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L8 Innovate or Perish

EC10: Innovation & Commercialisation

Managing the innovation process and remaining
Marcus Thompson
L8 Outline: Innovate or Perish

 Why Innovate
 Ideas & Commercialisation

 The Innovation Process

 Managing Innovation Creativity

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1. Why Innovate?

EC10 Innovation &

Innovation in Smaller Companies
Small firms produce 55 percent of innovations. They produce twice as many
product innovations per employee as large firms, including the employees of
firms that do not innovate. This is also true of significant innovations.
Small firms obtain more patents per sales dollar and apparently have more
discoveries than large firms, since research has shown that large firms are
more likely to patent a discovery.
Small research and development (R&D) firms are quite research intensive:
the percentage of employees that are R&D scientists and engineers are 6.41
percent in small firms and 4.05 percent in large R&D firms.
Large firms receive 26 percent of their research and development dollars
from the federal government; small firms, only 11 percent.
A federal R&D dollar to a small firm is more than four times as likely to be
used for basic research as a federal R&D dollar to a large firm.
The Facts about Small Businesses, 1997, Small Business Administration,

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Policy Approaches to Innovation
The rate of return on R&D expenditures is 26 percent for both small and
large firms, but only 14 percent for firms not involved with a University. The
estimated rates of return on total R&D for firms with a university relationship
are 30 percent for large firms and 44 percent for small firms.
Innovations coming from small high-tech firms are expected to increase in
the coming years as a result of the increase in the. Under the Small
Business Innovation Research (SBIR) program, federal agencies with large
R&D budgets must direct a share of their R&D funding to small firms, the
source of 55 percent of innovations and new technologies. Since the
inception of the SBIR program in FY 1983, almost $4 billion in competitive
federal R&D awards have been made to qualified small business concerns
under the program.
Among the important innovations by U.S. small firms in the 20th century are
the airplane, audio tape recorder, double-knit fabric, fiber optic examining
equipment, heart valve, optical scanner, pacemaker, personal computer,
soft contact lenses, and the zipper.

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European Policy Measures
“Europe has a structural trade deficit in high technology products of over
ECU 10million”.
“It is to hasten the emergence of new technology-orientated
entrepreneurialism in Europe to optimise the participation of SME’s - both
in research itself and in the exploitation of its results.” Edith Cresson

Measures being considered:

– Tax measures favouring use of stock options
– Transfer of pension rights (across Europe)
– Rapid improvement of system for protection of knowledge
– Facilitation of technology transfer between University & research centres
– register of business angels & venture capital network
Rejected - 5% of all public research expenditure to SME’s
Source: EGX111, Role Models For Innovation, Innovation and Technology Transfer, January 1999

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The formation and development of high
technology firms have been encouraged
by Governments and other agencies in
developed economies.
– (Oakey, 1984; Malecki, 1991; Oakey, 1991a, 1991b; Henneberry,
1992; Garnsey and Cannon-Brookes, 1993; Garnsey et al.,
1994; Storey and Tether, 1998; Tether and Storey, 1998).

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Why Encourage High-Tech?

It is assumed that a growing stock of high

technology firms will:
– Encourage national economic development.
– Make less favoured areas more competitive and
– Broaden the industrial base of regions.
– Improve the competitive capability of industry.
– Create jobs and will be associated with wealth

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Perceptions of Technology Based

“For twenty years or more, there has been an

abiding perception, with considerable currency
amongst politicians and policy makers in London,
Brussels and Glasgow, that new and small firms
are an important source - perhaps even the source
- of innovation, new technology and employment
creation.” CRIC Project

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SME, Innovation & Employment
Innovative or technology based new and small firms
are more likely to create employment than similar firms
in the general population.

The average rate of employment creation within an

individual innovative or technology based new or small
firm tends to be modest.
The third recurrent finding is that growth amongst
innovative and technology based new and small firms
tends to be concentrated in a few firms.
The fourth finding is that even amongst the fastest
growing innovative and technology based new and
small firms the absolute number of jobs created over a
decade tends to be modest.

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2.Ideas &
Innovation & Commercialisation
Choosing a Direction
“Entrepreneurs are managers. They manage more than just
organisations, they manage the creation of new worlds.
This new world offers the possibility of value being
generated and made available to the venture’s
stakeholders. This value can only be created through
change - change in the way things are done, changes in
organisations and change in relationships.
“Effective entrepreneurs know where they are going, and why.
They are focused on the achievements of goals.”
“The entrepreneur’s vision is a picture of the new world he or
she wishes to create. The picture is a positive one. . He or
she is motivated to make their vision a reality.”

