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School of Business
OPENInnovation
Anne Sigismund HuffUniversity of Ireland Maynooth
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AGENDA
Define Innovation Sources of innovation Three interesting trends
• Open innovation• User and customer innovation• Service innovation
Management’s contribution to• Disruptive Innovation• Incremental Innovation
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What is an innovation?
Why is it important?
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Invention*
….
2. U.S. Patent Law . a new, useful process, machine, improvement, etc., that did not exist previously and that is recognized as the product of some unique intuition or genius, as distinguished from ordinary mechanical skill or craftsmanship.
*invention. (n.d.). Dictionary.com Unabridged. Retrieved October 09, 2011, from Dictionary.com website: http://dictionary.reference.com/browse/invention
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Innovation*
Although the term is broadly used, innovation generally refers to the creation of better or more effective products, processes, technologies, or ideas that are accepted by markets…
* http://en.wikipedia.org/wiki/Innovation, accessed Oct. 9, 2011
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Multiples Levels of Innovation
Network Innovation
Corporate Innovation
Organizational Innovation
Functional Innovation
Individual Innovation
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IT IS NOT EASY TO BRING SOMETHING NEW TO MARKET
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Of 197 products brought to market
124 immediate failures 54 lose money 17 mediocre results
ONLY 11 successful (11/1919 = .006%)
BIG ISSUE: How to generate enough quality ideas to reach market success
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2nd big issue -- Diffusion “The Classic S-Curve”
Time
De
gre
e o
f T
ech
no
log
ica
l Ass
imila
tio
n
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PROBLEM
SOLUTION
HOW I GOT FROMONE TO THE OTHER
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Figure 2.3: Thomas Lackner (Siemens)The Most Important Innovation Strategies and their
Positioning along the Technology Lifecycle*
Pace-setting technologies: Determine tomorrow‘s
competitiveness
Key technologies: Determine today‘s
competitiveness
Basic technologies: Basic competence
for today‘s business
New technologies: Discontinuity New rules of the game
Time
First mover“The early bird catches
the worm“
(American saying)
Fast follower“The early bird catches the
worm but the second mouse gets the cheese“
(G. Keillor)
Trendsetter“If you‘re in control of
wormholes and mouse-traps, you get both –
the worms and the cheese“
© Siemens AG. All rights reserved*From Huff et al. (forthcoming) Leading Open Innovation. MIT Press.
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Different Foci of Innovation
Look forward: Invention & Innovation
first mover and fast follower Look backward: Expand markets, develop products
performance by implementation Look outside: Suppliers & other stakeholders (those
who care, especially customers – YOU) Look inside: Products/services/experiences,
processes, structures from those close to delivery
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3rd issue: disruption of the status quo
Incremental innovation close to current markets, close to current products
Radical (disruptive) innovationFarther from current skills and current markets
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Figure 2.2: Thomas LacknerDifferent Paths from Innovation to the Market*
Existing NewTechnology
iPod - iPhone
LED
MRI
ICE 1-3
• Easy to use• Attractive design
• New imaging technology• Other diagnostic possibilities
• Brighter• Lower power consumption
• Incremental improvement
IV
I II
III
© Siemens AG. All rights reserved
*From Huff et al. (forthcoming) Leading Open Innovation. MIT Press.
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Where do ideas come from?
Who develops them?
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YOU are an important innovator
Young• Energy and enthusiasm• Less influenced by the past• Today’s and tomorrow’s consumer
University trained• Increasingly important cutoff for employment
(and thus consumption)Helpful frameworks and tools to address new
situations
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1. Hold your mobile phone
2. Think individually of new hardware features (not available now) that you would like your phone to have
3. Quickly list these ideas one at a time going around the group with no comments except clarifications
4. Encourage new ideas to emerge 5. Each person vote on 3 that you like best6. Report on winner(s)
Possible group exercise
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Why group?
New ideas will come to you as you hear what other are thinking of [ A myth that inventions spring fully formed from one person’s mind]
Why strangers?
Innovative solutions often come from varied & unexpected sources
Why mobile phone?
A product most of you use and care about
Mobile phone hardware and apps still changing
(clear room for innovation) Why hold your phone?
