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The Canadian Economy and the Apparent Innovation Paradox:

Dr. Sorin Cohn BD Cohn sulting Inc. T here is No Paradox – it’s mostly a matter of Management and Culture!. The Canadian Economy and the Apparent Innovation Paradox:. Investments are not the fundamental issue for the Canadian Innovation Gap (“ Paradox ”) .

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The Canadian Economy and the Apparent Innovation Paradox:

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  1. Dr. Sorin Cohn BD Cohnsulting Inc. There is No Paradox – it’s mostly a matter of Management and Culture! The Canadian Economy and the Apparent Innovation Paradox:

  2. Investments are not the fundamental issue for the Canadian Innovation Gap (“Paradox”). The issue is Innovation Management! … and LEADERSHIP nurturing a culture of entrepreneurship and pursuing innovation comprehensively, competitivelyand methodically! Core message concerning Business Innovation in Canada Question:How do we bring Firm Innovation Management knowledge to the people that matter: in industry and in governments?

  3. From Industry Analysis to Action • Topic: • Is there a Canadian paradox concerning: • Good Canadian Science & Technology Research • vs. • Poor Canadian Business Innovation? • No! There is a disconnect between reality and some outdated perceptions (myths)! • This is not about innovation in the research labs but about firm-level business innovation that leads to tangible performance where it counts: in the market! • Agenda: • Business Innovation • Perceptions & Reality of Canadian Industry Innovation • Summary: What’s To Be Done Innovation is the central issue in economic prosperity.(Michael Porter)

  4. What is Business Innovation?Why Innovate? There is a lot of buzz around INNOVATION. However, there is much confusion about what it really means and how to manage it properly. Goal of Innovation: Create Value, Ensure Growth, Enhance Competitiveness • Amaze and attract customers with new/better value in products & services • Surprise competition through more effective internal & external processes • Be more competitive, grow and achieve your vision

  5. Innovation is Means to an End  “Success” • Successof a company is predicated on: • A Market of sufficient significance &/or growth • The Competitiveness of the organization in serving this Market as determined by: • Desirabilityandaffordability of its Products (Good & Services) • Effectiveness of its Interactions with the Market (environment) in terms of understanding of, promoting to, accessing to and satisfying of its targeted customers & its stakeholders • Efficiency of its Operations (including management, development, production, HR, quality, supply, distribution, etc.) • Financial Strength, • TheCulturepervasive in the Organization (including Leadership, Skills, Competencies, etc.); and • Luck & Timing Innovation is the specific instrument of entrepreneurship. The act that endows resources with a new capacity to create wealth.Peter Drucker

  6. Business Innovation is Much More than just R&D Innovation is about creating value. Business value can be seen only in the context of the market. Social value can be seen only in the context of the community. Business innovation may address all aspects at all times Customers Business Models & Strategies Processes & Platforms Markets & Channels Resources, Culture & Organization Research & Technology Products • Goods • Services “Innovation is a process through which economic and social value is extracted from ideas and knowledge through the generation, development, and implementation of new or improved strategies,capabilities, products, services, or processes."

  7. Data from: 2012 Canadian Industry Survey on Firm-level Innovation Metrics & Management Center for Business Innovation at Conference Board of Canada • Inside the Firm Understanding of Innovation • Across all industry sectors • Across the wide geography of Canada • Firms of all ages, sizes and revenues • Over 600 responses to questions on: • Competitive Interests • Innovation Focus & Investments • Innovation Management Practices • Metrics • Factors affecting innovation effectiveness • With significant impact conclusions thanks to performance correlations

  8. Myth #1: S&T Research = Innovation • Reality, simply put, is that: • Research = Transformation of Money into Knowledge • Innovation = Transformation of Ideas & Knowledge into Money (etc.) Knowledge Research • S&T Research • Science & Technology • Market Research • Users’ Needs & Market Requirements • Business Research • Management Know-How • Processes Money Commercialization • Market Specifics • Customers • Channels & Support • Value & Brand • + Economic & Social Benefits Solution(s) Implementation • Strategies • Business Models • Products & Services • Resources: People, Platforms, Partners • Corporate Processes

  9. Myth #2: Innovation is Having Ideas • Reality: Innovation is Structured Work to transform Ideas into tangible Market Value and higher Competitiveness 36.6% Without Project Structure 30.0% With Project Structure 2012 Conference Board Survey on Innovation Management 2012 Conference Board Survey on Innovation Management

  10. Myth #3: Canadian Industry Does Not Invest Enough in Innovation • Reality#1:Canadian Industry Invests a Lot in Innovation beyond R&D 48% of companies Over 26% of companies 2012 Conference Board Survey on Innovation Management Over 61% of companies Less than 13% of companies - Ratio of Time Dedicated to Innovation is a Better Measure of Innovation Investment

  11. Reality #2:Innovation Investments and Pursuits Are Sector Dependent R&D intensive R&D intensive Not R&D intensive Not R&D intensive Not R&D intensive Prof. Serv. Serv. Providers IT & S/W Life Sc. Et al Manufacturing Resources Innovation Beyond R&D Innovation Beyond R&D Innovation Beyond R&D Innovation Beyond R&D Prof. Serv. Serv. Providers IT & S/W Life Sc. Et al Manufacturing Resources Sectors have specific needs and pursue different types of innovation.

  12. Myth #4: Innovation Results are Strictly Proportional to Investments • Reality:Yes… But If and Only If Innovation is Managed Adequately • No Innovation Management • 50% Formal Innovation Management 35% 2012 Conference Board Survey on Innovation Management • 50% of Canadian firms surveyed do not manage properly their innovation! • That is the problem!