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Making the Vision into Reality
Vision must exist before strategy development and planning
 The vision provides:
– sense of direction.  The vision is constantly
– defines goals and refocused:
objectives.  what is source of value to be
– provides focus when going created?
gets tough.  Who will be involved?
– gives the venture a moral  Why will they want to be
content and social priority. involved?
– It communicates and  What rewards will they gain?
attracts venture support.
 What new relations are needed
– It forms the basis of the
 What is the potential for self
leadership strategy. development?

Source: Adapted from, Strategic Entrepreneurship, Wickham, 1998, p107

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Route Adopted
e Directorship
v Form a management team

l Licensing
Commercial arrangement through which licensor of IPR allows licensee to develop
o sell or use in return for a royalty payment
C Sell rights and transfer the ownership of the invention and IPR to third party for lump
o sum
r Joint Venture & Partnerships
o Collaboration with one or more organisations to exploit IPR. Includes sharing of costs
and revenues
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Innovation Process
 Prepare
– Evaluate the life cycle of existing services and products.
– Set-up is systematic abandonment process.
– Estimate the abandonment revenue gap.
– Set up separate organisation with reporting line, measures,
structures and sufficient resources to bridge revenue gap.
 Conduct systematic, purposeful and organised of the seven
innovation sources (see next slide)
 Perform diagnostic analysis of opportunities.
– What do the seven sources mean to the organisation’s
business processes, channels and technologies.
– Conduct analysis by listening to customers
– Use focus groups to corroborate the analysis (see Slide 3 for
analysis criteria)
 Exploit Opportunity
– Conduct pilot tests
– Commercialised in stages Adapted from Drucker, P, Innovation & Entrepreneurship
– Allocate resources
– Evaluate and measure success.
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Drucker on Sources of Innovation
 Unexpected Occurrences
– Unexpected successes existing management find
– Unexpected failures.
– Unexpected out side events.
– Suppliers and customers and competitors.
 Perception-Reality Incongruities.
– Internal misperceptions. Adapted from Drucker, P, Innovation
& Entrepreneurship
– Conflicting internal reality.
– Customer expectation gaps.
– Dysfunctional or imbalance at critical point in a business
 Process Weaknesses.
– Weak links in process.
– Constraints or vulnerability.
– Need to improve.

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Drucker on Innovation (2)
 Industry and market changes.
– Competitive strategies.
– Change in players’.
– Structure of industry.
– Customer value propositions. Technology and operations.
 Demographic Changes
– Ageing. Shifts in a wealth.
– Urbanisation and globalisation.
– Culture and societal changes (environmental).
– Changes in buyer’s attitudes.
– Changes in mood and perception.
– Changes in buying habits.
 New scientific and business knowledge.
– Application of old innovations into new areas.
– Expensive innovation with long lead times and risks.

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Innovation Potential Checklist
 How does it create new value for customers?
 Is price related to value to customer not cost to
 A response to unmet customer needs or
 Does it delivers attributes not products?
 Reasonable speed and access to market?
 Simple and focused and does one thing and
satisfies one need for one group of customers?
 Will it obtains a leadership position in the market
 Not too clever nor too far ahead of market?
 Consistent with an organisation’s strength and
not Adapted
too from
diverse in terms of product?
Drucker, P, Innovation & Entrepreneurship
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Adopters of Technology
 Innovators
– Willing to accept risk. Younger and higher income.
 Early Adopter
– Often opinion leaders, caution with risk. High
discretionary income. Highly independent.
 Early Majority
– Only willing to accept new ideas when risk is low
 Late Majority
– Sceptical. Place emphasis on word of mouth and seek
security from larger organisations
 Laggards
– Traditionalists. be older
Innovate Perish from
or Source: Rogers Etlower social
al, Diffusion groups.
of Innovation,1962, 19
3. The Innovation Process
How to Stimulate Innovation
Sector Innovation
• ‘An industrial sector is defined as ‘technology’ according
to its overall R&D intensity (sum of direct and indirect).
The direct intensity corresponds to the ratio of R&D
expenditure to value added for each sector and country.
For indirect intensity, embodied technology (R&D
expenditure) in intermediate and capital goods
purchased on the domestic market or imported was
taken into account. To calculate indirect intensity, the
technical coefficients of manufacturing industries
extracted from input-output matrices used.’ (OECD
Fact-book 2005)

