1. Innovation Value Chain (IVC) - 3 key points 1) Must think of innovation as an end-to-end process: - idea generation => conversion => diffusion - Only then able to manage innovation well 2) The strongest link is a weakness - It makes no sense to focus on the strongest link (e.g., “we are very creative”). Strongest links can make problems worse (e.g., lots of great ideas never realized) 3) From an IVC perspective, a company is only as good as its weakest link - Means diagnosing, then improving the weakest link

2. Idea Generation: key challenges A process for generating ideas, not just having creative types! People networks, online tools (e.g. www.innocentive) Not too many ideas! Not too few! Quality of ideas, not quantity Diversity of sources, not from the same people all the time Outside the firm, from diverse sources Across units, different units working together (cross- pollination)

3. Conversion--Selection and Development: Key challenges Selection Must screen! Terrible to have ideas that never die (never killed), nor get the support they need (never really selected) Too loose screening as bad as too tight screening Too loose: lots of stuff through, never vetted well. But a stepwise screening, a la Shell’s Gamechanger, a good thing: a bit of money for first phase, then more for next, and so on (is still diligent screening, but phased) Too tight: often a disease in large companies Development Maybe the biggest challenge in large companies Whole of IBM case really on this

4. Diffusion: key challenges Really means two things Getting every appropriate unit in the company to adopt the innovation, quickly Turns out to be a great problem (e.g., P&G’s pampers spreading slowly among European sales units) Monetizing by pushing all appropriate sales channels and subsequent incremental innovations Challenge is, once innovated, “let’s move on to next big thing, that’s the fun part, not improving what we already have…” All channels (geographies, web, direct, indirect) Push add-ons (e.g., ipod, ipod nano, ipod this, ipod that….)