended to help citizens start new companies. Amazingly few people are aware of this. It is called the SBIR (Small Business Industrial Research) program and is part of the Small Business Administration (SBA). You can find all the details on the SBA website. www.sba.gov In essence, this program will give (not loan) up to $150,000 for a 6 month feasibility study of your idea. You can pay yourself from these funds. If the idea is still alive after the feasibility study is completed, an additional $750,000 can be given (not loaned) in Phase 2 over a two year period to start the idea commercially. Thereafter you are on your own ! You do not have to pay back any of the funds. 19 Wow ! That sounds great ! How can I get started ? You must submit a proposal describing your idea and how you will study its feasibility. This proposal is rated by a number of experts who may endorse it or kill it. When funded, you must devote at least 51% of your time to this study. To get into Phase 2, you must demonstrate in Phase 1 that your idea is indeed feasible and explain how you plan to get the company going in the next two years. This is really a wonderful part of US society because it means that no member thereof can ever say that he or she never had a chance to accomplish anything because of some disadvantage of birth or education. Also the new companies that come into being and contribute to the well-being of US society are a reflection of the creativity and innovation skills of its members. 20 Every member, and especially young persons starting their careers, should be aware of this well-funded pathway. It would be of interest to learn which other societies have comparable systems. Morocco, with about 26% unemployment among university graduates, may have such a system but few are applying. Why ? After the SBIR funds have been spent, you can grow your company further by the acquisition of additional money through Angel Investors or later Venture Capital concerns. There are frequent articles about both of these in the business section of your local newspaper. Both are entities that exist in all major cities to seek out beginning companies in which to invest. Their money comes from individuals who contribute and combine their risk capital to find attractive potentially highly profitable investment opportunities. 21 When you reach this stage of dealing with Angel Investors or providers of Venture Capital, you will certainly need good legal advice to protect your position. Another source of funds are the various cash prizes available. For example, The Lemelson-MIT Program gives a prize of $500,000 for inventions with a focus on sustainable solutions to world problems. Their website, web.mit.edu/invent/n-main.html, has a subsection with the inventor of the week, a handbook for inventors and games/trivia. Also see The Collegiate Inventors Competition program of the National Inventors Hall of Fame. www.invent.org/collegiate If you prefer to work for an established company and make your creative contribution there, a whole different culture of innovation comes into play. 22 Innovation In the next few pages, we are going to cover some innovation tools that will help you to move your idea forward. Although these tools are going to focus on bringing a new product to commercialization, these tools apply to all types of innovation, such as bringing an idea forward to make our schools more productive, or a new idea on how to solve some of the planet’s problems, such as reducing the impact of global warming. 23 Definition of Innovation First, we need to make sure that we all have the same basic understanding of what innovation is. It is not creativity. Innovation is the generation of new sources of value for a company or the implementation of a new solution to a societal problem or customer need. Innovation is also not invention. Philo Farnsworth in the US invented television in 1927 but it was David Sarnoff who organized television broadcasting to bring television to the consumer in 1939. Innovation is bringing all the tools and skills necessary in an integrated approach to make new value-added products for customers. 24 Types of Innovation Normally, we regard innovation as the creation of a new product but it can be more than that. For example, it could occur in a process change that would allow us to make the same product much more cheaply. Container shipping comes to mind as an example of a process change that literally has changed the world of commerce. Prior to the large scale use of the shipping container, goods used to be loaded onto ships in small quantities. This kept ships in port, loading and unloading goods, for more time than these ships were at sea. The cost of goods was further increased by pilferage and breakage. If you get a chance, rent the great 1954 movie, "On the Waterfront" starring Marlon Brando to get an idea of what shipping trade goods was like prior to container shipping. 25 Back then, to ship something to a foreign market, one had to have a large cost advantage in order to compete against a local producer. Now, goods can be made in one part of the world, put together in another part of the world and sold in a third part of the world. This can be done predictably, on time, without the necessity of having to maintain a large expensive inventory. Container shipping did not require breakthrough technical invention. Rather, it required a systematic change that involved understanding the process of how goods were inefficiently moved prior to this. The idea of shipping containers had been around for years before it was finally implemented. Do you know what key event finally got this concept implemented ? 