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Wal-Mart Innovation network

• Evaluation & Assessment

• Innovation Development & Pre-
• Commercialisation

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Support in Scotland

• Scottish Enterprise (SE)

• (
• Smart Successful Scotland (SSS)
• (
• Business Gateway
• (
• Technology Venture Scotland (TVS)
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Sources of On-line Information
• http://www.scottish-
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Exercise: Support for Technology

 Based on the web-sites below as your own

independent research, report on support
structures for technology business in Scotland
 www.gro-

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4. Creative
Innovation & Commercialisation
Types of Creativity

 Normative
 Original thinking used to solve known
 Exploratory
 Blue Sky to identify opportunities
 Serendipitous Creativity
 Accidental eg post-it

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4. Creativity
 Conceptual fluency-: the ability to produce many ideas
or solutions in a given situation.
 Mental flexibility: also known as `lateral problem from
an entirely new angle.
 Originality: usually evidenced by unusual answers to
problems. -
 Suspension of Judgment: a willingness to defer
judgement of ideas of others.
 Impulse acceptance: a willingness to react impulsively
to an idea
 Attitude towards Authority: a willingness to challenge
Majaro (1992)
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Decision Making
‘The Prescriptive Approach
Linear and rational process, starting with where we are now
and then developing new strategies for the future.
One whose objective has been defined in advanced and
whose main elements have been developed before the
strategy commences.
The Emergent Approach
A a corporate strategy, which emerges, adapting to human
needs and continuing to develop over time. It is evolving,
incremental and continuous, and therefore cannot be
easily or usefully summarised in a plan which then
requires to be implemented.
Emergent corporate strategy whose final objective is unclear
and whose elements are developed during the course of
its life as the strategy proceeds’. Lynch, Richard – Corporate
Strategy, Second Edition (2000)

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What is a Learning
Organization (Team)?

A Learning Organisation is one in

which people at all levels,
individually and collectively, are
continually increasing their capacity
to produce results they really care
about. (Senge 1990)

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Why adopt the concept?
Organisations have increasingly taken an interest in
adopting the learning organisation concept because of
the increasing pressure on organisations to change
with developments in globalization, changes in
customer expectations and technology driving this
Organisations need to continuously develop themselves
to maintain their competitive advantage and learning is
considered the only way of obtaining and maintaining a
competitive edge.
In the knowledge era, knowledge is regarded as being
more important then financial resources, market
positioning and other corporate assets. (Marquardt
1996). 8. Innovate or Perish 31
Benefits of Becoming a
Learning Organisation
 Learning organizations link individual performance with
organizational performance setting clear direction for
employees and achieve goal congruence.
 provides continuous learning opportunities for all employees
and uses learning to achieve organizational goals and
 All employees including managers learn from their
experiences rather then being bound by their past
 Learning organizations encourage communication and
innovation by fostering dialogue, making it safe for people to
share ideas and take risks.
 Learning organizations seek to learn as much from its
failures as from its successes encouraging continuous
development and improvement.
 A learning organization8.continuously
Innovate or Perish interacts and responds
to its external environment allowing for better customer
What do you

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The Elephants Legs

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What am I thinking?

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Beauty is in the eye of the beholder

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Dots before your eyes

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Putting a different light on things

The idea of a lighted flower pot may strike us as pretty humorous, but it was
the answer to a lifelong struggle for a Russian immigrant named Conrad
Hubert. Hubert came to the United States in 1890 when he was about 35
years old. He was flat broke. He did what he could to earn a living. He
worked in a cigar store, ran a restaurant for a while and managed a boarding
house. He even tried fanning and repairing watches. Whatever he did,
however, he never made much money. All he wanted was to stop worrying
about making ends meet. Now Hubert had a friend named Joshua Lionel
Cowen who was very interested in electricity. Joshua had invented a flower
pot with a battery in it. Electricity from the battery made the flower "light up"
when a button was pressed. Hubert decided he would try to sell these flower
pots. Meanwhile, Joshua became interested in something new, electric
trains and he sold his friend the flower pot idea for almost nothing.
Fortunately, Hubert never went ahead with the flower pots because he had
had an idea for a modification. He took the battery, the bulb and the paper
tube from the pot and remade it into what he called "an electric hand
torch." Hubert sold his invention at first as a novelty, but the usefulness of
the flashlight soon became apparent. When he died in 1928 it must have
seemed to Hubert a long time ago that he was poor. He was worth

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Would you trust this man?

