breakthrough-1

Transcriber:	MiLa S. P. Huang
Brief Bio:	MBA, a university lecturer, a traveller & currently the "Head of a growing Gang" ~ wahaha
Date finished:	ASAP ~ I hope
Proofreader:
Brief Bio:
Date finished:

The Sources of Innovation

Well, I want to welcome you. This is going to be really cool and this is going to be really fun. And I think you’re really going to enjoy yourselves. This course is about creating breakthroughs. Now, what you see is that methods for doing incremental innovations are reasonably well in shape, but methods to do breakthroughs, are really not. So what we have for you is really the leading edge ways to identify breakthroughs. And now, why would you care?Well, basically it turns out that once you have, as a manager, managed to take all the cost out, and once you have managed to be as efficient as you can, then really, to grow, you need major innovations. You can’t continue to do all these minor things. What happens is, as you see, things become commodities. Now, firms are not stupid and they realized this, so what the manager or CEO often does is to say something like, “We must have new products. We must have major new products.” So then what they do is they continue to produce incremental ones, because nobody knows how to make major ones. And the manager even fears so, so he says something like, “We must have one-third of our products brand-new within the five years.” So then everybody gets into this mad exercise where they change the xxxx use of existing products. They say, well, Let’s see what’s your definition of “really new”, boss? Well, in xxx, we’re in good shape. Now, by the way, that is xxx, your gentle, kind, friendly TA, and he will be able to advise you as well I, as we go.

Today I’m going to give you a bit of introduction first. We’re going to talk about who really develops breakthroughs. Because people organize the innovation process around the way they think it works. And So we’ll set that in place, then we’ll talk about the course and logistics; how it should work and what the paper is like and all those other things you want to know before you decide whether you want to do anything with this.

(3:03)OK? So who am I? I’m running the TIE group here. We used to be called MTIE and then we got ourselves in wonderful shapes so to call ourselves TIE, Technological Innovation and Entrepreneurship Group. And I know a bit of economics, and a bit of innovation process, and so far studied 30 years or so now. And you might find comforting to know that I also have real-world innovation experience. So that one of those things that is really helpful for people when they’re trying to do a search on something or teach something, is to go out there and actually do it first. Many of the informative experiences that I had are what were the important questions came from looking at where the innovation comes from and so on and how it works and so on in my own company.

(4:02)My research focus is the fuzzy front end. It is a funny term, isn’t it? But that’s what they use. It’s the end of the innovation process that nobody knows how to do anything about. Which is where the idea from breakthrough comes from in the first place? That’s what I study. And I should say the reason that I began to study that was rooted in the experience in my own firm, way back when. We make fax machines, and that was my first job. I was 26 and started this company. And again it was stock market boom back then and all a sudden we have 400 people. And we were designing the stuffs and I was always designing myself into corners. I was running guarantee. I was sort of lay it out like this and it’s going to be so great. And then we ended up with this little thing in the corner where we have space for something crucial that I forgot about. I was like, oh my god! So, that amount to say. I as a buyer of something, wanting something special. And my experience generally was, that I would go to these companies, who were supposed to supply these stuffs, and they were not helpful. And the conventional way as you know, is finding need and fill it. The marketing researcher comes along, and look deeply in your eyes, and say, “Ah, I know what you need.” Well, that wasn’t my experience. Far from that. I remember once we have to make a little fan. And that had to be a higher power fan than these companies could make. So I went to this firm and I said, we need a fan like that, with certain pressure and something. They said, “Well it can’t be done, my son”. I said, “But I need it!” And they said, “Yeah, but it’s against the law of nature.” O, so we went off to Princeton and where they don’t know about the law of nature, and asked them that the xxx is down to design the firm, which they did. So we brought this fan back to this company and said, “Ok, would you manufacture this lovely fan?” The said, “We told you it wouldn’t work.” So, of course they tested it and they did. Never mind, leave it decide, If we make it for you, you have to buy them 10000 in a whack, and you have to pay for the tooling. So fine, we did that. They started to present us this fan, then we get this embarrassed phone call, which says something along the line of “Ah…turns out other people want that too.” And I said oh, and being only 26 I didn’t say, “We own the tooling so we’re going to grind you into the dust.” No I didn’t say that. Instead I said, “That’s cool, make them for other people too.” So they did. But the surprising thing about it, and the thing that makes me puzzled about the conventional wisdom of how breakthroughs come about, was the advertisements these people then putting into the trade press. Which was festinating. They have real pronoun trouble. It was, “They said it couldn’t be done!” and “They said it was against the law of nature! But we knew, deep down, you would need this thing.” Gee…maybe it isn’t true, that the way this thing works, is the way once it was taught to work. So, that’s why I began to study these kinds of things. To understand, once you know how it works, you can  know how to make it better. These are the kinds of things that we’re going to talk about in this class. And just FYI, the kinds of things that we have study the phenomenon on, are both industrial and consumer products. And on the consumer products’ side, it’s things like skateboards and other wonderful stuffs like that. I forgot the time today. I’m going to you a little piece of video that actually shows the innovator of skateboards, and of course all thirteen.

