Innovation for SMEs Brendan McKenna, B.Sc. (Hons), C. Eng. MIEI, WCP

What is innovation? Innovation is not the creation of ideas – Every new idea is simply a combination of other ideas that Someone else has thought of first Innovation is the commercialisation of ideas 07/10/2013©

Two Types of Innovation Incremental – Continuous improvement – Must be part of the culture – Idea box, etc. – I’m not going to deal with it Commercialising the big idea – The subject of this presentation 07/10/2013©

Commercial Innovation Facts 10,000 business ideas -> 1,000 start ups - >100 VC funded -> 20 IPO -> 2 category leaders 55% of all invested money in the US is written off (62% in Europe) But the capital that survives has backed businesses that now account for 21% of US GDP (Apple, MS, Cisco, ….) Source: Saul Klein, Index Ventures, Web Summit 2013 Keynote Speech 07/10/2013©

Radical Innovation Typically will take 15% of a medium company’s resources Will fail 80-90% of the time But if it succeeds it will produce 40% of your future wealth Source: Research done by BCG and presented at the Product Development & Management Association (pdma.org) innovation conference. 07/10/2013©

Pivoting – Innovation for Start-Ups Follow the money – Sales & Cashflow are king. Learn the market – Try and find that lucrative niche Use social media – Use LinkedIn InMails when entering new markets – Make sure you have something attractive for your potential clients first! 07/10/2013©

Pivoting: Case Study 1 – The Agreed DenariusThe Agreed Denarius Started Dec 2012 based on an opportunity presented by patent lawyers Pivoted four times since then! – Criminal prosecution – Personal Injury – Insurance Fraud – Criminal Defence 07/10/2013©

Concept to Commercial Reality – Step 1. Innovation Drivers You are an established business making money and profitable You want to innovate because things are moving too fast in your space not to – Your business is under constant threat – You must innovate to survive You have ideas from in house surveys – These should be related to the existing business but to one side of it, not completely unrelated – You need to check them out with your existing customers 07/10/2013©

Interview existing customers – what do they want? – One asks questions and listens, a second person writes all the notes – Summarise notes into a series of ideas – Brain storm, affinity diagram the ideas to come up with the product/ solution/ service to create keeping in mind your in house ideas – Define the ideas into solution statements Concept to Commercial Reality – Step 2: Verifying Ideas 07/10/2013©

Concept to Commercial Reality – Step 3: Funding Get Funding!!! The EI series of R&D grantsEI series of R&D grants – Innovation vouchers Innovation vouchers – Feasibility Study Grant – R&D grant Treat getting funding like you would going for any business, put the effort in. Set time and staff aside for it. 07/10/2013©

Concept to Commercial Reality - Step 4: Customer Partners Part of the fund raising will involve doing a detailed business plan and presentations for each new product. Involve your customers all the way. See if they will partner with you, become your first trial customer, add some resources. 07/10/2013©

Concept to Commercial Reality - Step 5: The Dedicated Team Form a dedicated team to do the innovation projects – They have to be separate from the main business The main business is not and cannot be about innovation, it is only designed to do what it does efficiently not to innovate – Efficiency and innovation are mutually exclusive – The main business could be impaired by innovation Measure innovation progress with different metrics to those of the main business 07/10/2013©

Concept to Commercial Reality - Step 5 (cont.) The innovation team can act more like a start up – it is able to pivot if necessary – An established business cannot pivot – Don’t turn the innovation team into a mini main business The innovation team must be able to avail of the experience and learning of the main business if it is to do something useful for it. The innovation team are there to make long term profits for the main business – Don’t expect anything commercial for at least 12 months – Budget accordingly 07/10/2013©

Concept to Commercial Reality - Step 6: Execution Run the projects like a disciplined experiment Always have a crystal clear understanding of what you are trying to achieve Seek the truth – Expect your predictions to be wrong 07/10/2013©

Concept to Commercial Reality - Step 7: Keeping to Budget Don’t do the innovation unless you can afford to lose all the money you put into it. – Same as investing in the stock market or any other high risk venture When your budget runs out put the results of the innovation, including the staff, back into the main business – Don’t keep going 07/10/2013©

Case Study 2– An Innovating SME Over 10 years in business in the mobile telecoms space 50+ employees and growing Decent profits Recognised the need to innovate Hired an “innovation specialist” Did it all right and had a usable product in less than 12 months Made a commercial sale 12 months later after considerable modifications and improvements in conjunction with the eventual customer 07/10/2013©

Recommended Reading The Other Side of Innovation, Solving the Execution Challenge – Vijay Govindarajan, Chris Trimble – Harvard Business Review Press – NA1G0 NA1G0 07/10/2013©