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Read these allow as fast as you can

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The Process of Idea

1.The Need

2. Collect Information

3. Analyse and validate data

4. Develop coping Strategy

5. Implement Strategy
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The Moral of the Story

If the princess thinks the same as everyone

else she would never have lived happily
ever after . . and the prince would have
remained a frog.

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Team & Creativity
It follows, then, that one common way managers kill creativity
is by assembling homogeneous teams. The lure to do so is
great. Homogeneous teams often reach “solutions” more
quickly and with less friction along the way. These teams
often report high morale, too. But homogeneous teams do
little to enhance expertise and creative thinking. Everyone
comes to the table with a similar mind-set. They leave with
the same”.

Amabile, T, “How to Kill Creativity”, HBR, Sept - Oct 1998, pp 77 - 85,

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How to Kill Creativity in Marketing
 When leadership becomes dominance
 When questioning becomes accusation
 When assertiveness becomes aggression
 When myopia becomes focus
 When opportunities become problems
 When arrogance becomes confidence
 When structures become strictures
 When inclusion becomes exclusion
 When rules become constraints
 When support becomes ownership
 When capabilities become impediments
 When experience becomes intolerance
 When collaboration becomes fragmentation
 When identity becomes an excuse
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Creating the synergistic
There is no scientific formula to guarantee that synergism
will result.
The team project is most important. It's OK to feel honoured to be
named as a special team member, but be committed to the work
and to working together with other members.
Keep others informed of your progress. Be honest about what you
can do and what you have accomplished.
Just as too many cooks spoil the stew, more than one leader can lead
to misdirected efforts. Be careful to do what you are assigned. Feel
free to express your own ideas, but let the leader decide if they can
be used now.
Small groups create a good setting for trying new techniques, so
leave your reluctance behind.
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That means caring a little more, thinking a little harder, making a little
Sheet 1

Old Clothes

Lots of people have clothes that they

have grown out of.

How would you use unwanted clothes?

Think the Impossible!

You can use bits of

things or combine them.
You can change shape,
colour size.

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Things Can Make Money Sheet 2

Combine with other


Use As A R Use To
Substitute Provide
For E A Service
Alter Size
Package O Shape
U Colour?

Use for S Recycle
other Or
People E Reuse

Use Bits Or Parts

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Sheet 3


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Sheet 4

People Want Things!

Want But Doesn’t Exist

Out of date or style

Seen but can’t find it

People Or
Interest Groups

Not easy to use Quality not good enough

It’s too expensive

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Sheet 5

Problems Worksheet

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Problems Means Sheet 7


Substitute Shift Attention - Outrageous


Reduce the problem Make Better


Change Perspective Make it unnecessary Random Word Association

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Sheet 8

Skills Mean Business

What Products? What Products?

Which Business? Which People?

For Business For People

Provide a Service

? Your Skill

Making Things

For Business For People

Which Businesses? Which People?

What Products? What Products?

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Sheet 10
Assessment Checkbox
Factor Score (1-10)

Personal fit

Degree of risk
Score Funding needed
your Ease of start-up
Short-term potential

Level of preparation

Competitive threats



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Is There a Market for Your Idea?

Do you know who the customers will be?

What will they pay?

Roughly how many customers do you need to


Do you know about the competition?

For what reasons will people use you rather than


Do you think you will be able

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customers each season?

Can You Provide What the Customer Wants?

Have you got the skills to promote your business?

Could you make or provide the amount and quality of products or service that
the customer wants?

Do you know how much you will charge?

If you need people to help you provide your product or service, do you know
who those people are?

Do you know how much money you will require?

Do you have access to the money and other resources?

How much do you still need to get?

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Can You Get Your Idea in Front of Customers?Sheet

Action Points
Do you know who will buy this from you?

How will they find out about you?

Do you know of anyone who already sells to these customer groups?

Are there any local outlets that would help you sell the service or idea?

Can you get the names of customers from any sources?

Do you already have people lined up who are interested?

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Sheet 14

What Resources & Support Do You (still) Need?

Do you have the option of buying an existing

business or can you form an alliance?

Could you lease or hire equipment, premises

etc. locally rather than buy?

Who will help you get sales going e.g.

promotional material, selling?

Can you set targets and prepare first-cut

financial projections?

What information do you still need to prepare

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a (Business) Plan?
Creativity & Marketing

"But the truth is that the winning strategies

are smart, innovative and original, and
break the rules, and most times there is
someone somewhere who has seen
through conventions and traditional
assumptions to create a new business
idea" Piercy 2002, p 269

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