April 9, 2015
Innovation Everywhere
NACFAM Annual Conference
Stephen Ezell, Director, Global Innovation Policy
Information Technology and Innovation Foundation
ITIF is a Washington, D.C.-based think tank that seeks to
design novel innovation policies and examine how
innovation will create new opportunities to boost economic
growth and improve quality of life. We focus on:
 Innovation “verticals”: energy, life sciences, telecom,
manufacturing, and Internet and IT transformation
 Innovation “horizontals”: trade, tax, talent, and tech
policy
 “Innovation economics” as an alternative to mainstream
economics
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What is Innovation?
Innovation—The improvement of existing or the
creation of entirely new products, processes, or
services. (The Economist)
Innovation—The transformation of existing
conditions into preferred ones. (John Kao)
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Innovation Isn’t Easy…Some Puzzles to Ponder…
Why didn’t Western Union buy the telephone?
Why didn’t Kodak commercialize the digital camera?
Why didn’t IBM keep the operating system?
Why didn’t Microsoft create the browser?
Why didn’t AT&T create AOL?
Why didn’t Sears create Wal-Mart?
Why didn’t American Airlines create Southwest?
Why didn’t Citibank create Paypal?
It takes effort to stand in the future and see new possibilities.
Just because you aren’t willing to disrupt your own business,
doesn’t mean somebody isn’t willing to do it for you.
Many companies don’t sense the need to innovate until it’s too late.
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Competitive Separation
*
*
* *
Competitor 1
You
Competitor 2
Competitor 3
*
Create separation
from your
competitive set
Do something that
customers value highly
and that your competitors
either cannot or will not do
Thereby gaining bargaining
power to earn revenues and
margins
Competitive Set
© 2006, TCG Advisors LLC
Used with permission
Source: Jon Pittman, Director of Corporate Strategy, Autodesk
Innovation Continuum
Impossible Impractical
Source: Jon Pittman, Director of Corporate Strategy, Autodesk
Possible
Expected
Required
Impossible
Impractical
Breakthrough
Innovation
Possible
Expected
Required
Impossible
Impractical
Possible
Expected
Required
Sustaining
Innovation
Breakthrough
Innovation
Experimentation
Sustaining
Innovation
Constant Improvement
New Solutions
Reliability
Unexpected Surprises
Scale
Leveraging Trends
Responding to Trends
A Balanced Allocation of Innovation Resources/Efforts
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Expected Returns from Innovation Investments
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The Ten Types of Innovation
How you join with
others to create value
How the enterprise
makes money
How you create your
offerings
How your products and
services complement
each other
How you support and
structure your business
How you differentiate
your offerings: features,
performance, functionality
How you connect your
offerings with
customers and users
How you deepen
relationships
How you enable optimal
experiences
How you convey your
offerings and business
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Source: Larry Keeley et al., The Ten Types of Innovation: The Discipline of Building Breakthroughs (April 2013)
Innovation in Practice
Using Innovation Types Strategically
Platform-Led
extending
capabilities and
offerings to deliver
value
Business Model-Led
configuring
partnerships, revenue
models, and assets to
deliver value
Customer ExperienceLed
providing and engaging
customers in optimal
experiences to deliver
value
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Volume of Innovation Efforts
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Volume of Innovation Efforts
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Integrating more types of innovation delivers
superior financial returns
5-Year Indexed Stock Price Returns of the Top Innovators vs.
S&P 500
Stock Price (indexed to 100)
5+ Types of
Innovation
45 companies
3–4 Types of
Innovation
59 companies
1–2 Types of
Innovation
34 companies
S&P 500
2007
2008
2009
2010
2011
Source: Larry Keeley et al., The Ten Types of Innovation: The Discipline of Building Breakthroughs (April 2013)
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Quiz: Is This a Product or a Service?
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Quiz: Which Has Superior Market Share?
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Perhaps some comparative data will help you decide.
Cleans best
Rinses cleanest
Best fragrance
Cost-efficient bottle
Lowest cost/ounce
Best shelf placement
Highest ad budget
?
Market share
?
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Get Out Into the Field With Your Customers
Macro
market
research
video
ethnography
Latent
Empathic and
observational
research
customer
satisfaction
surveys
Explicit
focus
groups
Ethnography
Psychography
Anthropology
Micro
Adapted from Alan South, IDEO London
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Why It Matters – The Smile Curve
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Thank You
Stephen Ezell
sezell@itif.org
Follow ITIF:
Twitter: @sjezell
Facebook: facebook.com/innovationpolicy
Blog: www.innovationpolicy.org
Website: www.itif.org