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InnovationWhat? Why? Who?
Types? Metrics? Case study
“The business has two and only these two basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs.”
~Peter Drucker
What is innovation?
For something to be called innovative, it has to be:1) New/different and 2) Have value
(commercialization)
Invention vs. Innovation
Hard science + social science
Why does it matter?
Do-nothing assumed cashStream (common thinking in big corporations, RIM Blackberry as latest example)
Do-nothing likely cash stream
Innovate cash stream
DCF & NPV
Types?
Incremental Radical (disruptive)
Types of innovation
Famous innovators
http://www.youtube.com/watch?v=fW8amMCVAJQ
How to create a movement as a leader in less than 3 minutes?
“Never doubt that a small group of thoughtful, committed people can
change the world. In fact, it is the only thing that ever had.”
~Margaret Mead
What about metrics?
3 types of metric
InputProcess
Output
Resources put behind ($, FTE)# of patents
# of ideas# of NP% of sales from NPROI
Time from PoC to FDPBreadth of ideasPathway approach
Metrics recommendations
•3 broad types•First vision & strategy, than metric•No magic metric•Choose few•Measure vs. competition•Get buy-in•Embed in performance review
InnovationWhat? Why? Who?
Types? Metrics? Case study
Question(s)?
Founded 1867225.000
employees$70b sales
495 factoriesRisk averse
....but 4% growth target by new CEO
Coffee market in 90s
30%
70%
Sales
InstantRoast & Ground
Nestle coffee business in 1990’s
•Present since 1938
•Owns instant coffee market (30% of total coffee market)
•Wants presence in high-end coffee market
Coffee market in 90s
30%
70%
Sales
InstantRoast & Ground
95% filter5% gourmet (mostly out of home)
Simple outside, complex inside; 3 steps to making coffee:
1974 - Simple outside, complex inside
•Individualized taste
•Simple steps to making coffee
•3 steps technology:
• Pre-wetting
• Aeration
• Extraction
•Strong IP protection
•Licensed machines to others
1986 (12 years later)
1987 failure launch in office sector in Italy
Photo of Turmix, Italy, results
1988 – Jean Paul Gaillard hired
Tiger team
New segment identified through observation
1989 – step1: switch to high end household market
1989 – Step 1: household strategy endorsed
Step 2: Broadening strategic partnerships
Focus on capsules
Distribution?
Losing profits
Supermarket=luxury?
3 months shelf-life
Step 3: Nespresso club
Rules of Nespresso club
24 hours ordering
Personal advice
Prompt delivery
Calls replied within 3 rings
Focus on training and experience
Nespresso club – raving success
Sho w statistics from case study
Airway companies sign contract with Nespresso
Minimal advertisingLoyal customer at the center
1995 break-even7 years since JPG arrival21 years since acquiring technology
“Our problem is not a lack of good ideas – we have too many of them. The key is to be able to extract an idea, carry it forward in the organization and
transform it onto the market.”~CEO Nestle
Key take-aways
Innovation takes time and involves multiple failures
Leadership and team
matter
Culture
Focus on core, partner on rest
Experiment
Observe
InnovationWhat? Why? Who?
Types? Metrics? Case study
Question(s)?
How would you define 3 years innovation vision for you and your
team?
THINK BIG!How will you know that you are
achieving it?