More ideas in context
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Why think individually before discussion?Groups tend to head quickly in one direction
One or two people tend to dominate
“Social loafing” is too easy
Why list all ideas before development or evaluation?Basic brainstorming: do not evaluate too soon
Make sure all are involved (otherwise ideas from high status tend to have too much weight)
Finding from research: best ideas build on others
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Why vote on three?Helps separate idea from the proposer
Maintains a large idea pool
(don’t fall in love too soon)
Why report on winners to a larger group?Again, keep the pool large
Expect further building on ideas from others
Research shows that a winning idea is often generated late in the innovation process
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You can train yourself to be a better innovator
Learn about and use creativity techniques (web)
Analyze new product/services/experiences on the market• Anticipate innovations• Predict outcomes
Keep up with the news and think about innovation at different levels
- Economies – Governments
- Industries – Companies
- Public organizations - Individuals
– Groups (e.g. sports enthusiasts)
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Even more important!
Learn how to work effectively in groups
(inventions often first developed by one, innovation to market almost always involves many)
Become a student of organizations, especially your organizations
Continually improve your communication skills Learn how to make things HAPPEN
•Lean toward action
(ALL GOOD CAREER ADVICE IN GENERAL especially important in an era that is emphasizing innovation)
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BUT (as we will discuss) invention and innovation are not always welcome
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Disruptive innovators tend to be
‘Wild ducks’ with a divergent point of view though at the same time success comes especially to those who are socially connected
Dissatisfied with the status quo but aware of how it works
Persistent, able to learn from negative experience Supported by someone who listens and believes
but also challenges• A partner/friend• A co-worker• A leader
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NIH
“not invented
here”
Not surprisingly, innovations are often resisted
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Figure 4.6: Rudi GrögerA Small List of Arguments used to Slow the Change Process*
We tried that beforeThis place is different
It costs too muchThat‘s beyond our responsibility
We‘re all too busy to do thatThat‘s not my job
It‘s too radical a changeWe don‘t have the timeThere‘s not enough help
Our place is too small for itIt isn‘t practical for operating people
The folks will never buy itThe union will scream
We‘ve never done it beforeIt‘s against regulations
It runs up overheadWe don‘t have the auhtorityThat‘s too ivory-tower-like
Let‘s get back to realityThat‘s not our problem
Why change it? It‘s still working okay
It‘s hopelessly complexYou are right, but...
You‘re two years ahead of your timeWe don‘t have the personnel
It isn‘t in the budgetIt‘s a good thought, but impractical
Lets give it more thoughtTop management would never go for it.
Let‘s put it in writingWe‘d lose money in the long run
It‘s never been tried beforeLet‘s shelve it for the time being
Let‘s form a commiteeHas anyone else ever tried this?What are you really saying is...
Maybe that will work in your department, but it won‘t in mineThe executive committee will never ...
Don‘t you think we should look into that further before we act?Let‘s all sleep on it
It won‘t pay for itself.I know a fellow who tried this way
What would the president say?
*From Huff et al. (forthcoming) Leading Open Innovation. MIT Press.
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New innovations for generating innovations?
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Three interesting developments
1. Open innovation
• Within the organization• With selected communities• Open to an unrestricted audience
User / customer innovation
Service innovation (80% plus of most GNP)
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Open Innovation to expand the “solution space”for ideas that can make it to market
“ assumes that firms can and should
use external ideas as well as internal ideas, and
internal and external paths to market…”
Henry Chesbrough, Open Innovation (HBPress 2003)(http://www.openinnovation.net/)
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An Example of OI from within an Organization From Robinson & Stern*
• Japan Railways East (largest rail carrier in the world) constructing new bullet-train north of Tokyo– Slowed by water in tunnel through large mountain– Engineers drew plans to drain away
• Maintenance worker (job = safety of tunnel equipment) – Noticed that workers were enjoying the water – Proposed the railroad should bottle and market it as a
premium drinking water
*Corporate Creativity (Berrett-Koehler, 1998)
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Water not JR’s core business but they had captive market
Vending machines on 1,000 platforms Advertising emphasized purity of snow,
slow process of melt percolating through unusual geology (picking up healthy minerals)
Home delivery
Bottom line: $47 Million sales within a few years
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Key recognition of Open Innovation
“Not all the smart people work for this organization”
- (Bill Joy, Sun Microsystems)
• Many people with good ideas • Not all work for R&D department within an organization
(some in engineering, marketing, maintenance! etc.) • Not all work for this organization
• Many good ideas from suppliers and customers• POTENTIAL suppliers or customers• Smart people with relevant knowledge located in
unexpected locations
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Figure 2.9: Thomas Lackner*Open Expert Networks for Enterprises –
Why do we Need Communities?