26 Innovation can also occur with business models. Google, now part of Alphabet, is one of the most innovative companies in the world today and continues to come out with new innovative products. One of their greatest innovations was their business model for selling advertising on their search engine. Innovation can also transpire in branding such as a company's logo or its approach to advertising. Innovation can also be observed in the way a product is distributed. The Dell Company is an example of a new way of selling computers, directly to the consumer. There are several other kinds of innovation and most companies are using more than one approach to increase their company's growth in the market. But innovation does not have to occur in a company, it can appear in non-profit or government institutions. For example, the innovation of new ideas are certainly needed in our school system. 27 Innovation Spectrum Innovation encompasses degrees of change, going from small incremental improvements of existing products to transformational new products such as the calculator. When the electronic calculator was invented in the early 70's, the slide rule was completely wiped out of the market within 2 years, even though these early electronic calculators cost up to 10 times more. In contrast, the diaper wars have been going on for years now, and still companies continue to make incremental improvements to their diaper products. 28 Incremental Innovation It is important to recognize that all innovation falls on a degree of change spectrum. Incremental innovation is much easier to accomplish than transformational innovation. Why? Consider all that is known when one makes only a slight improvement to an existing product. The iPhone for example. You know who the customers are and what they might be willing to pay, you have a pretty good estimate of how to make the product and what it will cost, and the distribution networks to market are already established. 29 Incremental innovation exploits the core competencies of the company and usually the decision makers can visualize the short time to market to capture some value. However, this value is not normally huge, and does not achieve what many older companies are seeking. Namely, game-changing innovations that will boost declining markets and margins. For example, newspaper readership is shrinking. Will a new high graphics capability change this direction? Probably not ! To survive, newspapers are going to have to re-examine their capability and redefine their value proposition. Back in the 1950's, television came into being and greatly reduced the value of the traditional radio station enterprise. 30 Before television, radio used to run drama shows like the Lone Ranger and Superman in audio. After television, the consumer preferred to watch these on TV visually. So the radio stations redefined their role and started playing music and have survived nicely for the past 50 years. However, nothing remains stable forever, and the iPod is now dipping into this role in a very big way. What are radio stations going to morph into this time ? Incremental innovation is necessary to remain competitive in the market place when everyone is more or less the same. But it is not much use against a game-changing innovation that comes along once every 10-20 years 31 Transformational Innovation Transformational innovation is generally defined by a new product that has a different set of performance features such as:    Improvement in performance by 5 or more times Significant reduction in cost of 30% or more Bringing new value to the market that did not exist before. For example, Cirque de Soleil redefined the concept of a circus but it certainly wasn't cheaper than existing circuses and it didn't improve performance by 5 times. Instead it offered a new experience that was new to a different segment of the market. 32 Transformational innovation is much more difficult to implement. For example, compare the knowns and unknowns before and after with incremental innovation. Consider the "Bodies the Exhibition" recently shown in Seattle where actual human bodies are displayed in such a way to show the bones, nerves, blood vessels etc of actual human bodies. Imagine that you are the person that came up with this idea. Were people declaring "I have a need to see a real human body and its various components and if someone were to come up with such a show, I would be willing to pay $24.50 to see it“ ? Probably not ! 33 The person who came up with this innovation did not know if anyone would come and see this type of show. He/she would have great difficulty even checking out this product concept. If you went up to people and asked in a survey, "Would you be willing to pay $24.50 to see a bunch of cut up human bodies ?” They would probably think that you were nuts. Transformational innovation therefore is much more risky, but also more rewarding financially, if it becomes a winner. Generally, you have the only product in this new market space so you are less sensitive to competitive pricing. 