Innovation and Invention What it means and why it matters By Peter Chapman & Peter MacKinnon Independent Researchers & Business Advisors Course: ELG 4913 Electrical Engineering Design Project II School of Electrical Engineering & Computer Science

March 1, 2016

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Agenda 1. 2. 3. 4.

Opening questions & comments Innovation & Invention: A discussion with examples Disruptive Innovation & Disruptive Technologies Going from Idea to Product: What do you think are the challenges? 5. “Necessity is the mother of invention” NO, it is “innovation”

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Disruptive Innovations & Technologies

Telephone wires in New York 1887

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“Necessity is the mother of invention innovation” •

Innovation needs to do something for people in order to succeed – – –

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It needs to take into account human factors • The mouse is far less efficient than a keyboard, but requires no learning, hence its success Usability is the great driver of acceptance of technological innovation Innovation occurs when people are unhappy

Common innovations that we take for granted: – – –

Wheels on suit cases Angled paint brushes/paint rollers (invention?) Supermarkets

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Disruptive Technologies •

The bicycle (1816 no pedals, 1885 modern) –

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The Segway –

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After it was invented people did not believe it was possible without actually seeing one

An unlikely idea • It achieved only limited acceptability because it did not consider the regulations - in many territories it has to be licensed as a motor vehicle

Heavier than air flight – gliders (1853) preceded powered aircraft (1903) –

It is likely that it would not have been invented without having seen birds and insects. It just seems so unlikely

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A typical technology adoption curve

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Innovation Dynamics

Source: Gartner 2004

• Investment required in advance (a few years) of confirmed market • Persistence in face of disillusionment PG 7

What is innovation? • •

Invention is a novel idea or concept that is unlikely to be thought of by someone else Often it is something that can be touched – but not always Innovation is a way of doing something new –

• • • •

Many industrial processes involve innovation, as do retail practices

Innovation is not necessarily more efficient or reduce effort or costs Most “apps” are not innovations Not all innovation is beneficial The patent process refers to “invention” and defines it as a novel way of doing something, which would not be obvious to someone skilled in the art

patent process refers to “invention” and defines it as a novel way of doing something,

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Some facts about innovation • • • •

Innovation is not the same as invention Innovation is not the commercialization of invention Innovation often does not involve invention Innovation is often not tangible

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Extracts from “Innovation in Canada” • •

Innovation is change –

It is the change achieved by developing a new idea and putting it into practice

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evident in the myriad of new and improved goods and services always being introduced into the market

Product innovations

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Process innovations

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Innovations arising

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in how things are made and done

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from discoveries made in research

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from new concepts in design

– – – –

in marketing and logistics in business models in organizations in the social institutions that regularize human arrangements and relationships

Innovations Innovations

Source: Innovation in Canada by Tom Brzustowski

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Innovative Culture in Canada •

Nortel/Bell Northern Research –

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RIM/Blackberry –

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Changed the game in phones from basic to smartphone. Created the “keyboard on a phone” concept

Wesley Clover –

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Identified and created many new products and services that made the Internet possible

A high tech ideas incubation company created by Terry Matthews (founder of Mitel and Newbridge)

Medical technologies – – –

Canada identified and enabled the production of insulin Canada created the vaccine to protect against polio John Bell, of Ottawa hospital, has identified and is developing viruses that cure cancer

These organizations all have or had a management culture that recognized valued and rewarded innovation PG 11

Why do we need Innovation? •

Wealth in this new regime flows directly from innovation, not optimization. That is, wealth is not gained by perfecting the known, but by imperfectly seizing the unknown. Kevin Kelly, New Rules for the New Economy

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Whoever Makes the Most Mistakes Wins: The Paradox of Innovation Richard Farson & Ralph Keyes

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A focus on cost-cutting and efficiency has helped many organizations weather the downturn, but this approach will ultimately render them obsolete. Only the constant pursuit of innovation can ensure longterm success.” Daniel Muzyka, Dean, Sauder School of Business, University of British Columbia (FT/09.17.04)

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Why do we need Innovation? (2) •

