Presentation for Covidien Zion BarEl CEO Ideation International

Presentation for Covidien Zion Bar-El; CEO Ideation International July 15, 2008 1

Presentation Outline 1. Introduction 2. Who are we? 3. Where are we? 4. Creativity, innovation, inventions 5. TRIZ and I-TRIZ: applications, processes and tools 6. Covidien’s Journey. Implementation and execution 7. Q&A and closing remarks 2

1. Introduction 3

Presentation Objectives Provide clear understanding on: § Ideation Methodology, applications, process and tools § Ideation differentiation and value proposition § How to institutionalize the methodology within an organization and expected R. O. I. § How Ideation can help Covidien grow organically to ensure technological and market leadership 4

2. Who Are We? 5

Ideation Brief History § § § § § Established in November 1992, Delaware corporation Provider of TRIZ-based services and products Acquired Kishinev School (Leading TRIZ School in Russia) Headquarters in Farmington Hills, MI The world largest group of TRIZ masters and certified TRIZ specialists Installed customer base of over 5000 enterprises worldwide Active in 40 countries and 60 universities Trained over 250, 000 people worldwide Completed over 200 projects Conducts continuous research and advancement of the TRIZ methodology 6

What is Ideation’s Business? Provider of I-TRIZ: Education Software Anticipatory Failure Determination Inventive Problem Solving Publications Books Papers Failure Analysis Analytical Services Age of Application 60 yrs 30 yrs Book Papers Failure Prediction 30 yrs Directed Evolution® Used internally Enhancement of Intellectual property Used internally Book Papers 20 yrs Papers 5 yrs 7

Ideation’s Business Philosophy Customer Satisfaction Quality Innovation Excellence Respect Winning Customer Trust Caring Integrity Quality Commitment Building On Values 8

Ideation’s Vision Enablers i Market Leader Technology Leadership Assets Organizational Value Knowledge Based Human Resources Instruments 9

Selected Successes-To-Date: Medical and Healthcare Industries § § Johnson & Johnson Advanced Cardiovascular Medtronic Merck § Pfizer § Eli Lily § ADT New design, inventing around blocking patents, cost reduction, failure prediction, enhancing intellectual property, increasing market share, technology management, training § Medical instrumentation § Sanitary products § Packaging of pills 10

Selected Successes-To-Date: Universities, Hospitals and Healthcare Agencies § § Colombia University Creighton University of Pennsylvania University of Nebraska § § University of Western Ontario Aurora Hospitals Public healthcare Iowa Health system New design, enhancing intellectual property, increasing market share, licensing technologies, start-ups § § Endoscopic surgical tool Machine-Brain interface Assisted delivery forceps Medical devices § § Pandemic flu Obesity Hospital logistics Artificial retina 11

3. Where Are We? 12

A Characteristic of Today’s Business World § Ever-increasing diversification of products in the market today due to: – Rapidly accelerating technological innovation – Shortened product life-cycles – Diversification of customer needs New technology spawns new markets 13

Trends in the Global Marketplace 1950 s and 60 s 1970 s and 80 s § § § American industries dominated markets American industries originated most of the world’s technologies Consumers preferred “Made in USA” labels; USA meant quality § § Worldwide global competition Other nations capture markets Innovation is no guarantee of product success Ineffective U. S. response to market trends § Success requires understanding customer needs and expectations Success requires meeting market needs promptly Success requires providing value to all customers Success requires innovative products Success can be attained through Systematic Innovation using the I-TRIZ Methodology 1990 s § and 00 s § § § 14

Business Challenges I-TRIZ provides value by supporting a variety of business needs § Expanding Breadth of Business Opportunities § Matching of Technological Solutions to Market Needs – Managing Technology, Society, and Market § Increasing Probability of Success – Rapidly Overcoming Technological Problems § Shrinking Time to Market – Development and Implementation of Products and Processes § Reducing Cycle Time While Maximizing Quality & Reliability – Integration of Innovation and Six Sigma § Maximizing Return on Capital Investment – Cost of Development, Capital Equipment, Facilities – Life Expectancy of Capital Investment § Controlling growth and profitability 15

Trends of R&D Evolution Generation 1 Generation 2 Generation 3 Generation 4 Tools for: Research Information Creativity Primitive Sophisticated Complex Paper Computer Trial & Error of a talented person Trial & Error of a large team (Brainstorming) Integrated on the base of Hi-Tech, networking and TRIZ Organization: Structure Linear Hierarchical Matrix Network Principle Non bureaucratic Bureaucratic Non bureaucratic N/A Occasional Reactive General Personal relations Discipline+ Initiative Entrepreneurial R&D Nothing special Engineering Scientific Creative Market Pro-active Culture: 16

Evolutionary Positioning: S-Curve Analysis Stage 0 - a system does not yet exist but important conditions for its emergence are developing Stage 1 - a new system appears due to a highlevel invention and begins developing slowly System Characteristic 3 4 5 Stage 3 - begins when the resources on which the original system is based are mostly exhausted 2 0 Stage 2 - begins when society recognizes the value of the new system Stage 4 - begins when a new system (or the next generation of the current system) emerges to replace the existing one 1 Time Stage 5 - begins if the new system does not completely replace the existing system, which still has limited application 17 17