(8:15)Ok, now. Periodic major innovation is essential; everything becomes commodity eventually—and may even be entirely supplanted. 3M Scotch tape. Do you even know what that is? You know what a Scotch tape is, right? It’s generic now, right? That was invented decades ago. And how did they keep that going? They did marginal improvements. You know you could write on a tape, oh cool. And double-sided tape, what they noticed was that people, I don’t know, you probably have done it yourself. They were sort of making the loops of tape, and tape it, oh, double-sided. And they noticed, once you make those double-sided tape, you can put it on a lumpy wall and it’s still ok. And if they have these double-sided tape, it wouldn’t because the tape is thing. So they said, oh ok, “Foam tape”, double-sided foam tape, with the foam in the middle, to do what you’re doing here. All these variations, decorating gift tape, they noticed people use these tape to wrap packages. They said, great, we’ll print decoration on it. That one didn’t go very well, of course, because it’ll never match your paper.

Aspirin, look that stuff. Buffer, coughing, child-sized, flavored, liquid. You know, you have this basic innovation; you can spin it out for the long time. And incremental innovation is very important. But to get the stuff of basic innovation, to spin out over time, is a crucial matter. You have to do it once in a while. Companies are aware of it, but they generally don’t know how. In this class, I’m going to telling you about breakthrough vs. incremental innovation. We ought to discuss that for a minute. This term, people use breakthrough in lots of ways. You know, technical breakthroughs, and so on and so forth. But what we’re talking about, is the first member of a major product line in a firm. So the scientific instrument is the first gas-chromatograph, and then improve gas-chromatograph would be improvements, incremental improvements. And obviously, masking tape, the first masking tape, the idea you can sort of mask for painting. And improvements of that, so you can go on corners a little better, better dispensers, and the rest of that, would be incremental. Now, as I mentioned, why a course in developing breakthroughs? Because periodically they are essential. Now I’m astonished, on where they are. They are essential, and firms are pretty good at incremental innovation, but they don’t know how to develop breakthroughs systematically. And the result is that major innovations are often very rare and desperately sought by management. You’ll see as we go along; we’ve worked with a bunch of companies and show them how to do this. The history of these companies in terms of how often they come up with something fundamental, it’s amazingly rare. I mean if you think of companies you know about, look Dell Computer, right? what have they done? They’ve done this build-it-to-demand thing. And they’ve been doing that, doing that, and doing that. Is there major innovation in there? Beyond that, not clear? And yet look, they build this huge company on it. So in a way, what happens is that these companies, you’ll see they become resistant to innovating again because you sort of build in into a way you used to do things. One of the things we’re going to talk about is resisting innovation. But what you see is these huge companies often are engines with a single idea, and if you could come up with another one, you’ve done something humongous for them.

What we talk about in this class is not only how to do it, but we’ll bring up the problem that is hard to implement even if you know what to do. It’s funny. Yesterday I was talking to a company called XXX Purina, which is a dog food company, and we’re talking about innovations. And we’re talking about the fact that they really have two major problems, one is to find the innovation, and the other is to implement it. And the implementation, actually getting this thing thru the company, is an equally difficult job. It’s sort of amazing because you look at these things and you say: Well, innovation is obviously a good thing, right? Who could be against it? And you see these amazing things like, for instance, the British introduces lime, years ago they use lime to their sailors, as a way to prevent scurvy. It took, after the demonstration, and this was by Naval people themselves…it took two hundred years to introduce it, to actually get it in there, to the Navy. Meanwhile, as they sail along, they’re throwing half of their crews over board, dead, needless to say. Two hundred years, and then it took another fifty years to get it over to the merchant marine. Now, these kinds of things are stoning, and we tend to stand around and say things like, well, must be because of not invented here. But what it really is that there is an enlighten self interest involved in whether you do or do not innovate.

(15:19)Firms are built around doing something efficiently. If you introduce something new, what you often do is disrupt the patterns, which allow them to meet their quotas, what you do is to set up numbers on things like… You say, well, you know what, you’re going to be rewarded. You’re the manufacturing director. You’re going to be rewarded by the amount of the scarps you produced. The less scrap the better off you are. Your bonus is on it. Then along somebody walks in the R and D and says, “I got this great new thing! Let’s put it in!” You’re thinking, if I put in this new thing, boys! It’s going to be a lot of scraps before we figure out how to do this. No, I don’t wanna do that. So you’ll find, even if for the firm, it’s a matter of life and death. You’ll find that within the firm as the department and the individuals, there are lots of reasons, to not do it. Ok?

Changes obsolete corporate expert ices and production investments. Polaroid produces instant film and cameras, remember the death of Polaroid, right? The death of Polaroid is festinating because they were always coming around MIT and said, you know what, we really should get into digital, right? Yeah…ok, we’re going to set up a group to do digital. And they set up this group to do digital, and that group would get beaten on. They would look these things, and says, that’s not as good as what we normally do. That’s no good, close down the group! And they did this several times. We’ll get into why this might be. Kodak is a current example.

