new products, servlces, and companies can have a significant POS1t1ve lmpact on the economies Of every country. If you focus on customer value as the starting point 0f successful in- novatlon, a series Of important questions arlse: ・・ ' ・ ho is your customer? ・ What is the customer value you provide and how dO you measure it? What innovation best practices do you use t0 rapidly, efficiently, and systematically create new customer value? This book will provide you with specific concepts and tools to answer these important questions based on the Five Disciplines Of lnnovation. ・ lmportant Needs: ・ Work on important customer and market needs, not just what is interesting to you (Chapters 5 and 4 ). ・ Creat1()n•. l_Jse the t001s of value creatlon to create cus- tomer value fast (Chapters 5 , 6 , 7 , 8 , and 9 , and the Appendix). ・ 'lnnovation ChamPIOns. Be an lnnovation champion to drive the value-creation process (Chapter 10 ). ・ lnnovation Teams; I_J ・ se a multidisciplinary, team-based ap- proach tO innovation tO create a collective, genius-level lQ (Chap- ters 11 , 12 , 13,and 14 ). ・ Organizational AIignment: Get your team and enterprise aligned t0 systematically produce high-value innovations (Chapters 15 and 16 ). FaiIure to ultimately satisfy any one of the Five DiscipIines of lnnova- tion will 第厖ろりん 4 ノ加″″ on the project. Of course, in the begin- ning Of a new lnnovation and as you go along, one or more Of the Five Disciplines will be missing. The key is to recognize this quickly and then address the problem. Even a small improvement in each of the Five DiscipIines can significantly improve the probability of success. 20 CURtIS 良 . caRLSON aND WILLIam Ⅵ '. WlLmot

you know that there are 5.7 million U. S. companies with fewer than 500 employees, which represent 99.7 percent of all businesses in the country? These are an lmportant part Of the econom1C engine for the United states economy. But the mamstream mass media currently pro- vide little, if any, insight intO the significance Of these companies and their needs. lnnovation and itS importance tO the future Of the IJnited States are glven even less ser10LIS attent10n. Over the next decade, the mainstream media will spend a great deal Of time talking and writing about the consequences Of our lack Of com- petitiveness and itS impact on big companies. They will be concerned when Chinese firms buy big United States companies, when software jObS move tO lndia, and When protectionism a political issue. But these storles , absent the bigger context Of innovation and competi- tlveness, represent a disservice tO their readers and listeners. action iS not JLISt with the larger companies, which, as we discussed in Chap- ter 2 , are finding it increasingly difficult tO survive, but rather at the grassroots level, where new company formation through innovatlon thrives. The mainstream media are basically missing the story. Perhaps each media-outlet science and technology editor can change his or her jOb description tO "Science, lnnovation, and Entrepreneurship Editor' tO more accurately reflect the reality Of our Situat10n. More generally, the media can lncrease their active role in helping communicate the challenges, opportumties, and excitement Of innovation and entrepreneurship in our time. They could help stimu- late a productive discusslon about hOW the United States needs tO im- prove 1tS SChOOlS, tax policies, government regulations, and research agencies. They t00 lnnOVation best as a tO measure the United states' performance against that Of Others. Ulti- mately, they could help promote and exemplify the skills and attitudes needed tO thrive in the exponential econOI れ y. For example, maybe the creative staffs Of the 1 れ a ] or television networks could make this the ul- tlmate survlvor" ShO 、 M. One bright spot is a program at Stanford UniversitY called lnnova- tion Journalism. lt iS not about lnnovation / 〃 JOUrnaliSm it IS a journalism program innovation. 50 The program is led bY David 282 CURtIS R. caRLSON aND WILLIam W. WILmot

