Creating Value from Innovation -...

Creating Value from Innovation

Don Creswell

Co-founder SmartOrg Inc.

Marcus Evans PDI Conference

Philadelphia, PA

13 – 14 September 2012

© 2000-2012 SmartOrg. | Confidential and Proprietary. 1

SmartOrg services and software help companies optimize the economic value of R&D, NPD and Innovation

Portfolio Navigator® Software

Services

Confidential and Proprietary 2

Evaluate and track

sources of value, risk

and upside.

Focus on critical

issues. Aggregate and

compare

• Training & Coaching

• Management Consulting

• Pilots & Implementation

• Customization

Lessons from organizations like these

3

Life science Aerospace Technology Other

Confidential and Proprietary

http://www.bayer.com/

http://www.lilly.com/index.html

http://www.ineco.es/ApliServlet?accion=verPagina&idNavegacion=100

http://www.alcatel-lucent.com/wps/portal/!ut/p/kcxml/04_Sj9SPykssy0xPLMnMz0vM0Y_QjzKLd4w3cjUDSUGYpvqRKGIG8Y4IkSB9b31fj_zcVP0A_YLc0IhyR0dFAJgg_-M!/delta/base64xml/L3dJdyEvd0ZNQUFzQUMvNElVRS82X0FfMkU2

http://www.cisco.com/en/US/hmpgs/index.html

http://www.andersenwindows.com/

From ideation to a scalable business

4

Formulate Ideate Incubate Accelerate

Reformulate

Committed Innovators with

actionable insight

Aligned Learning

Plan

Proven Opportunity

Scalable Business

We like to think it’s like this…


But it’s often like this!


Niccolò Machiavelli on Innovation


“It ought to be remembered that

there is nothing more difficult to

take in hand, more perilous to

conduct, or more uncertain in its

success, than to take the lead in

the introduction of a new order of

things.

Niccolò Machiavelli on Innovation


“Because the innovator has for

enemies all those who have done

well under the old conditions,

and lukewarm defenders in those

who may do well under the new.”

Innovation is risky business.

Even in the best companies 70% to 80% of new

products fail to meet profit/revenue goals —

many fail altogether!

Even the biggest fail!

© 2000-2012 SmartOrg. | Confidential and Proprietary.

http://www.youtube.com/watch?v=gZTVX21jPtc&feature=player_embedded

10

“Out of 251 Google projects or add-ons since 1999, 90 have been canceled. Out of 22 major product launches, eight have been huge flops”

http://www.youtube.com/watch?v=gZTVX21jPtc&feature=player_embedded

There is no crystal ball.

Portfolios spread the risk


Innovation Portfolio enables balancing risk vs. reward

Incremental innovation: easy to do but low value.


This is where we hope innovation will lead.


The world is more like this.


You don’t want these guys.


Value-based business models reveal the impact of uncertainty on project value.

Development uncertainty

Commercial uncertainty

Portfolio: collection of projects evaluated “on a level playing field”

What is the status of your portfolio?

Innovative

Projects

Inc

rem

en

tal

Pro

jec

ts

Too few Too many

Too

few

Too

many

Number of

good projects

60% of executives in survey of 50 companies say they have too few innovative projects.

Futurist

Starving

Glut Nearsighted

Innovative

Inc

rem

en

tal

Too few Too many

To

o

few

Too

many

Number of

good projects

2%

32%

10%

56%

88%

58%

Results from survey of 50

companies

Selecting an innovative product to develop and commercialize


The Innovation Team proposes a new product


A brilliant new innovation! The Solar Kettle

• Boils in seconds • Uses no electric power • Strong appeal to Green Movement

Team is excited — boss isn’t convinced!


“Convince me why we should invest in this product.”

© SAP 2009 /

Scoring indicates the project may be worth the investment.

Tea Kettle

“I need more information to make a decision.”


• The scores are tempting….but • We have a lot of other

initiatives; I can’t fund them all. Is this worth the investment?

• How does the kettle fit our NPD portfolio?