“Precisely because these firms listened to their customers, invested aggressively in technologies that would provide their customers more and better products of the sort they wanted, and because they carefully studied market trends and systematically allocated investment capital to innovations that promised the best returns, they lost their positions of leadership”. Clayton Christensen: “The innovator’s Dilemma” 1997

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Fail to innovate and often someone else will

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Why is innovation important? •

Innovation is needed to create new sources of value and revenue –

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Innovation can disrupt traditional business models – – – –

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The world economy is restructuring. Opportunities are enormous

FedEx Online shopping, tickets, hotel booking Social media replacing print media Real time TV being replaced by on demand streaming

Innovation often finds a new way of using an invention –

Internet was originally conceived and designed as a means of file sharing between research facilities

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WWW (Domain name servers) was the innovation that triggered its success

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Why is innovation important? (2) • • •

Protection from being blindsided Steamship versus sail Digital camera –

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Digital versus mechanical watches Transistor – vacuum tube makers did not generally succeed in making transistors –

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Kodak identified this opportunity early on and initially was a leader in digital photography

(RCA and Philips were the exception)

The personal computer – destroyed DEC Innovations that have saved companies –

LED lights (Sylvania, Philips)

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Innovation is an unintended sinkhole – but you have to do it! •

“Half the money I spend on advertising is wasted, the problem is I don’t know which half” John Wannamaker, a pioneer in American retail

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Similarly, more than half the money companies invest in innovation is wasted, but you have to spend it, and you don’t know which half

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In other words, there will be failure and you don’t know where, why or how until it happens

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An Example: Nortel At Nortel, the few innovations that succeeded were so successful, they more than justified the cost of those that were not commercialized

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Innovation is an unintended sinkhole – but you have to do it! (2) • • • • • • •

However, John Roth, CEO of Nortel dismissed BNR (Nortel’s R&D company) as a “$2B sinkhole” Execs at Nortel knew how inefficient their own innovation was, but mistakenly believed that start-ups were more efficient They obsessed with the more than 50% that was wasted in their own organization In fact, most start-ups they acquired produced little value-add to Nortel’s product line and R&D capacity BNR had a list of innovations that made Nortel one of the most valued companies in the world (~$300 billion in 2000) Nortel’s move from innovator to acquirer cost Canada the company Customers buy from innovative companies – even if they don’t buy their innovations.

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Examples of Innovation & Invention • Pioneered a new model for courier services which did not involve any invention. It is an innovation. It is not an invention. • The postage system is an innovation (1834) Same rate irrespective of distance Only sender pays – even if receiver refuses package

• A zipper is an invention, and its use in clothing is an innovation It was originally conceived as a convenient way of closing leather boots. Adopting it for clothing was the innovation

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Ideas that almost got missed •

Xerography (electrostatic copying) –

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Mouse – –

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They didn’t realize that it created a new market which enabled copying of documents after the documents were produced. Previous methods, primarily carbon paper etc. could only produce copies of documents while they were being produced Considered an interesting novelty by the inventors at Xerox. A 1950s version of a trackball was developed by Canadian military research but kept secret and never patented in its lifetime

Personal Computer –

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Originally the “mini”, produced in 1960 by Digital and subsequently many others, offered personal computing with greater accessibility than main frames. It took until 1982 for the concept to catch on It finally succeeded due to OS, human factors, not price

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Good ideas that had limited success • • • •

Supersonic passenger flight ISDN/ATM (early Internet transport technologies) Airships Leisure society –

We have the “struggling to keep up our knowledge base” society instead

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Ideas that stalled •

Hovercraft: –

Patent issue was delayed 4 years due to its military significance •

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Smartcard – –

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A patent can be delayed if it is deemed necessary to keep it secret due to military significance

A proposal for an “electronic purse” enabling anonymous money exchange Challenges: Acceptability (morality), technology

Paperless office – –

No one has created a substitute for documents – yet A fortune awaits the innovation that achieves this

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Recent Innovations • • •

Mobile Internet Knowledge network (replace experts, doctors, lawyers) Internet of Things (IoT) –

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Cloud –

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Surgery, dental, fixing things

Self driving vehicles Advanced genomes –

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But SaaS has only met with limited success

Smart robotics –

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Technology looking for a reason?