Organizational and hierarchal barriers
Business processand business project
specific barriers
Local, time, cultural and language barriers
"Isolated knowledge
islands"
=+ +
Open expert networks connect existing knowledge within the company
Employees with different expertise contribute their knowledge voluntarily
Focus is on technologies with clear business impact
Cross-sector networks leverage competitive edge of an integrated technology Company
© Siemens AG. All rights reserved*From Huff et al. (forthcoming) Leading Open Innovation. MIT Press.
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OI #2: Broadcast need for new innovations to experts outside the company
Knowledge Broker
Context1. Major multinationals not able to solve certain scientific problems
2. Go to distributed group of scientists who may have an answer
Firm R&D Labs
Firm R&D Labs
Firm R&D Labs
Firm R&D Labs
InnoCentive.com
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Karim Lakhani (HBS) found that InnoCentive is a VERY efficient mechanism for technical problem solving
Examined 166 problems• Firms spent 6 months to 2 years trying to solve • Offered $30,000 for solution on average• Solutions need to be submitted
within ~6 months of initial posting
How many problems solved?• 49 problems (29.5%) [More recent studies over 50%]• 75 solution awards given
Participation Patterns• Average of 240 individuals examined detailed problem statement• Average of 10 solution submissions per problem• 65% of solvers had PhDs in scientific disciplines, 35 % did not
have PhD• Average time spent ~74 hours by winning solvers
~36 hours by non-winning solvers
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Not just about business
We connect people with charitable projects they may not otherwise find througn an online market place where users can browse ways to help others around the world.
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OI 3: Not just about experts
Jiten Karia, “Harnessing the power of citizen scientists” FT Weekend Magazine, Oct 15/16 2011, pg. 49.
“Players of Foldit, an online protein-folding game that allows the public to contribute to scientific research, have solved the structure of an enzyme know to cause Aids in rhesus moneys, providing a new lead in the design of retroviral drugs. The structure had eluded scientists for 15 years but was solved in just two weeks by the gamers.
The announcement…came in the same week that researchers behind the Planet Hunters project revealed that their citizen scientists may have discovered two new planets associated with distant stars.”
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Business Model “Barilla Pasta”
Presented by:
Andreas Schwertsik
Ulrike Mumm
Tobias Hack
Anja Bürkle
Trend 2: Innovation using information from customers & potential customers
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Data from Storylistening
(method developed by Olaf Rughase)
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Barilla is perfect
Cooking time exactly specified
You know whatyou get
Barilla = Italy
Most/many different/beautiful shapes
Good price-performanceRatio in Italy
Doesn’t sticktogether
I eat pasta almostevery day
Stays al dente
Different numbersof spaghetti
The prettier the shape,the fancier has to
be the sauce
Cook in a lot of waterwith crude salt and
without oil
Recipe is on the back of the box
Italian barilla tastesdifferent from
Barilla in Germany
I bring Barillafrom Italy
I don’t only eat to get full, but because I feel like
pasta and a special shape
Barilla is the standard
Only few shapesin Germany
Costs twice as much in Germany
big “blue” shelfIn the supermarket
There is also fresh Pasta made by Barilla
There are betterPasta-brands in
italy
Only Barilla is inboxes
Nothing falls outwhen box is
open
Sauce doesn’t stick to Barilla
Therefore I prefer fresh
pasta
Barilla sauces areNot good andToo expensive
It’s easy to tell thedifference between
Cheap&expensive Pasta
There were special potsfor spaghetti
Italians
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I don‘t distinguish between egg or durum wheat
Barilla only has 500 gr packs
Package inconvenientCan not be selaed airtight
Commodity
Rarely cook
Often eat in „Mensa“
Price important
Barilla is quite expensive
Many varieties
In Italy it‘s less expensive
Cook to get fed
180 gr are enough
Last buy has been a while agoquick
Often don‘t have time to cook for a long time
Has to be prepared quickly
I like to spend more time eating than cooking
Steffi Graf is in a commercial
I recognized Barilla only after I saw advertisement
Cooking pasta takes almost too long for me
