Colorado State University PLI Presentation

1. Colorado State University PLI Presentation Chris J. Christopher April 3, 2014

2. Innovation – Growth & Renewal • Reasons to Innovate • Context and Challenges • Create an environment for Innovation • Innovation Delivery Requirements • Success story • Innovation & you • Take-aways 2 Chris J. Christopher – April 3,2014

3. Innovation Innovation is the application of resources to produce a new or improved product or service that delivers superior value to the market 3 Chris J. Christopher – April 3, 2014

4. The Innovation Lift Innovation Competitive Differentiation +D Value Resources Business Growth Higher Investment +D Gross Margin 4 Chris J. Christopher – April 3, 2014 Chris J. Christopher – March 30, 2012

5. Why Innovate? Social Economic • Preserve Jobs • Preserve the environment • Survival Defensive • Market Share Growth • Revenue • Profit • Improve quality of life • Growth in jobs • Meet personal aspirations • Have fun Offensive Chris J. Christopher – April 3, 2014

6. Why Not Innovate? • What we have works • It is too expensive • No work-arounds on our patents • Our markets do not change • We do not want to confuse our customers • We intend to sell the company 6 Chris J. Christopher – April 3, 2014

7. Innovation Exercise #1 • Identify a product or service that you believe represents an innovation • What criteria did you use to come to that conclusion? 7 Chris J. Christopher – April 3, 2014

8. Organizational Structure CEO Bus #1 Bus #N Research Labs Procurement Supply Chain Processes Corporate Functions Business Groups & Operating Divisions Chris J. Christopher – April 3, 2014

9. Business Drivers • Deliver on Financial commitments • Revenue • Profit • Focus on the next product cycle • Take care of current customers • Respond to competition Chris J. Christopher – April 3, 2014

10. Inhibitors to Innovation • Management short term focus • Lack of resources devoted to innovation • Core business  commoditized  lower margins  lower investment for innovation • Risk avoidance • Lack of core competence on how to innovate Chris J. Christopher – April 3, 2014

11. 11 Chris J. Christopher – April 3, 2014

12. Create an Environment for Innovation Hard Moves • Fenced allocated resources • Explicit expectations & measures • Specific Rewards • Core competency • Multi-disciplined • New talent • Soft Moves • Management interest & attention • Public recognition • Nurture a culture of innovation Chris J. Christopher – April 3, 2014

13. Innovation Strategies • Part of the ongoing business processes • Aggressive goal setting • Disciplined leadership & management • Structured, focused innovation team • Ad-hoc • Acquire from the outside Chris J. Christopher – April 3, 2014

14. EVP Business Group … Operating Division #1 … Quality Supply Chain Marketing R&D Innovation expected as part of the ongoing programs Program #1… Program # N Chris J. Christopher – April 3, 2014

15. Investment Model New developments 10% Adjacent products & markets 20% Core product lines 70% Chris J. Christopher – April 3, 2014

16. Key Success Factors Innovation Time to Market Cost Quality Chris J. Christopher – April 3,2014

17. Innovation & the Value Chain Product Generation SupplyChain CustomerSupport Marketing Sales • Innovation opportunities • Explicit identification of differentiation • Value chain stage dependencies Chris J. Christopher – April 3, 2014

18. Transformation of a Business Average Selling Price $25K-$40K $2K Average GM 35% - 40% 20% R&D as % of Revenue 6% - 8% 2% Opportunities for Innovation Multiple Few Business ModelProprietary TechnologiesIndustry Standard Chris J. Christopher – April 3,2014

19. Innovation Exercise #2 • You have been promoted to a business manager and are facing the ominous shift of the business model from proprietary to industry standard technologies. • What do you intend to do about the business you inherited? 19 Chris J. Christopher – April 3, 2014

20. Innovation & Team Work Do the right thing Optimum Results Breaking Glass Status quo Do it right 20 Chris J. Christopher – April 3, 2014

21. How Do I Innovate? • Personal Attributes • why is it so? • be resourceful • engage with customers Innovator • Commitment • passion • perseverance • energy • Broad Interests • look outside your industry • partake in the arts • smell the flowers 21 Chris J. Christopher – April 3, 2014

22. Take-aways • Your current product, process, value proposition and/or business model will lose the competitive edge • Innovation is the lifeblood of the entity that enables growth • and renewal • Understand the broader context • Gain in-depth understanding of the customer needs • Set an innovation expectation for yourself & demonstrate the initiative and leadership to nurture innovation 22 Chris J. Christopher – April 3, 2014

23. Back up Material 23 Chris J. Christopher – April 3, 2014

24. Creation of an OEM Business Design Prototype Test Manufacture/Sell Vendor Introduction Obsolescence Design Proto/Test FDA Approval Manuf/Sell Customer Introduction • Focus on the customer need • Innovate in multiple stages of the value chain • Innovate on the relationships with the customer Chris J. Christopher – April 3, 2014