Change devalues personal intellectual property. If I know Cobol, am I going to want C++? My secretary, years ago, when they were introducing word processors, you know, she had to learn how to do these things. It wasn’t her problem how quickly the paper was written. It was m y problem. So, I order one of these things, and it should’ve come in, and it should’ve come in. I finally asked her and said, “So where is the word processor?” She said, “I have it installed.” “Good, so where is it?” She said, “Oh I have it installed in the supply closet.” (Laugh) So there was firmly installed and wired in, in the supply closet. It was that she said I would not do this. She just make it impossible to precede to the next step. You know, would the best good will in mind.

Now, in this course, we’re going to talk about Contrasting Innovation Methods. We’re going to talk about fundamentally different ways to find big ideas and small ideas to innovate. The traditional methods are based on “find a need and fill it.” Ok? They are going to the target market users and saying, “What do you want?” As you see as we go, that ends up being something about incremental innovation. And then, there are new methods, based on finding and encouraging commercializing solutions developed by users themselves. So for example in the case of the skateboard, it’s not you as a manufacturer to go and interview these kids, says, “Now children, what would you like?” “Well, let’s see, we’d like to come near death so probably what we like is a board that’s totally uncontrolled, allowing us to go down the hill and come near death often times.” First of all, manufacturers probably don’t want to do that. But secondly, they couldn’t come out with it, it wouldn’t work. What happened instead is the kids started building skateboard themselves. The reason they called it skateboard is because they took skates and put them under boards. And wants sailing down the hill. So the kids were wheel along the way. This group, another words, the users, were wheel along the way towards innovation, by the time this group knows anything about it. So basically, what you see is the distinction of the new method is actually go after the need and solutions at the same time. You didn’t say to these kids, “What do you think you need?” You say, “Oh I see your carrer down the hill on your skateboard. Ah-ha!” And you bring it over here, where these people would say something like, “Mmm…I really like my bicycle to go little faster.” And something like that.

So, now, what I’m going to talk to you about, in the next bit of this lecture is how we discover the role of users. And to do that, I just have to give you some essential definitions. What we’re talking about here, and what I’m going to do, by the way, because I know chatting here is also important, so there is going to be some exercises a little bit. Or you get to say “hello” to your neighbor, which is always a sound strategy. And then I want you to talk about a user innovation you know something about. OK? So I’m going to tell you about user innovation. I’m going to give you some examples. And then since the half life of an unused knowledge is a nanosecond, I want you to play with it. We’ll do that throughout the course. You’ll start to play the stuff and sort of see then believe it. OK? I know it’s much more fun when you chat, your time to chat is coming.

(21:28)So what we’re talking about, first of all, is…let’s take in innovation. Innovation is actually anything new that’s put into the market place. It’s different than an invention. An invention is a legal term, that says if something meets certain standard of novelty, then that thing is an invention. But you could take that thing that you developed, say something wonderful that passes the standard like anti-gravity. OK? You could take that anti-gravity and thru it into the basement, assuming anti-gravity was down. You throw it in the basement and store it, and never put it into the market place, it does not become an innovation. It’s only an innovation when it’s used. An innovation can be something trivial or non-trivial, can be something like anti-gravity that’s used to pop-top on a can. Then it’s an innovation. Ok, we talk about the functional source of innovation. An innovation is a user innovation when the developer expects to benefit by using it. This is not just you as an individual, OK? This is also you as a firm. So take Boeing for example, Boeing is a user innovator, when it develop new machine, say to build airplane. Because it’s trying to use it. Right? Boeing, the same firm, is a manufacturer innovator, when it develops a  new airplane to sell. So you, when you try to develop something, to protect you from your brother when you’re growing up, or your sister, and it’s just not something on the market would works. You just cannot buy the proper brother-scaring device. So you have to develop your own. Again, you’re user innovator. You are not planning to sell it to all the neighbor kids, you’re actually doing that for yourself. So whether you’re an individual, or firm, if your reason is to use it, then you’re user. If your reason is to benefit from selling it, you’re manufacturer.

OK. Now I’m going to give you three slides showing how we do this. How do we find out where the innovations come from? Now, you remember, that I told you that the standard model is to find the need and fill it. That is the manufacturer goes, and takes a look, to see what average users want. Make sense, they’re the target market. And then comes back and innovate. So what we want to do is to see if this is true. This happens to be scientific instrument, but what we actually did was this over a bunch of things, you know, like sports equipment and so on and so forth. The point here is, what we do is we take these product lines. You see, if you are manufacturer, you have a product line, right? These represent product lines for your company. So what would you like to know? You’d like to know where the major innovations come from over time. If there is a pattern in that, then you can do it again. If you mistake what the pattern is, then in fact, you’re going about it the wrong way. And you’ll see this is the case. So find the need and fill it would say, these major improvements consist of us going out there to the field and figuring out what’s needed. User innovation would say, “the users developed it”.

25:10  So, what do we do? We are out of the field, and we look at the first company to commercialize each of these things in this case was the instrument that were about a hundred and plus.  We said to them, "Who invented this wonderful device? You or somebody else?” And I said, “well, we did, my son.”  "Oh, damn!