Down-to-earthLife style (german)
Package convenient
Package is in a nice blue with red letters
They also produce sauce
Buy other brand if cheaper
Lots of advertisingGood quality
Package is reusableAl dente
I don‘t know much about Barilla advertising
I don‘t like al dente
Their sauce hasn‘t a good taste
When I have no time, I‘m cooking noodles
250gr woould be better
Can be stored easily
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I only buy Barilla
Prefer high qualityhealthy
Only durum wheat, no eggsI only uns fresh ingredients for pasta
Cook for or with friends
Pasta is presentable
Al denteSmack it on the flagstone,If it sticks it‘s „al dente“
Still al dente if it cooks too long
Cook for half the time, pour with oil,Put it in the fridge, reboil in water
No comemercial sauce
When I got time
Good food for my family
Nudeln machen glücklich
Minimum once per week
You can always eat pasta Good as main dish
Good as side dish
Many varieties Different noodle for every dish
Carton package
brick packages
Beats noodle machine
Good to open
Friendly blue color
It‘s stable
Can see inside
Ready to go
Not good for a diabetic
No wholemeal noodles
Quickly squishy
Harder to digest
On vacation in Italy
delicious Special feeling
With a camping grill at the beach
emotional/sensibleLife style (german)
Tells the right cooking time
But try to buy in offer
With recepee
Right sizeexpensive
wrong size
Only self prepared noodles are better
There‘s nothing more boring than pasta
Different sauce for every noodle
No cellophan
I know some old photos from Italy with pasta hanging in the street
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Agenda
1. Innovation on packaging• Clasp• Size• Pasta with three corners
2. Innovation on pasta• Pressto
3. New products• Barilla Lifestyle Magazine
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We found out that…
Customers want to be able to close half-used
packages
Different customers need different package sizes
Some customers do not have much time for cooking
Customers like the huge variety Barilla offers
Which innovation satisfies the statements?
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Innovation 1: New Packages
Small variety packings
• eat as much as you want
• get a huge variety
Pasta with three corners
• 1 plate
• ready with cheese and sauce
Packages with clasps
• open and close as often as you want
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We found out that…
Customers want to spend little time on cooking
Want to spend little money on pasta
Love the versatility of many varieties
Enjoy cooking together
Appreciate pasta as a healthy and fresh product
Which innovation satisfies the statements?
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Innovation 2: fresh pasta tube
Press mechanism
Pressto can with dough
Pressto shape discs
Cutting mechanism
Press to have your own noodle
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Innovation 2: Pressto
lowers cost
cook together
Fresh/healthy ingredients
fast cookingtime
versatility
Fresh noodles right into the boiling waterLess cooking time
Cut out middle part of productionlower costs - (but potential for profit generation)
Press whatever you want with custom shape discs
Put mutual effort into pressing your own noodlesDesign individual shapeGet crazy
Have more time for preparing healthy saucesandEnjoy fresh noodles
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We found out that…
Customers like cooking with friends
Customers enjoy the Italian lifestyle - „Barilla is
Italy“
Every form needs different sauces
There is a need for fast cooking
There is a need for single person portions
Which innovation satisfies the statements?
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Innovation 3: „Barilla – Lifestyle“ magazine
„Tagliatelle“
Published bi-monthly
•Every magazine contains a gimmick:
•CD with Italian music
•Barilla Pressto shape discs“
•180gr package with pasta
•Or pasta for special seasons (christmas, valentinesday, eastern, halloween)
•Recipes for sauces when pasta included
•Recipes for starters, main courses and desserts
•Recipes for fast dishes
•Recipes for a single person
•Recipes for cooking with friends
•Offers or proposals for gourmet vacations
•Proposals for wine
•Proposals for table decorations and Italian lifestyle at home (music, furniture)
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Buon appetito!!!
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Vision Material Packing
With what kind of food will you eat with the new mustard?
128 individual suggestions
What kind of ingredients should the mustard-dip contain?
