Innovation - What, Why, Who, Types, Metrics

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



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



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?

Business

Innovation - What, Why, Who, Types, Metrics