Gene sequencing and writing

Artificial Intelligence –

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High density batteries and other forms of storing energy 3D printing –

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New materials –

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Wide ranging enabling technology applicable to many areas involving cognitive process

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e.g. graphene

Recycling techniques –

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How different is it from advanced machine tools?

Sorting, processing

Energy conservation and re-use Thermal insulation Grocery deliveries Emergence of platform companies

Disruptive Innovation •

Is an innovation that creates a new market and value network and eventually disrupts an existing market and value network, displacing established market leaders and alliances – –

The term was defined and phenomenon analyzed by Clayton M. Christensen beginning in 1995.[1] More recent sources also include “significant societal impact" as an aspect of disruptive innovation[2]

1 Bower, 2

Joseph L. & Christensen, Clayton M. (1995) Assink, Marnix. "Inhibitors of disruptive innovation capability: a conceptual model." European Journal of Innovation Management 9.2 (2006): 215-233

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Disruptive Technologies •

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Advances that will transform life, business, and the global economy that could drive truly massive economic transformations and disruptions in the coming years In other words, they have the potential to truly reshape the world in which we live and work Leaders in both government and business must not only know what is on the horizon; but also start preparing for its impact

Think about your role & your impact on these transformations

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Disruptive Innovations (2) • • •

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Tend to be produced by outsiders The business environment of market leaders does not allow them to pursue disruption when they first arise Why, because they are not profitable enough at first and because their development can take scarce resources away from sustaining innovations A disruptive process can take longer to develop than by the conventional approach and the risk associated to it is higher than more incremental or evolutionary forms of innovations Once it is deployed in the market, it achieves a much faster penetration and higher degree of impact on the established markets

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How low-end disruption occurs over time

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Examples of Disruptive Innovations Disruptive Innovation

Market Disrupted by Innovation

Disruptive Innovation

Market Disrupted by Innovation

Wikipedia

Traditional encyclopaedias

Light emitting diodes

Lightbulbs

Telephony

Telegraphy

Hydraulic excavators

Cable-operated excavators

Personal computer

Mini computers, workstations & word processors

Plastic

Metal, wood, glass, etc.

Smartphones

traditional PCs

Ultrasound

X-ray imaging

Digital calculator

Mechanical calculator

Digital media

CDs, DVDs, etc.

Digital photography

Film-based photography

Automobiles

Rail & workhorses

USBs & flash drives

Floppy disks

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Disruptive Technologies in Economic Terms

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Implementing transformative technologies often faces resistance • • •

e.g., the electric car will be resisted by gas-station operators in the same way automated teller machines (ATMs) were resisted by bank tellers and automobiles resisted by horseshoe makers

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Transition from an existing product to a disruptive technology or process

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Going from Idea to Product: What do you think are the challenges?

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Extract from a 2005 Nortel strategy document •

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“The question we need to be asking is not what the technology can do, but instead, what can the end user do. And then what can we do with the technology to make the end user’s task possible, simpler, more secure, more enjoyable? In a word, more useable?” “The [Telecom] industry is in desperate need of innovation. And innovation is not about cost reduction. It is about doing something useful for the end user; something the end user will be willing to pay for.” This approach has lead to an entirely new and innovative business model in the form of platform companies (e.g., Amazon, Google and Uber)

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Nortel - Ahead of the Curve

1992

1997

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BNR/Nortel innovations • •

Digital World – the basis of all telecommunications and networking today Optical long haul technologies –

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At its peak 70% of all Internet traffic was carried through Nortel equipment, worldwide

Smart phone –

1997 (10 years before i-phone) • • •

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Video phone –

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20 years ahead of Skype

Voice compression –

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Touch screen Voice dialling/recognition Auto switch to and from hands free

Compressing 64 Kbit/s into 12 Kbit/s

Predictive hands-free operation

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BNR/Nortel innovations (2) •

Manufacturing technology for filter codecs –

• • • • • • •

Only company in the world able to make single chip filter codecs

Innovative Internet technology ISDN (single chip long loop length) SONET/SDH Large CAM chip (key component of routers) Speech recognition Self configuring networks Patents sold for $4.5B to Apple, Blackberry, Ericsson, Microsoft and Sony as part of a consortium of over 30 companies

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What made these companies innovative? •