company would apply our ideas across the entire organization. Sure enough, when the group 0f fifteen cynics arrived, they were 怩り skepti- cal. They participated in the workshop, however, and learned to use the key skills we demonstrated. At the end of the workshop, they held a celebration for us in honor Of "a much more productive and enjoyable way t0 work. " These "cynics" were actually individuals who cared deeply about their organization and were dedicated tO making a difference. They simply needed a map for the road ahead. The Five Disciplines of lnnovation marked that route for them. ・ We are interested in improvlng organizational success throughout the 丘 1 Ⅱ range Of innovations, 伝 01 incremental tO transformational. For exist- lng products and servlces, lncremental innovations—through new fea- tures, 10 ℃ r COStS, lmproved designs, and enhanced experlences—are the core Of an ongoing business S activity. Transformational or "disruptive lnnovations are maJOr new market opportumtles that come through breakthrough technologies and business models. As we will demonstrate, the Five Disciplines Of lnnovation not only a110W you [ 0 make incremen- tal improvements tO existing products and servlces, but aISO provide the launching pad for creating wholly new products and seruces. Economic developments are increasingly being driven by powerful forces, including globalization and the accelerating speed 0f innova- tion. Everyone, 伝 om people running huge companies t0 the individual consumer, experiences the glObal economy on a daily basis. Just go tO Wal-Mart and look on the bottoms of products to see where they are made. They are produced throughout the world. The emergence 0f lndia in software and China in manufacturing Offers t , 0 examples Of globalization that are affecting your li every day. This world economy iS full Of opportunities, but it iS 1 OV1ng quickly, and innovation is the only way t0 stay ahead 0f these fast-moving developments and increas- ing competitlve pressures. mandate rethinking your lnnOVatiOn 第穴竹蚌 processes, the behavior Of your teams, the structure Of your enter- prise.Your innovation practlces must, Of necessity, exceed those Of your competition if you are t0 thrive. development 0f compelling ル 「〃加紘 / 〃 2 〃第紘ノ 0 / / ハノ〃 2 たノ iS a vital index Of an organiza- tion's potential for survival. 16 CURtIS R. caRLSON aND WILLIam 、 hvl. WILmot

waste—muda—and tO encourage faster growth. a maximum rate Of only 1 ろ percent. note wryly that this iS an unusu- ally practical form 0f socialism. When you benchmark the United States against these global devel- opments, you are left with the impression that the United States iS still not fully serious about innovation and competitiveness. The relative success 0f the United States until now has allowed many 0f the under- lying danger signs and weaknesses t0 be ignored, such as poor K— 12 education. ・ we are optimistic that the United States will respond, as it did during the 1980S to the challenge 伝 om Japan. But it will be a hard struggle, many will be unnecessarily hurt in the process and a family Of specific actions WiII be required tO assure success. Approacht0 ImprovingtheAbiIityt0 lnnovate For developed countries lnnovation iS the key tO growth, prosperity, and quality of life. lt is what will allow the United States to provide quality jobs and t0 be able to afford advanced health care and other so- cial servlces. The understanding and broad application Of innovation best practices across bOth the CiViIian and governmental communitles can positively impact the United States'S ability tO thrive over the next century. Because Of their central importance for countries, there iS a large bOdy Of knowledge devoted tO the conditions that promote innovatlon, productivity, competitiveness, and JOb growth—which we consider tO be innovation best practices. Many Of these practices apply directly [ 0 countrles and their governments, as well as [ 0 companies. Inn()Vatl()n and competitlveness within a country alSO constltute a diSCiPline that can be learned and applied. lreland proves that this is possible. Like companies, however, very few countr1eS and lnno- vation best practices. If we reshape Gary Hamel'S quote at the start Of Chapter 16 , we could say, "Every country's president will at least give lip service tO the idea that the world iS moving faster and that we need tO dO a better JOb at innovatlon and competitiveness. But ifyou go intO a country and ask people tO describe their innovation and competitive- 274 CURtIS R. caRLSON aND WILLIam W. WILmot

ate new ideas, but alSO tO 第 0 〃ど〃〃〃 / りノ 2 02 ′ C, 〃加紘 4 / 〃 ofpoten- tial innovations through the 第 0 ″〃ノノ〃 g Of ideas. Without a process tO lmprove your initial ideas—over and over—your creative flash Of ge- mus Will never result in a new lnnovatlon. lnnovations require a synthesis Of many ideas [ 0 succeed, including the new product or servlce, enabling technologies or capabilities, barri- ers tO entry from competitors, a compelling business model, and essen- tial partnerships. Ad hOC brainstorming meetings cannot lead tO the depth Of understanding that innovation demands. Watering } 401eS leverage react10TIS from a disparate audience a structured format to create customer value. Only by regularly tapping intO the genius Of this extended team will ne 、 V, high-value innovations be created rapidly enough t0 keep up with the exponential economy. Structured, Recurring Meetings One of our colleagues called these meetings Watering H01es because they are market-focused, structured, and recurring meetings that give substance t0 all the "business animals. " Although not a direct 卩可 pgy tO watering hOles in nature, the name stuck. They are a "safe place" where people can try out new initiatives and gain ideas, feedback, and resources. participants include the technical, business, financial, and legal staff plus outside experts, as needed. The meetings bring together multidisciplinary teams tO get all the perspectives needed for success. G ・ roups interested in a specific market segment, product, or meet every tWO tO eight weeks [ 0 strengthen their value propositions. There are generally five t0 twenty participants, including: ・ a facilitator WhO announces, setS up, and runs the meetings, and allocates funds ・ cham. PIOns and their innovatlon teams ・ coaches, partners, and customers from inside or outside the INNOVatION enterpnse, as approprlate

