Managing when the Outcome is Highly Uncertain Innovation Workout (practice for your Innovation Project) Planning to learn when uncertainty is high Assessing your project as it unfolds Future Fruit (Real Options Practicum)

Innovation Workout Preparation for your Innovation Presentation Assessing the Potential of an Innovation Quiz, Consumption Chain Analyze and Feature Map an Innovation

Pharmaceutical Innovation The Blockbuster drugs ($1 billion or more in annual sales) of the past 15 years have all been “lifestyle” drugs Mood adjusters (Prozac) Performance enhancers (like Viagra) Recreational (MDMA, a.k.a. Ecstasy)

Your Task Design (i.e., identify the major features of) a new Blockbuster Drug by Quizzing your teammates Use a Mind Map to find the main feature sets of a hypothetical blockbuster drug Constructing your consumers (a.k.a. teammates’) Consumption Chain Identifying the discriminators and energizers (Feature-Attribute Map) for the significant steps of the Consumption Chain

What to Present Mind Map of Feature Sets for the Drug Consumption Chain with key steps containing discriminators and energizers Tell how you will manage each discriminator or energizer to encourage consumers to move to the next step of the Consumption Chain Identify existing ‘substitutes’ for your new drug Identify other potential barriers to entry for the drug

Managing Under Uncertainty Adaptive Execution Information Elicitation Scenario Planning

Management’s Challenge Capitalize on new opportunities Guide the group so they can: Discover new Competences Discover new Customer Solutions Avoid forcing staff into the conceptual straightjackets that conventional project management can create.

The Problem It’s a Metrics Problem It is (devilishly) difficult to find good measures of progress For projects With a high assumption-to-knowledge ratio Options: Lagging indicators: actions already taken Current indicators: where things are going today Leading indicators: where you are going Lagging IndicatorsCurrent IndicatorsLeading Indicators Current AssetsMarket shareTrend extrapolations (profit, market share) Past profitsOperating ratiosMicro-microeconomic forecasts of firm statistics Other accouting numbersCurrent profitBacklog, advanced orders

What Companies Really Do Most companies choose lagging indicators Why? Because they are easy to collect Just get them from the existing accounting systems Leading indicators are the hardest to find Nobody tells you the future Leading indicators arise from two sources: Future commitments of firm and customers (e.g., order backlog) Forecasts of accounting statistics

The Bottom Line No. It’s not Profits. The bottom line in innovation is to end up with a new business model capable of giving you competitive advantage i.e., new product / innovation, new model, re- segmented market, etc. Adaptive Execution allows you to monitor obstacles, and progress in the right strategic direction

Strategy (Business) Drivers What’s your Strategy Driver? What makes your proposed business perform? What makes your proposed innovation a commercial success? These are spelled out explicitly in your discovery- driven business plan

Strategy Drivers Help Specify Deliverables and vice versa Translate broad strategy Into daily operating activities Strategy  Tactics  Operations 1. Everybody understands operations No one understands strategy 2. Create a focus for competence creation 3. The most dangerous assumptions reside in the operations 4. The more integrated your deliverables The harder it is for a competitor to copy them

The Best Strategy Cannot Stop Technological Disruption of the Industry

Diagnosing your Progress Emphasis on Communication with all people involved The ‘Team’ (What’s this mean) The ‘Team’ may be your best source of Leading indicators, and Strategy Drivers E.g., see Figure 11-2 (276) What is the problem with “we have no idea” responses?

Myths about Teamwork with evidence Myth 1: Effective teams work together a lot, face-to- face Independence + confidence is best; face-time = loafing Myth 2: Conflict between group members is bad In the extreme it is dangerous (when members start behaving at a more primitive level) but there is an optimal level of conflict that avoids groupthink and apathy Myth 3: Teams are better off when members like each other Mutual respect is more important Myth 4: Team satisfaction produces performance There is no correlation

Team Deftness Deftness = =Facility + skill | confidence Alternative term: ‘Cool’ Interpersonal confidence Confidence that others are willing to do what is needed Information flows are adequate and timely Feedback is adequate and timely Figure 11-3 (p.282)

Distinctively Competent There should be a continual team monitoring of whether or not The project will yield Distinctive competence  … more customer value added  … market differentiation  … competitive advantage  … you get the picture The point is to collect all of the information you can From all of the interested parties in the project At every point in time that you can The questionnaires in Figures 11-3 to are useful But a good project manager will be gathering this informally all along the project Through informal discussions, meetings, and after-hours gatherings

Future Fruit Scenario Planning