141 individual suggestionsShipping of user innovation-toolkits to 100 participants Sales of prototypes demonstrate readiness to pay 4.10 € per jar of mustard
What will the label of the new mustard look like?
Prototyping-sheets for download on the platform(no graphic design-skills needed to participate)
Result:A mustard for dipping vegetables, fruits and crackers
Results:Mango-Curry, Plum-Cassis, and Wasabi
Results:Sketches showing stripes and fruits on a see through label
Figure 13.5: Catharina Van Delden The unserAller Product Design Process for Mustard*
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Mari is going to introduce three kinds of mustard-dips, hence we need three different but compatible labels
Mango-Honey-Curry
Color of cap
Label design
Plum-Cassis
Color of cap
Label design
Wasabi-Dip
Color of cap
Label design
LABEL DESIGNFOR THE NEW MARI MUSTARD-DIPS
Toolkit 1: Material Toolkit 2: Label Design
Figure 13.6: Picture of the Two User Innovation Toolkits
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Figure 13.7: Picture of the Three Collaboratively Developed Mustards
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Figure 10.3: Karim Lakahni (Harvard)Participation [in open source program development]
is Highly Engaging
61.7% “This project is as (or most)creative as anything I have done”
72.6% “When I program, I lose track of time”
60.0% “With one more hour in the day, I would spend it programming”
48.4% “Like composing poetry or music”
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Global memory
Large scale contribution
Wide-range distribution
High-speed interaction
Web 2.0
Figure 5.5: Kathrin MösleinTools for open innovation and their effects
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Trend 3: Define Service Innovation
Service innovations improve how customers meet their needs and desires .
It can be understood both as a process of development within an organization and as the resulting configuration of new activities
by the company and by customers, suppliers and other actors within a specific context. Often the customer is directly involved in creating/consuming a service offering.
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RationaleWorld economy is increasingly dominated by
service activity. Yet
More attention is given to products than services More attention is given to internal organizational decisions,
processes and structure than to customer experience More attention is given to research on service than to company
learning More attention is given to services provided by single
organizations than by inter-organizational service systems The fields of engineering, operations management and
marketing are discussing service, less attention found in strategy, human resources, and organization behavior
More concern for the economic drain of low-value-added services than the potential of service innovation for economic growth.
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Service innovation typically means looking beyond the provider’s frame of reference
Quality of care
Latest technology
Physician credentials
Image and reputation
Convenient parking Evening appointments
Friendly service – bedside manner
Comfortable facilities
What the doctors seeThe patient’s view
Figure 3.1 Perceptions of attributes of health care services—patient and physician
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Some features that affect customer perception from Schneider & White*
Goods Services Environment (actual or virtual)
Cost/Performance Features Functionality Constraints Reliability Serviceability Aesthetics Speed Reputation
Professionalism
Concern/Responsiveness Fit Interaction Trustworthiness Flexibility Recovery Reputation Cost/Value received
Accessibility Ambience Security Novelty Personnel Customer commonalities (buyers’ perceptions of their similarities and differences compared to other buyers)
*Service Quality. Thousand Oaks, CA: Sage (2004)
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Exercise: Hybrid* Innovation
Divide into pairs. Choose either a specific automobile, or a specific vacation destination.
One partner individually lists service innovations, the other product innovations.
Brainstorm about hybrid combinations, develop the two most promising, and present.
* product and service provided simultaneously
See company examples at http://www.hybridvaluecreation.com/
66 (CHOOSING THE TOPIC)
BASIC RULES FOR CREATIVE BRAINSTORMING
• Generate a pool of possibilities
• Delay evaluation
• Expand the pool
– Piggy back, synthesize, etc.
• Evaluate
67 (CHOOSING THE TOPIC)
EXAMPLE: DESIGN A PEN
Size Shape Color Material Marker
small cylinder black wood graphite
medium sphere blue plastic ink
large box rainbow paper
ovoid marbled beet juice
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Conclusion
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69
Basic innovation story• fueled by ideas from many sources• enabled by new technology• often an “end run” around established organizations• almost always strong negative reaction from established
players • far-reaching consequences for
- You- Your company- Your “industry” - Your region- Your country
Innovation
Reliability
Speed Cost
Key question, and project management has part of the answer
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You will play a part as a manager in
• the way the world is understood
• the definition of problems
worth solving