34 Why is innovation important? Some people feel that we live in a "finite" world. Presently, there are in excess of 7 billion people on the planet and the population continues to increase. Hopefully, it will stabilize at a level around 8-9 billion people. Where are all these people going to live? Where is the food and water going to come from to sustain this huge population? Back in the 1960's, when the world's population was around half this number, people were asking the same questions? Somehow we have managed to house and feed this huge population so far. Today, we are worried about global warming and oil depletion. Will we run out of oil or will the price of oil spark new ideas and new sources of energy to replace our oil dependence? All these problems are solvable with today's technology. 35 What we are missing is the desire to implement the some of the ideas that we already have. Contrary to what some governments are saying, private industry is examining these problems as possible commercial opportunities. Rather than worrying about jobs, and an increased cost, private industry is looking for opportunities to exploit so that the world's problems can be solved and a handsome profit made. A couple of summers ago, your professor visited Land 0’ Meadow in northern Newfoundland. This was the first authenticated landing of Europeans in North America in about the year 1005 AD. The Vikings had sailed down from their settlements in Greenland. About 50 people set up a village in this northern region. 36 The Indians were very hostile so it was not something that was easy to do. The settlement lasted about 18 months before it was abandoned, presumably to move back to Greenland. It is hypothesized that the reason that these Vikings settled there was to obtain iron ore that was available from bog plants. Apparently the plants were capable of capturing high quantities of iron oxide and by burning to remove the plant material, the Vikings could eventually end up with raw iron. With this iron, they made nails which they needed for key parts on their boats. In 18 months, it is estimated that they made only 7 nails. 37 Imagine, 50 people spending 18 months in a hostile environment to make half-a-dozen nails. Now flash ahead 1000 years and see what innovation has accomplished ? Recently, in dismantling a rotten deck the nails were removed from the wood because they were dangerous, sticking out all over the place. But no one bothered to straighten and re-use them. It was cheaper to simply buy new ones that were straight. Contemplate some of the other things that have been innovated so that the cost is now almost insignificant compared to some other time in the past. Prognosticate what our world might be like in another 1000 years if we continue to bring new innovative products and services to market. 38 Companies that fail to keep up with a continuous stream of incremental improvements usually find themselves out of the market. Companies that fail to anticipate transformational change can find themselves totally out of business, despite their best efforts at incremental product improvements. Reflect on the state of the newspaper business. Why didn't newspaper personnel see that they really were in the news business and be the first to create on-line news ? Are incremental improvements to the quality of a newspaper's printing and graphics going to allow the newspapers to survive ? We'll see ! The jury is still out on this one. Darwin said - "It is not the strongest of a species that survives, nor the most intelligent, it is the one most adaptable to change". 39 Innovation is a large subject that is under intense investigation by many private companies and universities within Society. It would be impossible to cover this subject in great detail in this course. However, there are some excellent books for those who want more information on this important subject. These include; "Innovation; The Five Disciplines for Creating What the Customers Want" by Curtis R. Carlson and William W. Wilmot, Crown Publishing Group, 2006. "Lean, Rapid and Profitable New Product Development" by Robert G Cooper and Scott J. Edgett, Stage Gate Inc, 2005. 40 We will now review some of the most important next steps in moving your ideas forward in societies. Remember that the emphasis is going to be on bringing a new commercial product to market but, using your imagination, the system can be applied to making any new idea for Society a reality. The following four subjects will be covered: The first skill is how to share your new idea with someone in order to build it into a stronger idea. 41 The second topic is the need for teams. No one has all the skills and experience necessary to bring new ideas to reality. The third skill is how to construct a value proposition. By doing this, you should be able to explain your idea to angel investors or to a venture capitalist to gain the funds that may be required to move your idea forward to the experimentation stage. The fourth skill is how should you evaluate your idea to ensure that it really will bring new value to the market. 42 New Product Success Rate Factors Cooper, who has been studying innovation processes for over 30 years, gives us some of the primary reasons that new products fail to make it to the market or fail in the market after product launch. It has been estimated that it takes 3500 raw ideas to eventually get one successful new product into the market. How can we improve these odds ? In the remainder of this section, some concepts well be introduced that will help you to reduce these risks of failure. 