• We’re going into a new market and there are commercial uncertainties; I need more analysis.

Team assesses inputs to evaluation model.


What is the probability of development success?


Can We Do It?

What are the chances we can successfully develop, produce and market the tea kettle?

Team assesses commercial uncertainties — “what we do and do not know”


Should We Do It?

Uncertain about market size, share, price, margins, ramp-up time, profitability.

Team members (marketing/sales, R&D, finance) assess value ranges

Value-based model calculates results.


Compared to others in portfolio it looks like a challenge to pull off.


Solar Tea Kettle

Probability of Development Success

Compared to others in portfolio it has promising upside potential.


Solar Tea Kettle

Commercial Value Given Success

Tornado identifies three opportunities to improve the product’s value


Project Value Given Development Success

Team focuses on improving information about peak share, margin and market size


The team refines inputs.


Expected commercial value improved from $45 million to $200 million.


Now in second place in the portfolio.


Before

After

It’s a better bet.


VP approves but stresses value of updating the model as development progresses.


“You have made great progress in addressing the critical uncertainties. Let’s move ahead, but keep your eyes on the value meter!”

A real-world example from Inspire Pharma.


Tracking a Project Over

Time

NPV Given Technical Success

Pro

ba

bilit

y o

f Te

ch

nic

al S

uc

ce

ss

Initial

Perception

IP uncertainty

addressed

Improved

Strategy

Bread & Butter Pearls

White Elephants Oysters

Innovation screen

Positive

Phase 1

Positive

Phase 2

Regulatory

Set-back


Pro

ba

bilit

y o

f Te

ch

nic

al S

uc

ce

ss

Continue investing to

build value, despite

regulatory set-back

Project proceeds

as planned



Innovation screen

Initial

Perception

IP uncertainty

addressed

Improved

Strategy

with a setback.

The project path through development

Regulatory set back was this

But not this!


Pro

ba

bilit

y o

f Te

ch

nic

al S

uc

ce

ss



Innovation screen

New Corporate Strategy

New commercial strategy

greatly reduces value, but

still a “bread and butter”

opportunity

Positive

Phase 1

Positive

Phase 2

Regulatory

Set-back

Initial

Perception

IP uncertainty

addressed

Improved

Strategy

Then we changed commercial strategy


Pro

ba

bilit

y o

f Te

ch

nic

al S

uc

ce

ss



Innovation screen


Patent

Granted

Competitive

Product Approved

Should we proceed in light

of new news?

Positive

Phase 1

Positive

Phase 2

Regulatory

Set-back

Initial

Perception

IP uncertainty

addressed

Improved

Strategy

Patent success but competitor product approved


Patent

Granted

Competitive

Product Approved

Technical Setback


Pro

ba

bilit

y o

f Te

ch

nic

al S

uc

ce

ss

Kill project internally. Can

someone else build value?



Innovation screen

Positive

Phase 1

Positive

Phase 2

Regulatory

Set-back

Initial

Perception

IP uncertainty

addressed

Improved

Strategy

This blow was decisive

Innovation in motion: Monitoring value of an asset

Ex

pe

cte

d P

roje

ct

Va

lue

($ m

illi

on

s)

Positive

Phase 1

Positive

Phase 2

Regulatory

set-back

New corporate

strategy

Patent

granted

Competitive

product

approved

Technical

set-back

Initial

model

Time

What superior insight does

this analysis provide over

the traditional, business-

case NPV analysis?

What are some lessons

learned?

Principles of good innovation portfolio management

HP Workshop Training Mar 09 v1 – SmartOrg Material 51

To Learn More


Formulation Case Study

• Webinar Replay: www.smartorg.com/formulation-example

Frost & Sullivan Best Practices Guidebook on HP

• Guidebook: www.smartorg.com/hp-bpg

• Other HP examples: www.smartorg.com/hp

Assessing the State of Innovation

• Go to www.smartorg.com and search for “assessing”

Creating Value from Innovation -...

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