2014 Summit

Leading Innovation: a Key to sustainability

Dr. Colin McLeod

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The Ecology of the Silicon Forest

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The Power of Silicon Valley

• Silicon Valley is no more or less inventive than many other places in the world – but they excel at entrepreneurship

• Entrepreneurship is built on cooperation, respect, trust, communication.

• Cooperation is not just about getting along with people – it is understanding their world, including the pressures and constraints that they feel.

It is critical to understand that reciprocity is the key to the special ingredient: collaboration

SURPRISE: Bill and Dave were right!!!!!!

Well Established Drivers of Innovation Shared Understanding

collective endeavour built on a shared sense of purpose / direction

Alignment shared values and a ‘safe to experiment’ environment

Diversity

a bit of constructive friction helps; cross functional teams plus outsiders: customers, suppliers, outside experts

Interaction

opportunities for exchange and engagement

Slack

some timeout - focus on value creation

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70% of time on core business, 20% of time expanding the core, 10% “thinking outside the box”

In the meantime, in the rest of the world

How do Managers spend their time?

Writing reports & attending meetings (estimated to be 70% of management time)

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Inefficiency and complexity are the result

• Many private and public sector organisations comprise of extremely complex and large-scale organisational entities

• Localised skills shortages and gaps, lack of clear agreement with respect to perceived problems, approaches and solutions, overlap in responsibilities, and communication difficulties.

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Everyone has a common problem – doing more with the same or less resources

At the national level, we just run faster:

• It is estimated that unpaid labour* contributes about $110 billion or 7.9% of GDP

• Despite the call to ‘work smarter not harder’, the trend is for longer hours and no growth in productivity.

• Some estimates suggest the average Australian works longer hours than any other developed economy … including Japan.

*Typically this is unpaid overtime by managers / professionals 8

With the Exception of………Innovators

0

1

2

3

4

5

6

7

RevenueGrowth

Profitability Productivity Long termcompetitiveadvantage

Costadvantages

Cash flow Customersatisfaction

Bottom 25% Top 25%

0 = very low, 7 = very high

from “Innovation: The New Imperative”, AIM and University of Melbourne

Ranking on innovation performance

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Getting Started on Innovation

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Understand the Basics of Innovation?

• Very little innovation is about building new ideas from scratch

• Most innovation is ‘recombinant’:

- ideas pieced together by combining existing pieces of knowledge in new ways (so connections are important)

• Selection is critical – Most ideas are bad.

- What processes do you have for picking winners?

• Tweaking / adjustment is important.

- Who does it? When? How? How are ‘tweaks’ communicated?

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The Central Role of Innovation Strategy

42%

58%

0%

10%

20%

30%

40%

50%

60%

70%

Yes No

Innovation Strategy

29%

45% 53%

65% 71%

55% 47%

35%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Less than 25% 25-50% 51-75% Over 75%

Yes No

Innovation Success Rate

Cap Gemini Consulting: Innovation Global Leadership Study 2012

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Strategy and Leadership in Australia

13

14

8 8

31

23

44

0

5

10

15

20

25

30

35

40

45

50

Innovation is prioritised inour strategy

Senior Leadership support We have a strategy formanaging risk

Bottom 25% Top 25%

from “Innovation: The New Imperative”, AIM and University of Melbourne, 2013

Ranking on innovation outcomes

Creating an Innovation Culture is Critical

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Cap Gemini Consulting: Innovation Global Leadership Study 2012

66%

34%

0%

10%

20%

30%

40%

50%

60%

70%

Yes No

Deliberately tried to create a culture of innovation

57% 65%

86%

65%

43% 35%

14%

35%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Less than 25% 25-50% 51-75% Over 75%

Yes No

Innovation Success Rate

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6 5 5

9

25

51 48

55

41

0

10

20

30

40

50

60

Our organisationembraces change

Teamwork isemphasised

There are lots ofinformal

communications

Creatingcustomer value is

a priority

Externalcollaborationwith partners

Bottom 25% Top 25%

Organisational Culture

from “Innovation: The New Imperative”, AIM and University of Melbourne, 2013 15

Ranking on innovation outcomes

Ideation Hypotheses – Can We……?

• Produce savings?

– (e.g. time, money, or efforts, …)

• Make your customers feel better?

– (e.g. kills frustrations, annoyances, things that give them a headache, ...)

• Fix underperforming solutions?

– (e.g. new features, better performance, better quality, ...)

• Ends difficulties and challenges customers encounter?

– (e.g. make things easier, helping them get done, eliminate resistance, ...)

• Wipe out negative social consequences?

– (e.g. loss of face, power, trust, or status, ...)...

• Eliminate risks

– (e.g. financial, social, technical risks, or what could go awfully wrong, ...)

The Rules of Engagement

1. Withhold judgement of Idea

2. Quantity, not quality

3. Encourage wild ideas

4. Build on the ideas of others

5. Everyone & their ideas have equal worth

Then imagine the ideas were

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Then you would

• Put it in front of them and see if they eat it

• You would build hypotheses and test them as quickly and cheaply as possible.

• You would build rapid iterations.

• Every time one fails, you get closer to one that will succeed – failing fast, cheaply & in an organised way (learn as you go) makes sense.

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The Emerging Way of Doing New Stuff:

Customer Discovery

Customer Discovery

Customer Validation

Capacity Building

Customer Creation

• Stop selling, start listening

• Test your hypotheses

• Continuous Discovery

• The heart of Innovation Development

• Iteration without crisis

• Fast, agile and opportunistic

The Pivot

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Make the issue real!!

Riding the “Electric Sewer”:

Making the issue real and giving it meaning…

Note:

• You cannot simply just get managers out of the office to look at operational detail.

• Managers must also listen to customers firsthand.

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Customers and Innovation – “The Pivot”

5

9

5

55

41

54

0

10

20

30

40

50

60

Creating customer value is apriority

External collaboration withpartners

Actively seek customerfeedback

Bottom 25% Top 25%

from “Innovation: The New Imperative”, AIM and University of Melbourne, 2013 20

Ranking on innovation outcomes

Customers can help allocate Resources

Hot Spots, Cold Spots and Resources

• Hot Spots - low resources but high potential performance gains

• Cold Spots - high resource input but low performance impact

• Horse Trading - Trading excess resources in one area to another to fill resources gaps.

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In business and in life, we often hear about survival of the fittest – who are the fittest?

• The fastest? • The strongest? • The smartest?