43 Here are Cooper's main reasons why products fail: 1. The most important reason that Cooper lists for introduced product failure is me too, ho hum, trivial new products. People like to go after the "low hanging" fruit rather than search for features that would give the new product a competitive advantage. The bar is set too low and there is little reason to expect the customer will be motivated to try the new product. A good example of this might be the release of Zune, Microsoft's answer to the Apple iPod. A cursory glance of Zune's features indicates that Microsoft's product is almost a carbon copy of what is already out in the market for about the same price. Why would a customer be motivated to buy this new product innovation ? 44 2. The second reason for this lack of success is that people are in too much of hurry to do their homework with care. We live in a "ready, fire, aim culture". There is a common perception that we don't have time for this activity and need to get going or someone else will beat us to the market. But consider the fact, that at this point in the journey, we don't have a lot of facts. The information that we have usually comes with a lot of assumptions and few concrete facts. However, there is generally more information available than we believe, if we just take the time to go and get it. For example, patents are supposed to teach, so we should look at the patents for learning. With the internet, there is a fabulous wealth of information readily available for free. 45 3. The third reason for failure is a lack of customer input or customer insights. One of the most important things that we can do is to understand the customer and the competitive products before we begin development. How this can be accomplished will be discussed later. 4. A fourth cause of failure is that when we don't really understand the customer, we stand a good chance of moving the goal posts continually, never reaching them, and eventually running out of money before a product is ready for launch. 46 5. The fifth major cause of new product failure is the lack of a functioning team. In the past, new product development was done by passing the project from one group to another. For example, engineering would work on a product until they were satisfied that the new product did what the customer wanted. Then they passed it onto the marketing group. This is a good prescription for failure. Apple's success comes as much from incorporating design into the product from the beginning as its success originated from new technology. The importance of teams and team leadership are also important and are dealt with in the next section. 47 6. The sixth reason given by Cooper is the lack of the right skills or competencies on the project team. Properly structured relationships with outside firms or individuals can make the difference between success and failure. Wasn't the partnership with IBM one of the main reasons for Microsoft's early success ? Partnerships are especially important if the project involves a transformational innovation that is outside the core competencies of the team's experience. How can we start to reduce these risks before starting on the journey to new product success ? In the next sections, some simple tools are described that have proven to be successful at reducing risk. 48 Idea Incubation Teams You have the beginnings of a great idea. But you haven't enough knowledge to see your way through to commercialization. You're ready to get going but don't know where to begin. Well, you could start with something called an Idea Incubation Team. This informal team, which typically exists for only 2-3 hours, helps to clarify your idea and identify some next steps that might prove critical. More importantly, it helps build your confidence in this new idea and turns you into a champion. 49 Champions are: – problem solvers that overcome the hurdles and barriers that stand in the way of achieving success. – passionate – committed – stay focused on the vision – inspire team members and partners to work together – persevere by taking full responsibility – when the road gets bumpy, come back at problems in new ways Rank does not make you a champion. 50 How can we accomplish all of this in just 2-3 hours ? One of the most important things to be aware of is that most ideas are automatically rejected. It has nothing to do with the quality of your idea or the organization that you may approach with your concept. When Steve Wozniak invented the personal computer, he and Steve Jobs decided to start their own company to commercialize it. Wozniak realized that since he was working for the Hewlett-Packard Corp. (HP) at the time, ethically he should give them a shot at his idea. He arranged a meeting with his boss's boss and showed them a working model of his invention, the Apple 1. He mentioned that he could produce this computer for under $800 and that it was not a toy but something that would be valued by the average household. 51 HP was in the process of developing their own computer, but their target was the scientific community. They assumed that they would need this market segment because only the scientific community could afford the price that they were contemplating. After giving the usual reasons (it doesn't fit our strategy, we don't know how to market to household consumers, etc), HP turned Wozniak down and said that they had no interest in his invention. This was sad (because he wanted HP to recognize what he had accomplished) and good news at the same time for Wozniak since Apple went on to be a great success and Wozniak became a multi-millionaire. The person at HP who turned down this idea, did have some nagging questions and even phoned Wozniak late in the evening several times and asked if he really thought that he could produce his computer for under $800. 