"lnnovation—mystery or mastery? For Carlson and Wilmot, the answer is definitely the latter. Follow- ing the example 0f Deming' s 叩 proach t0 quality—another 0f those magically powerful substances— they lay out a thoughtful, practical methodology for managing innovation projects through t0 successful outcomes. Sure, in that one percent inspiration there may be the occasional moment Of mystery, but for those of us operating in the ninety-nine percent perspiration part of the field, it' s terrific to finally get a great user' S manual. , AUTHOR OF DEALING Ⅳ〃 ' 〃 DARWIN. ・ / イ ( ) Ⅳ GREAT COMPANIES / ル 0L47 方 AT EVERYPHASE OF THEIR EV() た U 〃 0 Ⅳ $ 27.50 (CANADA: $ 36.50 ) ロロロロ ロロロ ロ ( 。月 ued ん。 m ん。召叩 ) and WiImot's 石方 hes 0 石 n 月 0Y2 ロ on focus atten- t10n where it should be: on the creatlon of valuable new products and serVICes that meet customer needs. 石社 ) 0Y2 ロ 0 月 is not just for the "lone genlus in the garage" but for you and everyone in your enterprise. Carlson and 、行れ 0 [ provide a systematic way to make innovation practical, one lntlmately tied to the way things get done in your business. ロロロ ロロロ ロ ロ Othing iS more important tO business success than innovation . . And here's what you can d0 about it on Monday morning with the definitive h0W-t0 b00k from the world's leading authority on innovation When it comes to innovation, Curt CarIson and BiII Wilmot ofSRI lnternational know what they are talk- ing about—literally. SRI has pioneered innovations that day in and day out are part of the fabric of your 1 飛 , such as: •The computermouseandthe personalcompute 「 inte 「 faceyou useathomeandwork ・ The high-definition television in yourliving 「 00m •TheunusuaInumbersattheb0ttomofyou 「 checks thatenableyou 「 banktomaintainyouraccountbalance C0 「「 ectly ・ Thespeech- 「 ecognitionsystemused byyourfinancial servicesfirmwhenyou callfO 「 youraccountbalanceor t0 makeatransaction. Each of these innovations—and literally hun- dreds Of others—created new value for customers. And that's the central message of this book. lnnova- tion IS not about lnventing clever gadgets or JLlSt creativity. lt iS the successful creation and delivery Of a new or improved product or service that provides value for your customer and sustained profit for your organization. The first black-and-white television, for example, 、 JLlSt an lnteresting, C001 inventlon until David Sarnoff created lnnovatlon—a net 、 vork— that delivered programming tO an audience. The genius of this book is that it provides the hO 、 Of innovatlon. lt makes innovation practical by getting two groups who are often disconnected— the managers who make decisions and the people on the front lines 市 0 create the innovatlons—onto the same page ・ lnstead of smart people grousing about the executlve stllte not recogmzmg a good idea if they tripped over it and the folks on the top floor wondering whether the people doing the complaining have an understanding Of market realities, Carlson (continuedon 房訣 p ) 1 ssotl!snfl Åq 9006 ◎〕【「こÅd0 し CURTIS R.CARLSON is the president and CEO of SRI lnternational, 、 vorking 、 Mith leading compames ln a 、 vanety Of industries, including pharmaceuticals and health SCiences, computers commumcatlons, energy and the envlronment, and national defense. Dr. CarIson started and led the team thatset the U. S. standard for HDTV, for which his team shared an Emmy. He lives in Menlo Park, California. WILLIAM W. WILM OT helped create the SRI Discipline of lnnovation workshop and is director of the Collabo- ration lnstitute, a group specializing in workplace communicatlon and collaboration. Dr. 、行れ Ot , an emeritus professor at the University ofMontana, lives in Georgetown Lake, Montana. T 「 ue innovation iS about delivering value tO custome 「 S. 加〃 0 / a ″ 0 〃「 eveals the value-c 「 eating p 「 ocesses used by SRlInternationaI,the 0 「 ganization behind the Curt CarIson and Bill Wilmot show you れ ow t0 use these p 「 actical, tested processes tO C 「 eate great custome 「 value fO 「 you 「 organization. じ p ⅱ n e s f 0 「 T h e F i v e D s t 0 m e 「 s W a n t C 「 e a t i n g W れ a W 一 LLI 一 M 謇 W 一冖 M 0 T compute 「 mouse, 「 ObOtiC SLI 「 ge 「 y, and the domain names .com/ .0 「 g , and . gov. A L S 0 A VA I L A B L E A S A N E B O O K Author photographs: CARLSON: ◎ 2006 嶬"嶬《嶬,. RICKENGLISH.COM/ WILMOT: BRYANT PHOTOGRAPHICS, MISSOULA, MT C R ( ) W N ト U N [ 、 5 New York 8 / 06 www.crownpublishing.com Ⅵ′Ⅵ′Ⅵ..crownbusiness.com Printed in the U. S. A. U. S. $ 27.50 / $ 36.50 CAN BUSINESS & ECONOMICS ISB N 0 ーろ 07 ーろろ 669 ー 7 C U R S R. C A R [ S 0 N & W 仕 LI A M W. Ⅲ [ M 0 T 9 7 8 0 ろ 0 7 ろ 6 6 9 9 5 2 7 5 0 SRIInte 「 nationa い heinnovatorsbehindthecompute 「 mouse,HDTV 「 0b0tic su 「 ge 「 y, and 0the 「 world-changing ideas C RO W N 日い N ト S S を