Managing the Strategic Challenge of Change Levels of Change Leading Anticipating Reacting Events • Create new technologies and products • Launch new markets • Raise industry standards • Redefine customer expectations • Increase pace of industry product cycles • Globalization of markets • Creation of new customer segments • Emergence of conflicting technologies • Competitor’s product moves • New government policies • Unexpected customer demands Strategy • Force other firms to follow • Line up resources (e. g. venture partners, cross-cultural employees, currency trading skills) early • Develop corresponding marketing channels • Create technical options • Release better products • Create services that exploit change • Repackage existing products 18

4. Creativity, innovation, inventions 19

History of Creativity Creative activity of humans starts with the human history: § ~1500 BC – myths about Dedalus – the first human-inventor § Beginning of AD – descriptions of group search for solutions applied by Scythian and German tribes – Brainstorming predecessors. § 4 th century of AD – attempts to create a science of invention (heuristics) by Papp from Alexandria. § 13 th century – Great Art by R. Lullius (St. Lullius) published in 1480 – a technique for systematic exploration of possibilities – predecessor of morphological charts. § 19 th century – evolutionary theories by Lamarck and Darwin (biology), Comte and Marks (sociology). Attempts of techno- and socio-Darwinism by Spencer. § End of 19 th – beginning of the 20 th century - beginning of psychological research in creativity. Creative Imagination by T. Ribot, works of Freud, etc. § Middle of the 20 th century - System approach by Bertalanffy, Brainstorming by A. Osborn; control questions for inventors by Osborn, Thring, Laithwait, etc. 20

Components of Creative Thinking Adults' Thinking Children's Thinking "TRIZ" Thinking Fear of contradictions, aspiration to avoid them Non sensitiveness to contradictions, absence of aspiration to avoid them in their arguments Love for contradictions, search for contradictions in problems. Understanding that revealing and formulation of an obvious contradiction is a step toward to its resolution Metaphysical approach, consideration the objects, processes and phenomena separately, non systematically Syncretism, aspiration to connect "everything with everything" Systematic approach, aspiration to reveal the connections between remote objects, processes and phenomena, that often look as though they are not connected at all Unorganized combination of various types of deductions, that are often applied erroneously Traduction - type of deduction, erroneous from the classical logic viewpoint, were the deductions are made from the one specific fact to another specific one Deductions by analogue, transition of deductions, ideas, solutions between various systems, with various levels of generality (an organized combination of induction, deduction, and traduction) Combination of logic thinking and natural intuition Natural, inborn ability to produce an intuitive deduction Combination of logic thinking with purposely formed intuition "Laws obedience" - use of intuitively known or verbalized laws "Creation of laws " -spontaneous search and development of intuitive and verbalized laws Purposeful search and development of laws; 21 verbalization of the intuitive laws

Innovation Techniques besides TRIZ § 1950 s 1970 s § Brainstorming by A. Osborn § Innovative design by J. Jones § Morphological analysis by F. Zwicky § Evolution of technology by D. Sahal § Value Engineering Analysis by L. Miles § Quality Function Deployment (QFD) § Taghuchi methods § Psychological activation by De. Bono § Fishbone diagram by Ishikawa, etc. § § § 1960 s § Synectics by Gordon – professional Brainstorming with the utilization of analogies § Revealing and resolving contradictions by § J. Page § Control of though in creative work by E. Matchett 1980 s § Third Wave by A. Toffler § Six Sigma § HAZOP and FMEA § DFMA 1990 s § Innovative design by J. Jones § Concurrent engineering § Systemic design – PERT and PATTERN § TOC by Goldratt § Technological forecasting § Reengineering by M. Hammer § DFSS 22

What is TRIZ? § Russian acronym for the Theory of Inventive Problem Solving § Systematic, structured way of thinking supported by numerous tools § Science based on patterns of invention and evolution 23

Over 60 Years of Development initiated and led by G. Altshuller and involving hundreds of scientists and inventors Practical experience of thousands of scientists, inventors, engineers, managers, businessmen, etc. More than 3. 000 world- wide patents History of evolution in different areas of technology and science, social systems, business, management, art, languages, etc. Feedback from solving with TRIZ thousands of problems 24 24

What is I-TRIZ? § The next step in TRIZ evolution developed in the USA by Ideation International Inc. § Advanced, westernized and software supported version of TRIZ § Version of TRIZ in which Problem Solving includes: – – – Revealing the problem Formulating the problem Developing the solution Evaluating the solution Implementing the solution 25

Ideation TRIZ Development “Osborn’s D i rection” Decreasing of psychological inertia, activa motivation, o tion of human rganization of effective team work “Altshuller’s Direction” Utilization of evolution patte rns and methods of idea generation based on evol ution patterns ” “Miles’ Direction dge for effective le ow kn g in st xi e of g Re-structurin ive process application of the creat Ideation TRIZ Combination of all effective approaches to creative problem solving and control of technological evolution information a z i r e t u w Comp use of ne d ization an r e t u p m o C ies technolog Hybridization of different approaches to creativity 26