52 When you present your idea to someone else, just be aware that it is human nature to examine the idea critically and then proceed to tell you why it won't work. Humans pride themselves on being critical thinkers. Young people come to their ideas fresh because they are not burdened with the years of experience that says that an idea won't work. Unfortunately, young people also lack the experience to avoid some of the pitfalls lurking out there that might actually kill their idea. It is not only young people that are faced with this dilemma. For example, people from other fields of expertise also are just as likely to come up with an innovative idea because they come with an outside perspective and look at a problem with a new set of eyes. Whatever the reason, there is a need to tap into some of this wisdom that comes from experience without killing the idea. How can we bring the idea generators together with the experienced people in a positive way ? 53 54 55 What Is an Idea Incubation Team? An Idea Incubation Team is a small group of people (5-10 people) that you call together to answer 6 questions: 1. 2. 3. 4. 5. 6. What is the problem or customer need that we are really trying to solve ? What is your solution to this problem ? What do you like about this idea ? How would you make the idea better ? How can I make this idea a reality ? What are your final thoughts or opinions ? 56 The emphasis is on trying to come up with something that will help make the original idea work, not on brainstorming new ideas. Also, remember that there is no rule that says you can only have one idea incubation team. Have as many as you want ! After all, an incubation team doesn't cost much and you get a lot of valuable feedback. Get your group together in a relaxed space, like your living room. Try to get people with different backgrounds but don't worry about picking the best team. You can always call another team together and you will have a better understanding of what kind of people work best. Brief your team on what is going to happen and what your expectations are. Start with the first question and make sure that you follow this order. 57 To answer Question #1, you have to define the problem that you are trying to solve. This is more difficult than it first appears. For example, if the problem that you want to solve is, “Kids in the public school system are not being served because half of them drop out before finishing the 12th grade”. The challenge then is to know whether your proposed solution really applies. You should first ask: Why are kids not finishing school ? If the answer comes back that they are not motivated, then you have to ask why again. If the answer comes back that it is the result of boring classes, then you again ask why. Keep asking why until you feel that you have reached the right level of root cause so that you can now apply your solution. 58 Recognize that you can carry the "why" questions too far. For example, if you kept asking the "why" question to the school problem, you might end up with the problem being defined as the country doesn't value education. In which case, there is not much you can do to solve this problem. But if it does end up that classes are boring, your solution might be to make them less boring by tying class learning into video games. When you present your interpretation of what you think the problem is, you should allow the group to ask clarifying questions but not change the problem. If they have a different take on what the real problem is, then they are free to propose their solution to their own incubation team, not yours. You called the group together to help you alone. 59 You should take note of the clarification questions as this will point out areas of confusion and lack of definition. This information may be important if you decide that you need to conduct several incubation teams. With greater clarity, subsequent teams should be more helpful in building up your idea. In Question #2, you get to present your idea to the group. If you can include a prototype, or hands on samples, it is helpful to engage the attention of the group. Again, allow the group to ask clarifying questions. 60 In Question #3, this is the most critical question. It is common to ask "Well, what do you think ?" and assume that this is the same as "What do you like about this idea ?” If you go with the first question, you are allowing the group to put on their critical thinking hats (remember de Bono) and tell you all the reasons that your idea won't work. If, on the other hand, you ask the group what they like about your idea and they earnestly follow through on answering this, they have to start out on a positive note. Usually, someone in the group has to like something about your idea. 61 In Question #4, you follow up with: “How would you make this idea better ?” This engages your audience in the idea, particularly if they contribute to making it better. They now are vested in seeing the idea go forward. The most important aspect of this question is that it allows people with different experiences or perspectives to give you ideas that you hadn't thought of. Question #5 asks: “How can I make this idea happen ?” This is purposefully a general question. Team members may offer you technical advice on how to make a working model of your idea or it may involve a strategy on how to take this idea to a venture capitalist for funding. 