NOTABLE INNOVATIONS: 1 / 2 golden nugget ・ AdistinguishabIe advance in eitherdesign, technology, process, or business model ・ ExampIes: RAZR cell phone, disposable hearing aids, the first quality ice cream, a unique restaurant franchise SIGNIFICANT INNOVATIONS: 1 golden nugget ・ An important advance in some combination ofeitherdesign, technology, process, or business model ・ Examples: iTunes with iPod, electro-active polymer motors, an effective cancer drug, Southwest Airlines TRANSFORMATIONAL INNOVATIONS: 2 golden nuggets ・ TWO important advances in some combination ofeither design, technology, process, or business model ・ ExampIes: OriginaI GiIIette safety razor, WaI-Mart, Goog 厄 , Toyota production system, lightbulb and electrical distribution system, Microsoft Windows ln these examples, the potential impact increases greatly from top t0 bOttom. lt has been suggested that innovations are better thought about on a logarithmic, Richter-like scale. 14 lncremental innovatlons might have an lmpact Of 1 , notable innovations 10 , significant lnnova- t10ns 100 , and transformational innovations 1000. These examples are, Of course, illustratlve and you may put them in a somewhat different order depending on hOW you evaluate their merits. Consider, for example, a mobile phone with a simple address locator, it may be better than anything on the market, but it iS still not optimal because Others Will quickly imitate it. lt iS an lncremental innovation— the kind that must be repeatedly made with established products to stay in business. On the other hand, the iP0d created both a new way 0f downloading music through iTunes and a way of playing it on a terrifi- cally designed product—two good innovations that created a solid golden nugget. But Apple still has [ 0 keep on running fast with one new innovation after another t0 keep ahead 0f the pack. Artificial Muscle's INNOVatION 147

1ntO the basic curriculum. The United States needs tO retool educatlon 伝 0n1 kindergarten through graduate education, creating an lnnova- tion culture at all levels, and providing students the opportunlties tO explore open-ended problems, engage in teamwork, and work on pr0J - ects that cross traditional disciplinary lines. " 42 The fundamentals Of in- novation and entrepreneurship, for example, can be taught as part Of traditional K— 12 classes, such as history, science, and SOCial studies. For some students, a specific program based on lnnovatlon and entre- preneurship could be inspiring. Our colleagues at SRI have suggested that there should be an ISO standard for education. 45 ISO stands for the lnternational Organization for Standardization, which develops stan- dardS for m. anagement processes as well as Other areas Of endeavor. The key feature 0f an ISO standard for education is that it would measure the た 0 / ノ第 2 〃オ Of the SChOOl. Once an organizatlon accepts con- tinuous improvement based on delivering the highest value, positive change iS almost assured. Other countries have already reached these conclusions and taken action. Singapore, for example, teaches courses on innovation and en- terprise" tO all students. Tharman Shanmugaratnam, minister Of edu- cation for Singapore, announced, "[T]he key focus for the ministry 0f . would be tO nurture a SP1rit Of innovation and enterprise educatlon . [I&E] among our students and across our SChOOlS. " 44 Singapore recog- nizes that the future 0f its small country 0f 4.4 million is dependent on a well-educated workforce equipped with new skills in creativity, teamwork, and human values, such as respect for Others and integrity. 45 country iS creating a comprehensive program With new rewards for teachers, "360-degree" supervisor feedback, and continuous improve- ment. IS it any wonder that Singapore, on the "lnnovation lndex," IS projected tO move tO the top Of the index for nations?46 CIearIy, the United States needs [ 0 establish a "National lnnovation 、 Agenda" for our educational system. 47 need tO iSOlate the specific aspects Of our educational system that need repair and move forward tO enable a culture Of innovation. ThiS would embrace sclentists and engl- neers at all levels and provide them with a collaborative, multidiscipli- nary curriculum that includes value creation and innovatlon. Similar advances are needed in umversity education. ・ we mentioned 280 CURtIS R. caRLSON aND WILLIam W. WILmot

