Boosting Innovation to Growth: Accelerating Commercialization Aug. 2 nd and 3 rd , 2012

1. Boosting Innovation to Growth: Accelerating Commercialization Aug. 2nd and 3rd, 2012 Jay Rao Professor

2. Today’s AgendaDeveloping Capabilities to Sustain Innovation • Managing Innovation Projects • Predictive vs. Emergent Strategies • A Game • Tapping Entrepreneurial Energy • Building a Better Skunk Works • What is my role as a leader? • What is my style? • Culture of Innovation • A video • AssaAbloy Americas Culture of Innovation

3. Managing Innovation Projects: Marshmallow Tower Game Jay Rao Professor

4. Game Rules • Build the Tallest Freestanding Structure • Structure measured from the top of the table to the top of the marshmallow • Use as much or as little of the kit – Spaghetti sticks, String and Tape • The entire marshmallow must be on top; OK to stick it on the top • OK to break up the Spaghetti, String and Tape • OK to tape the structure to the table • The Challenge Lasts 18 minutes • Cannot use the paper bag or scissors as part of the structure • Cannot hold on to the structure when the time runs out • Structure cannot be suspended from a higher structure, e.g., ceiling • Do not search the internet for answers

5. Game Summary

6. Source: Tom Wujec, Autodesk

7. Source: Tom Wujec, Autodesk

8. Source: Tom Wujec, Autodesk

9. Source: Tom Wujec, Autodesk

10. Source: Tom Wujec, Autodesk

11. Source: Tom Wujec, Autodesk

12. Who consistently performs poorly? Source: Tom Wujec, Autodesk

13. Who consistently performs well? Source: Tom Wujec, Autodesk

14. Why? Source: Tom Wujec, Autodesk

15. Source: Tom Wujec, Autodesk

16. Source: Tom Wujec, Autodesk

17. Source: Tom Wujec, Autodesk

18. Source: Tom Wujec, Autodesk

19. Marshmallow Game Lessons • Understanding known and unknown variables • Rapid Prototyping uncovers hidden variables and their relationships • Fail Fast, Fail Cheap, Learn Quick, Refine and Repeat • Diverse skills matter • Specialized skills + Facilitation skills matters • Incentives magnify outcomes • Big Bang vs. Start Small • Incentives without skills are useless Source: Tom Wujec, Autodesk

20. Empirical findings about Innovations 75% of all new products launched by established firms fail to make profit. Most are yanked/killed without shaping & developing them More than 90% of all Innovations that were successful started off in the wrong direction Given more money & time, firms are known to pursue the wrong strategies for a longer period of time. Most new innovations are started with access to no credit in good times and in bad Most of the great businesses today started without a lot of VC funding or any bank lending until 5-6 years after they were up and running

21. 2008 McKinsey Study Highlights CEOs and Executives are frustrated with their efforts to jumpstart Innovation initiatives Overall dissatisfaction with dismal outcomes of Innovation programs Resources and Processes that are applied are either underutilized or not achieving scale to have a financial impact Unanimous agreement (94%) that people and corporate culture are the most important drivers of innovation Mimicking and Benchmarking best practices have been ineffective Source: The McKinsey Quarterly, 2008 no. 1

22. Leading into the Future: Managing Innovation Projects Analytical and Emergent Strategies (Prediction and Creation Logic)

23. “The Future ain’t what it used to be.”“It is tough to make predictions, especially about the future.” Yogi Berra

25. Steady and Stable Slowly changing, Predictable, Trends are Evident Increasing Rate of Change with Some Predictability, Foreseen Trends May Appear Rapid Change, Little Predictability, Many Surprises Chaotic & Unpredictable Normal Complicated Complex Environmental Conditions Risk Uncertainty Ambiguity

26. Nature of Innovation Projects Ambiguity Unknown Unknowns Known Unknowns Uncertainty Outcome Risk Known Knowns Known Knowns Known Unknowns Unknown Unknowns Process

27. “Killing”

28. If you don't know where you are going, you might wind up someplace else. Yogi Berra

29. J. P. Guilford(Convergent & Divergent Thinking) Selecting the most suitable bomber pilot candidates during WW II

30. How do you “sail” from Barcelona to Mallorca?

31. Practice: How do you “sail” from Barcelona to Barbados?

32. Steady and Stable Slowly changing, Predictable, Trends are Evident Increasing Rate of Change with Some Predictability, Foreseen Trends May Appear Rapid Change, Little Predictability, Many Surprises Chaotic & Unpredictable Normal Complicated Complex Environmental Conditions Risk Uncertainty Ambiguity

33. Going into the future: Emergent Strategy Think Different Think Big Start Small Start Several Prototype Rapidly Proof of Concept = Voice of Customer + Voice of Tech. Fail Fast, Fail Cheap, Learn Quick Pour Resources only after Proof of Concept Celebrate Success & Celebrate Failure

34. Going into the future: Analytical Strategy Scan and analyze the Environment Predict trends Use WACC & IRR to set aggressive goals Set strategy and set budgets Draw detailed project plans Choose teams and assign KPIs Execute to plan Kill project when projections don’t materialize

35. Steady and Stable Slowly changing, Predictable, Trends are Evident Increasing Rate of Change with Some Predictability, Foreseen Trends May Appear Rapid Change, Little Predictability, Many Surprises Chaotic & Unpredictable Leading into the Future Analytical Strategy Environmental Scanning Predictive Models Set Strategy Project Planning Budget & KPIs Execution Plan Prediction Logic Emergent Strategy Think Big Start Small Start Several Prototype Rapidly Fail Fast, Fail Cheap, Learn Quick Pour Resources after POC Creation Logic

36. “Killing”

37. Do you remember this?

38. How to get better at Emergent Strategy & Creative Logic? • Learning by Doing • Action vs. Analysis • Take action to produce data and uncover variables • Generate data vs. Using existing data • Grounded in reality vs. Speculation • Entrepreneurial Thought and Action • Value Diversity and Inclusion • Several functions and across layers • Learn to Improvise • Fluid and flexible processes • Portfolio of Projects (Risky, Uncertain & Ambiguous)