Ideation TRIZ: Collaboration with Other Methods t s n ai r B Theory of Constraints in g ne er ng i es t D V al u n ig e E us ob ra e t La Ideation Technological TRIZ Forecasting M orp ho log ica l M eth DFMA od R ing k in h T l ng i orm FD En gin eer ing M nt TQ rre FMA, HAZOP Q Co ncu And more… 27

Ideation Operating System for Innovation A systematic procedure for identifying the root causes of a failure or other undesired phenomenon in a system, and for making corrections in a timely Failure Prediction manner. A systematic procedure for identifying beforehand, and then preventing, all dangerous or harmful events that might be associated with a system. DE AFD® IPS CIP Control of Intellectual Property A systematic procedure for increasing IP value and providing protection from infringement and circumvention. Inventive Problem Solving Failure Analysis Anticipatory Failure Determination Directed Evolution® A systematic procedure for strategically evolving future generations of technological systems A systematic procedure for resolving tough technological problems, enhancing system parameters, improving quality, reducing cost, etc. for current generations of products and technologies. 28

5. TRIZ and I-TRIZ: Applications, processes and tools 29

6. Covidien Journey. Implementation & Execution 30

Based on Future Thinking Leadership Teams Vision What we want to be Values Mission Objectives Strategies Goals Initiatives Milestones What we believe in What we are going to do What we are going to win How we want to be measured Tasks to convert strategies into reality Measurement of progress 31

Based on Market Knowledge and Market Vision of the Future § Intelligence analysis § Prioritize market segmentation § Segment, profiles & trends (market lifecycles) – Value sets, buyer criteria, price elasticity – Trends – emerging and declining value attributes § Competitive analysis and trends § Market share tracking § Market forecasting § Customer readiness assessments § Strategic planning § Intellectual property planning and licensing – technology, patent fences § Readiness assessments: organizational competencies 32

Put Emphasis on. . . Skills / Resources Strategy Product Compensation Market IP Technology IP Prioritize & Selection Company Mission Knowledge If new “S” curve – reuse, rebuild, replace “the house” Build Bottom-up – IP Building Blocks & Architecture 33

The Ideal: Where You Want to Be Opportunity B Enhanced probability of success of options D p a m e int h ot u t fu re d a Ro Controllable creative process A C E F ced ing n ha Mak n E onsi ility i c De Ab Management Selected Ideal Future Position G H J Leverage Point I (if we could be here we would have a significant competitive advantage) 34

Mapping the Future Using DE s n io t Op Potential longterm problems need to be understood and taken into account. Time 35

Integrated Tools Phase 0 Phase I Concept Planning & Spec. Phase II Development Phase III Test/Prototype Phase IV Scale-up Robust Design QFD TRIZ FMEA DF(X) Phase 0 Review Phase III Review Phase IV Review 36

Structured Innovation Idea Generation & Enrichment Idea Selection Opportunity Analysis Gate 2 ENGINE To NPP Gate 3 Assess Gate 6 Develop Com Concept Definition Opportunity Identification To TSG Gate 1 Gate n New Concept Development Technology Stage Gate (TSG) 37 37

Structured Innovation Output Number & GP Value of Business Concepts Delivered to Gate 3 Build G 1 Assess 1 G 2 2 Develop G 3 3 4 5 $ Commercialize G 6 6 • Technology “fusion” from internal/ external search coupled with Rapid Screening • Cycle Time Compression -- frees resources 38 38

Integration within Business Core Competencies, Investments & Assets Financial Perspective Sales Growth Controlled Growth Earnings Growth Market Change Competitive Intelligence Knowledge Application Industry Change Business Dynamics Social Change Regulatory Awareness Technological Change Technology Awareness Organizational Change Business Environment Directing the Evolution of Technological Systems Supplemental I-TRIZ Based Research of Historic and Inherited Ideas Business Intelligence 39

Importance of Controlling the Innovation Cycle Cash flow Innovation cycle time Tb To Tf Net Profit Period Tr Ts TP To Opportunity occurs TP Opportunity is perceived Tb Project activity begins Tf Product definition and plans freeze Tr Ts BET Te Time Product is released to production First customers are satisfied Break-even time Project becomes extinct From Accelerated Innovation by Marvin Patterson 40

Management of Technology 41

Covidien’s Journey § IPS workshop with the project – July 28 § AFD Failure Prediction with a project – August § AFD Failure Analysis with a project – September § LCD technological problem – July What to Expect? 42

7. Q&A and Closing Remarks 43

Lee I. Fenicle, Director Intellectual Resources Management Creighton University “Using Invention on Demand Directed Evolution, Ideation’s I-TRIZ staff helped us turn one patented surgical device into a core of products that we used to start a company. Our company has received its second round of venture-backed funding and will be selling its first products in the next few months. Without Ideation’s help we would have licensed our technology and would be waiting for a royalty stream for a very long time. For medical devices, I-TRIZ has proven to be the best way to attack a future market, solve design problems and to get the most out of the intellectual property we have. ” 44