Innovation Tournaments Jay Armstrong Innovation quotes Innovation has

Innovation Tournaments Jay Armstrong

Innovation quotes “Innovation has nothing to do with how many R&D dollars you have. When Apple came up with the Mac, IBM was spending at least 100 times more on R&D. It’s not about money. It’s about the people you have, how you’re led, and how innovative you are. ” Steve Jobs “Innovation is the entire process by which an organization generates creative new ideas (invention) and converts them into novel, useful and viable commercial products, services and business practices for (potential) economic gain. ” Fiona Murray, MIT

Innovation tournament - Background What do Merck, Pixar and Netflix all have in common? They have discovered and continue to use, “Innovation tournaments” to uncover breakthrough ideas and exceptional opportunities in various markets. Merck applied the principles of the tournament in the 1990 s with its aunch of Zocor. Pixar, which receives an average of 500 movie “ideas” per year, leveraged innovation tournaments and brought forth “Cars, ” to critical and financial success. Finally, Netflix held an open competition – basically a tournament for the best algorithm to predict user ratings for films, . First proposed by Karl Ulrich and Christian Terwiesch of The Wharton School, these tournaments are an organization wide idea generating process in which a huge number of ideas are generated, evaluated and then eliminated by “filters, ” until only the very best remain. Think “March Madness” on steroids, but with a more substantial prize for the final participants. Surprisingly, while the costs, time and resources to hold a tournament are minimal, the benefits have been enormous for organizations willing to undertake the opportunity to engage.

True innovation = Unique AND Useful ideas, if they are NOT unique, are commonplace and provide no long term advantage. Unique ideas, while sometimes clever, must also be useful to be truly innovative…. . Innovation tournaments provide unique AND useful ideas…

Why is innovation important? Innovation ultimately drives profitability – especially in pharmaceuticals………… “Competitive advantage lies in the ability to create an economy driven not by cost efficiencies but by innovative ideas and intellectual know-how. ” - HBR 2007 An “average” company lifting its innovation culture by a 0. 5 standard deviation of improvement, creates an increase in sales/rep of $314, 000 or 17% improvement – George Chressanthis, Temple School of Business “ 80% of CEOs believe that innovation drives efficiencies and provides a competitive advantage” – Pw. C 14 th Annual Global CEO Survey, 2011 Why was Genzyme such an attractive acquisition target for Sanofi? – Hint – It wasn’t their pipeline – there were better pipelines available.

The problem - The average cost of “raw ideas” And growing! Compounds Movies Consumer Goods Names 1 10 100 1 k 10 k Average Cost of Identifying/Creating/Evaluating a Raw Idea ($/opportunity)

One “type” of innovation tournament……… But… is it a good one, or even the one we should be using? Karl Ulrich, 2012

Innovation tournament = Organizational tool Karl Ulrich, 2012 Remember – the problem isn’t generating enough ideas, it’s selecting the few outstanding ideas………

Innovation tournament – high level format Filters can be novelty, financial, time to implement, cost to implement, overall potential, etc… 3 2 Karl Ulrich, 2012 1 It’s better to start with “leaky” filters first and then strengthen them…

Tournament Structure Challenge – What are you trying to do? What is the issue? Individual evaluation Rank Group evaluation Rank Pre-work/Discovery/ Workshop(s) Days – weeks (depending on scope) / / Tournament 1 -2 days (depending on scope)

Workshop/Tournament Structure - Detail Pre-work/Discovery/ Workshop(s) Days – weeks (depending on scope) Pre-work Identify problem/issue area in group, dept Review current solutions, ideas Development of rating system(s)/filters First horizon pass of ideas – initial filter Project savings, improvement(s), etc / / Tournament 1 -2 days (depending on scope) Tournament Head-to-head competition of ideas Round 1, 2, 3 Review/validate “winner”

Improvements over existing processes • An increase in the quantity of ideas produced • An increase in the average quality of ideas produced • An increase in the variance of the quality of ideas which leads to more exceptional ideas • An easy validation system for the very best ideas • An improved culture for idea generation and empowerment