62 Question #6 asks: “What are your final thoughts or opinions ?” The audience has had time to reflect on your idea, has had some interaction on some of the merits, some contributions on how to make the idea stronger and finally on how to make the idea happen. Now you need to know the truth. “Does anyone agree that your idea has merit ?” When you came into the meeting, you were probably the only one who believed in the idea. Now, after a period of 2-3 hours, you need to know whether others agree with you or not. If they do, you now have the knowledge that the idea is not bizarre nor totally without merit. When 5-10 people now agree with you, you become a champion. Champions are needed to plow forward, particularly if the idea is more transformational than incremental. 63 If the group does not support your idea, you have to ask yourself; is it because it really has no merit or is it because I explained the concept poorly. Or is it that I chose the wrong group to give me feedback ? In any event, the incubation team session is easy to carry out. For example, you could do this after a Christmas dinner, if you wanted to test an idea that you have. So you are allowed to have as many incubation team activities that you have the enthusiasm to call. The important point is that it is your idea and you should be the one satisfied with the answer. New ideas or new concepts always come with a set of difficult problems. But the place to address them is not right at the beginning. These hard questions need to be addressed or you probably won't be successful. 64 However, these questions can be better addressed in a team setting when you start to form a team with various expertise or competencies. Typically, the idea incubation team consists of friends or acquaintances that you trust and respect. It is not important to make sure that you call the perfect team together. The important thing is to make it simple and get going. When you approach an individual, one on one, such as your boss, and that person tells you that you have a bad idea, it hurts. It may even discourage you to the point where you decide it is just not worth it to be creative. But if you answer your own question about the merit of your idea, it doesn't hurt. You simply learn more about what a good idea is and try harder the next time. 65 Teams Edison was a great inventor. Teams were important to Edison and contributed a lot to his success. He was the first one to set up an industrial research group. This research group was small enough that members of that group became a team made up of various technical specialties. They bounced ideas off each other and encouraged each other to enhance the products that they were working on. Edison went on to start many companies to commercially exploit his inventions. Edison always wanted to become a tycoon but in order for his companies to be successful, he had to be removed from the boards of all the companies that he started. Edison was not an effective businessman, just as many technical people are not. If Edison could have formed a team that included a business person, he would have succeeded in becoming fabulously wealthy. 66 Consider Google, one of the most innovative companies in the world at present. Sergey Brin and Larry Page, Stanford University students, started Google in a garage with no thought of it ever being a successful commercial enterprise. They did fine and managed to attract venture capital to continue developing their ideas. But venture capitalists are interested in eventually making a profit on their investment and they forced Brin and Page to hire a professional business manager, Eric Schmidt. In the first year, there was some conflict as the team members got to know the role each played in the business that they were creating. Eric Schmidt had trouble with the undisciplined style of Brin and Page so he had to bring management practices into the company without destroying the creative drive of the other two. Schmidt recently commented that he sees himself in the analogous role of a playground supervisor. 67 With the addition of professional management (Google had grown to a considerable size by this time), the company has thrived and Larry, Sergey and Eric are multi-billionaires. In this example, it is important to realize how difficult it is to find individuals who can get along with each other and still fill in the needed roles to make the enterprise successful. This is well illustrated by the Apple Corp. Apple Corp. was started by Steve Jobs and Steve Wozniak. These are two totally different individuals. Steve Wozniak is basically a brilliant innovative software/hardware engineer who was only interested in building the first affordable personal computer. He introduced the concept of the keyboard and television screen. Prior to Wozniak, a user had to program his computer by flipping switches so this was a major advance in computer technology. Wozniak had no commercial interests and in fact gave his designs away for free to a computer club of which he was a member. 68 His basic drive was to be recognized for his innovation, not any monetary reward. On the other hand, Steve Jobs had a commercial, marketing, deal-making talent. When combined with the inventions of Wozniak, Jobs put together a company to sell computers that had more features for a much cheaper price than any of the competition. Without Wozniak, Jobs would not have had a product to start Apple. Without Jobs, Wozniak's computer probably would never have been commercialized. Each played a critical role in Apple bringing this product to market. The important take-away from these examples is that no one possesses all the talents needed to bring a new product to market. If you have a new product idea, think about possible partners to fill in the blank spaces in the necessary roles. It helps if the partners like and respect each other and realize that all the partners’ skills are necessary for the venture to be a success. 