lt provides new customer value because it allOWS consumers tO conve- niently select and buy a wide variety of books 伝 om home. Of course for an innovation tO be viable, it must be affordable and alSO provide a sus- tainable profit to t company. Many people have invented revolutionary new products but have been unsuccessful at getting them intO the marketplace. Phi10 Farnsworth in- vented television in 1927 , but it was David Sarnoff who created tele- VISion broadcasting tO bring black-and-white television t0 the consum. er in 1939. ろ He developed a successful business model that put together televisions, cameras, broadcasting statl()ns, program content, and ad- vertising. Farnsworth invented a device, while Sarnoff was the innova- tor WhO put all the pieces together t0 create an industry. Sometim. es the new customer value Of an innovatlon may seem small such as a better way for a nurse [ 0 administer a medical procedure or a better way tO keep notes, such as 3Nf'S post-it N0tes. At other times an innovation has revolutionary, worldwide impact, such as Wal-Mart's approach t0 mass product distribution and sales. RegardIess of the mag- nitude Of impact, all innovations provide additional customer value, with customer value defined as a product's or service's benefits ItS COStS. Customer value includes not just tangible product or service benefits such as that provided by a higher-resolution computer screen, but also intangible needs, such as serVICe, convemence, and personal identity. Consider convemence. The ノ Apple iPOd 、・ ano can contain thousands 0f your favorite songs and can be attached [ 0 your key chain, allowing you t0 carry your muSIC conveniently in your pocket. By addressing multiple aspects Of customer value—product, convemence, serVICe, experience, and emotlon—companies such as Apple, Disney, Lexus, and Starbucks create significant customer value and can thus charge a premlum. The phrase C, 〃工加紘 24 / ″ど iS thrown around SO often that it may sound like just another buzz phrase. Yetthe failure to think through the process Of creating successful innovations by providing value tO the customer IS one reason that SO many talented—and sometimes brilliant—・ people experience SO much frustration. They can't find a way tO be successful because they don't understand all the pieces that must be in place. This also explains why people in management often failto act on potentially lmportant new products and servlces. ln the mindS Of many managers, INNOVatION 7

half the commercial nonfarm GDP. They are responsible for 60 to 80 per- cent Of the net new jObS each year and create fourteen tlmes as many patents per employee as bigger companies. ln 2001 , they accounted for 97 percent of all exports. 54 ln addition, while 75 percent of R&D expenditures comes mostly 伝 0n1 firms With more than one thousand employees, these large firms are often not the genesis of paradigm- changing innovations. The R&D expenditures of large firms largely go toward improving their current product lines, while only 8 percent of their R&D is spent on 1 れ a ] or new lnnovations. lt is within the smaller firms that the radical, paradigm-shifting innovations often occur. small firms' patents are at least twice as likely t0 be found among the top 1 percent 0f high-impact patents. 55 And small firms are more "effective ln producing high-value innovation. " 56 lt iS certainly no overstatement tO say that "the contribution Of small businesses tO the innovatlon economy rivals those Of large ones. " AS RObert Litan, Vice president Of Research at the Ewing Marion Kauffman Foundation, says, "A dispro- portionate number Of innovations are developed by entrepreneurs as opposed t0 big firms. " 57 、・ evertheless, the failure rate 0f companies with fewer than twenty employees is striking. Different estimates suggest that only ろ 0 to 50 per- cent Of new companles survive four years after formation. Elizabeth Seanard and Lloyd Taylor58 quote A. Garcia of the SmaII Business Ad- mltustratlon, , hO reports that "small businesses lncrease their chance 0f survival by 50 percent by preparing a business plan. " This is our experience t00. Very few individuals either have the skills or do the homework necessary before forming a new venture. The waste here iS huge, and a small improvement would pay great dividends. Small companies have tO overcome Other hurdles that reduce their probability 0f success: T0day, for example, more than sixty U. S. govern- mental organizatlons either regulate or impact small businesses. Some Of these agencies help, but most represent costs t0 be absorbed. The Small Business Admin1Stration notes that the COSt Of compliance for compa- nies with fewer than twenty employees is $ 7 000 per employee, which is 60 percent higher than for companies with more than 500 employ- ees. 59 This is upside-down. We should be helping small companies, not dragging them down. INNOVatION 2 8