A willingness to defy their customers and develop what those customers would need, not what they were asking for – – – –

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Digital networks Cellular wireless Combined voice and data equipment A phone with a keyboard (aesthetically rejected initially)

An independence of the R and D team from interference by executive management Recognition of where to allocate R and D resource: – – – –

Futures, futures, futures Not sustaining Not cost reductions Centrally allocated, not allocated by product line

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Why companies don’t like to innovate •

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“An innovation that is disruptive allows a whole new population of consumers access to a product or service that was historically only accessible to consumers with a lot of money or a lot of skill. Characteristics of disruptive businesses, at least in their initial stages, can include lower gross margins, smaller target markets, and simpler products and services that may not appear as attractive as existing solutions when compared against traditional performance metrics By only pursuing “sustaining innovations” that perpetuate what has historically helped them succeed, companies unwittingly open the door to “disruptive innovations.” Source: Clayton Christensen

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Evolving process of technology •

When a technology that has the potential for revolutionizing an industry emerges, established companies typically see it as unattractive –

e.g. it is not something their mainstream customers want, and its projected profit margins are not sufficient to cover big-company cost structures

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Evolving process of technology (2) •

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Adequate knowledge creation and management come mainly from networking and distributed computing (one person, many computers) Each person's computer must form an access point to the entire computing landscape or ecology through the Internet of other computers, databases, and mainframes, as well as production, distribution, and retailing facilities, and the like For the first time, technology empowers individuals rather than external hierarchies

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Recommended Reading

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Thank You - Merci Peter MacKinnon, Managing Director Synergy Technology Management Mobile: 613.712.9463 Email: [email protected] Peter Chapman, Founder & CEO Haven Hardware Antivirus Engineered Systems Inc. office: 613.592.8387 Mobile: 613.863.8387 [email protected]

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Extra/ optional slides

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Automation of knowledge work

“So I think we’re going to go from the sort of command-and-control interfaces where you tell the computer like a dog, “Bark,” to a situation where the computer becomes much more of a friend. And, a friend in the sense that the computer says, “Well, we kind of know what you care about.” And again, you’ve given it permission to do this. And it says, “Well, maybe you should do this” or “Maybe you should do that.” PG 43

Autonomous & Near-Autonomous Vehicles

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Mobil internet

iBGStar® Diabetes Manager App will make the regular checking of blood glucose easier as you can just connect the iBGStar – the blood glucose meter to connect to your Apple iPhone or iPod touch, and get your results instantly, anywhere and anytime on the move. PG 45

Advanced Robotics

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3D Printing

With a 3D printer you can essentially build your own thing. Another interesting aspects is the new materials that can be used in 3D printers, which have all sorts of new properties. PG 47

Advanced Materials

Materials that have superior characteristics such as better strength and conductivity or enhanced functionality such as memory or self healing capabilities, will bring various benefits to the most widespread types of industries. PG 48

Renewable Electricity

Its components technologies are photovoltaic cells, wind turbines, concentrated solar power, hydroelectric and ocean-wave power, geothermal energy.

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Advanced Oil and Gas Exploration and Recovery

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Innovations that bypassed •

Self driving cars –

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Will disrupt the insurance industry

24 bit recording (superior to vinyl) –

Will render the vinyl revival short lived

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According to Clayton M. Christensen, an Harvard Business School professor a disruptive technology is a new emerging technology that unexpectedly displaces an established one. Christensen used this term for the first time in his 1997 best-selling book entitled “The Innovator's Dilemma”.

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Perspective shaped by one’s “State of Mind” •

Pipe Thinking: –

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Platform Thinking: –

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“Build network effects before you optimize conversions.”

Pipe Thinking: –

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“Optimise conversion funnels to grow.”

“Our users interact with software we create. Our product is valuable of itself.”

Platform –

“Thinking: Our users interact with each other, using our product. Our product has no value unless users use it.”

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Disruptive innovation (duplicate) •

A disruptive innovation is an innovation that creates a new market and value network and eventually disrupts an existing market and value network, displacing established market leaders and alliances –

The term disruptive technologies was coined by Clayton M. Christensen of Harvard and introduced in his 1995 article Disruptive Technologies: Catching the Wave

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