69 Selection of Members of Innovation Team Selecting members for your innovation team is probably one of the most important decisions that you can make. This can either increase your chances of success or doom your project to failure. Here are some of the things that you should consider when selecting team members. Compatibility Diversity is important and you want people that think differently or see things from different perspectives. Disagreement and conflict can be healthy but team members need to get along. Therefore, compatibility is important. There is nothing like personal conflict and infighting to quickly rip a team apart. Each member should know what role they play on the team and should respect the roles that other team members have. 70 What Type of Team Members Should You Have ? Rainmaker The Dow Chemical Co. did a study about 15 years ago to determine which of their project managers were most successful at bringing higher margin, new products to the market successfully. To their surprise, these people (rainmakers) were those individuals who had difficulty with authority, didn't follow the rules and were generally regarded as out of the mainstream of the way things were done at Dow. During downturns, these folks were the first ones to be let go. 71 Other project managers were much more adept at following the accepted processes. Conventional project managers simply put the project through the normal project management procedures. They then believed that they had come up with the right answer, which was to kill the project. The only difficulty with this was that they killed almost every project that was given to them. What was the difference between these two groups of people ? It turned out that the Rainmakers were successfully "morphing" their projects early on. This meant that as they got into the project, their early learning told them that the project was not 100% correct and had to be modified in order to increase the chances of success. These Rainmakers are called "starters" and conventional project managers "finishers". Both are needed in a new product development activity. 72 However, a project needs to lean more on the "starter" in the early phases of a project and then transition to the "finisher" in the later stages. Without the finishers, "starters" can morph the project on forever. Starters need to be trained in some of the skills that are necessary to get new products to the market. It is possible to find "starters" and educate them in the other principles of innovation. Without this type of education, Rainmakers can get "Idearrhria" and never get to the point where the project moves forward. You cannot make a "finisher" into a Rainmaker. 73 Divergent and Convergent Thinking This is similar to the "Rainmakers and Finishers". Every project needs the dreamer who keeps thinking of possibilities. This may occur when trying to determine the scope of the new product or new solutions to problems that arise with the original concept. But without convergent thinking on the team, the dreamers will keep on inventing forever. Divergent thinkers never have enough information and the solution is never perfect enough. Convergent thinkers want to bring closure to the question at hand and move on. Divergent thinkers can't understand how these people can move forward with such limited information. A team that has a healthy balance and respect for each of these personalities will be vibrant and more successful with the products they bring to market. 74 Managers Who Understand Predictions and Risk Someone has to have the management skills to run the project. However, there is a danger that the manager chosen will not realize one of the big differences between running a new product development project and a normal engineering project. This difference deals with the accuracy of the assumptions that are used to make predictions. In normal operations, there is usually a lot of history that is relied upon to make forecasts. With new product development, especially transformation innovation, the data is not as reliable and therefore, there needs to be more tolerance for failure. 75 76 Business Person A business person is important to have in order to think about the commercialization aspects of the project. There are innovative business persons and noninnovative business persons. Try and pick someone who is willing to entertain new business models. Often, the business model innovation is as important as the original idea. Remember Costco ! They have a business model that encourages the customer to make each visit a voyage of discovery to try and find new bargains. 77 What Makes a Good Team Leader ? With such a diversity of team members, the team leader becomes a critical role. When selecting the team leader, here are some characteristics to consider:    Try to avoid an individual who is energetic and tries to do everyone's job. Try to avoid an individual who has so much depth of expertise and shows it, so that other team members are afraid to contribute. The best team leaders are those open to new ideas and like to delegate, so that everyone on the team feels that they are contributing. 