Innovation Governance Council Governance and Resource Allocation Purpose of Governance Council Define the Strategic Intent for Innovation Innovation Ventures Portfolio Shaping Allocate Extraordinary Resource Guidance to the teams Membership Highest Levels of Executive Management Should not delegate Frequency Quarterly Active & Engaged Sponsorship © 2013 Kennametal Inc. l All rights reserved. l Proprietary and Confidential l 0

Culture For Innovation - Traits Three Corporate Traits….. For Success Willing to cannibalize successful products Corporations nurture and sustain their most successful products Innovations are either Threat to current success Costly, distant in payoff, highly uncertain Focus on future Firms focus on current mass markets Todays mass markets will be gone tomorrow Must focus on future mass markets (Example who introduced camera & film but had most digital patents) Embracing risk Innovations have a high failure rate Success requires embracing the failure Incumbents tend to be risk averse, unaccepting of failure Willing to cannibalize, future focus, Embrace risk.

Culture For Innovation - Practices Three Corporate Practices….. For Success Incentives for enterprise Incentives for seniority, age, retirement stimulate loyalty but kill innovation In many firms failure is seen as shameful Incentives for innovation must be asymmetric Strong rewards for success Weak penalties for failure Internal competition Employees love job security Innovators love adventure Bring the market within : Competition in Idea fairs, funding contests, prototype races, competing divisions Employees generate, peers judges, managers facilitate Crowdsourcing targeted ideation and prioritization Empowering Innovation Champions Every employee can be an innovator Innovations often emerge deep in large organizations Top innovators seek new adventures / challenges Empowering champions, Incentives for enterprise, Internal markets.