78 Some people are not suited for new product development teams. They like to work with more certainty and cannot handle the risk of going forward with so much uncertainty. On the other hand, there are individuals that will thrive on such a team. 79 80 Create a Value Proposition SRI (Stanford Research Institute) International has an expression: "No customer input, no product". SRI describes how one can come up with a value proposition by using the NABC method. Unfortunately, product development teams are not nearly demanding enough about developing compelling, quantitative value propositions! In the business world, if you can tell your story in a few minutes, with passion, you have a much better chance of being funded. One test that you might apply to your story is the ease with which it can be explained. Can you summarize your concept on the back of a business card ? 81 How would you describe your new idea so that one can determine if there is compelling value? Use the NABC method. NABC stands for: Needs Approach Benefits Competition Start by completing the following questions; N - My customer needs are …. A - My approach to satisfying that need is …. B - The benefits per cost of my approach are …. C - My benefits per cost are superior to the competition and alternatives because …. 82 Need What is the important customer and market need ? When answering this question, one has to be careful that you are really stating a need and not a solution. For example, "the world needs a red wagon" is not a need but a solution to a need. The message is more persuasive when you can be specific or quantitative. For example, you could say that all university students will want to buy your new gizmo. However, if you can state how many people will likely want it and give the reasons for this estimate, investors can quickly determine if your assumptions seem valid and determine the potential value. 83 There are 2 kinds of needs; tangible and intangible. Tangible needs, such the speed of a computer or automobile horsepower, usually can be measured. Intangible needs are things like styling and design and are difficult to measure. Many new products that met the customer need 100%, failed because they didn't have a cool design. Intangible needs that should be considered are:  Service Convenience Emotional appeal  Product identity   84 In the example given earlier, what was the need that Sarnoff saw that television was the answer to ? Customers surely didn't know that they needed television. However, customers knew that they wanted to be connected to what was happening in the world and they wanted more variety in their choices of entertainment than what was provided by the radio, newspaper and movies. Is television still the best product to meet these needs ? Approach This element deals with how you intend to solve your customer’s need; but this element also includes the cost. The customer is always going to measure your solution to his need against the cost of the new product. 85 It is easy to fall into the trap of only focusing on your approach. The NABC can quickly become nAbc because this is what probably initiated your great idea. Decision makers or potential sponsors are more likely to be interested in the NabC because they want to know how this idea is going to beat the competition. In almost every situation, you may have to formulate two or more value propositions; one for prospective customers and one for potential sponsors or outside investors. By ignoring the other aspects of the value proposition, you also can miss some critical information and this may cause you to focus on the wrong things in your product development efforts. In your approach, you should always describe your business model which outlines exactly how you intend to make money with your innovation. 86 Benefits Customer value equals benefits minus costs. Try to estimate the costs of your new idea and determine what the costs are for the customer. For example, be sure to include the switching cost for the customer. With the iPod example, many customers have purchased accessories. To switch to Zune, these accessories become useless. Is the Zune good enough to make this cost minor ? Not all the costs need to be monetary. For example, if you are used to a PC, switching to an Apple computer requires learning new software. 87 Competition Make sure you look at potential competitors. This includes where they are today but also where they might be when you are ready to go to market. Identify specifically who your competitors are and how you are going to be clearly superior to them at a competitive price. The Weyerhaeuser Co. once tried to develop a 3 piece (1 side and 2 ends) paper container to compete with the aluminum beer can back in the 70's. While they were concentrating on this, the aluminum industry was developing the 2 piece aluminum can (side and bottom were formed simultaneously and used only one end cap). This turned out to be much cheaper than the former aluminum can product. Needless to say, no one ever saw a Weyerhaeuser paper beer can in the marketplace. 88 Summary In our complex global world, there are many unsolved problems in all societies. Selecting an important unmet customer need at the right time is one of the most critical factors that will increase the odds for success. Only after you have repeatedly talked with customers, deeply understood the competition, and have refined your unique approach will you be ready to start the rest of the journey to successful realization of your idea. 89 Assignment Which part of this Experience made the greatest impact on you ? Write about a page discussing your selection and submit as usual to the Canvas dropbox of Creativity & Society. 90
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