  13. Corollary: Investing a Lot in Innovation is Meaningless unless Innovation is Managed Adequately Splitting by Innovation Management Very Good Performance Better Performance Over 60% of Surveyed Firms Puzzling Performance Very BadPerformance Significantly Lower Performance

  14. Myth #5: Innovate What Customers Demand • Reality:Yes, Talk & Listen to Customers… • But Innovate Strategically 2012 Conference Board Survey on Innovation Management

  15. Myth #6: Executives Know Innovation Best • Reality:A Balanced Approach Top-down & Bottom-up is much Better 2012 Conference Board Survey on Innovation Management • Culture matters a lot, and a culture of constructive debate is more productive. • “When all think alike, then no one is thinking” (Walter Lipmann)

  16. Reality:Many Canadian firms use too few metrics and their performance suffers Over 45% of surveyed companies do not measure innovation performance at all or do it with just 1 metric Less than 8% are in sweet spot of 6 - 10 metrics Sweet Spot What could be gained in terms of industry well-being by raising the number of firms using 6-10 metrics? Source: 2012 CBI Conference Board Study of Innovation Metrics & Management

  17. Myth #7: Productivity Gains is a Good Innov. Metric • Reality:Innovation is a complex multi-stage process and Productivity Gains is an obfuscating Innovation Metric unless balanced by others • Input • Labour • Capital Output Value ($) Output Input Firm (Black Box) Productivity = • The Innovation Value Chain links productivity and quality factors at all stages • Look insidethe Productivity Value Chain to determine the Weak Links • For Illustration: Corp. Mgmt. • Research • S & T • Market Design & Developmt. Supply Production Marketing • Sales • Direct • Channels Productivity=PCM x QCM xPRSTxQRSTxPRMxQRMx PD&DxQD&Dx PSupxQSupxPProdxQProdx PMKT x QMKT xPSalesxQSales What value is in blaming the Workers’ “productivity” if Management took lousy decisions or Product Design was unappealing or Supply got materials of poor quality or Marketing was ineffectual or Sales channels were weak? To find solutions one needs to address the real problem(s)!

  18. It’s mostly about management! • … and leadership that nurtures a culture of entrepreneurship and pursues innovation comprehensively, competitivelyand methodically! • What truly matters: • Showing Leadership with compelling Vision & manageable Goals; and ensuring/instilling competitive Will • Knowing about the Market, Yourself and the Competition • Focusing on winning Business Models and the right Competitive Imperatives • Having the necessary and sufficient means: Funding, Expertise, Connections, Structure, Processes and “Tools” • Applying effective Metrics-based Innovation Management • Timely evaluating & adjusting the firm’s innovation portfolio • Nurturing a Culture of Innovation/Entrepreneurship and a suitable Organization What have we learned? What’s to be done? I doubt this will work!

  19. Reminder:Metrics Drive Behaviour.HR & Innov. Management should be aligned! Disregarding Innovation is NOT good! Encouraging innovation is GOOD! 2012 Conference Board Survey on Innovation Management

  20. Manage Innovation Comprehensively Outcomes: Financial, Customer, Brand, Territory, Social, Environmental, etc. VALUE Solutions: Products, Services, Processes Culture: Leadership, Governance, Innovation, Culture, Organization Solutions Resources: People, Facilities, Platforms, Partners Culture & Organization Business:Market, Business Model, Strategy, Innovation Plan Resources You can’t manage what you don’t understand and measure… (Lord Kelvin) Market Knowledge & Business Model Value-add Corporate Innovation Management (vCIM) Metrics drive behaviour!

  21. Manage Innovation Competitively • Determine YOUR competitive imperatives and the partnership needs by assessing your position in priority markets against most significant competitors • iTCA Tool for: • CEO • Exec Team Firm X Competitive Dashboard Where should firm X focus its innovation activities? 21

  22. Manage Innovation Methodically with Metrics-based Techniques & Tools cFIT Show Leadership: Vision, Goals & Will Learn, Improve and Continue Select Bus. Model & Competitive Imperatives Nurture Culture of Innovation and the Organization Evaluate, Review and Adjust Portfolio Resource, Organize & Plan Innovation Portfolio cFIT Manage innovation activities RIGHT Innovation without methodology is just luck. (M. Langdon)

  23. Nurture Competitive Firms & Industry Industry 1st • Focus on Entrepreneurial Competitiveness and Leadership • Apply Effective Innovation Methodology & Tools • Align Culture with Business Goals & Innovation Strategy • Collaborate to Conquer: Lead Customers, Anchor Companies, In-Market Partners • Go for “Smart Money”  integrate financial and strategic support Financial Strength Business / Commercial Capabilities Company Governments “Technology” Capabilities Product / Service / Process • Educate for Business Success andNurture Entrepreneurial Leadership • Invest in companies that do manage innovation adequately • Focus on Effective Industry Competitiveness at global scale • Support Effective Innovation and Commercialization specific to sectors & firm sizes • Coordinate & balance programs that are accountable by Industry Results It’s ALL about Entrepreneurship Management Know-How Culture &Collaboration • How do we get all this knowledge to the people that really matter?

  24. Innovation is a Renewable Corporate & National Resource to be developed, used and commercialized for economic and social benefits. • It’s mostly about management! • … and leadership that nurtures a culture of innovation and entrepreneurship! • Business Innovation is much more than R&D • Canadian industry invests a lot in innovation • Industry needs to manage better its innovation activities – comprehensively, competitively and methodically • Corporate culture matters a lot and being entrepreneurial is crucial • It is up to all of us – industry first, governments & academia to better it • … How do we bring all this knowledge to the people that matter: in industry and government? Questions? Dr. Sorin Cohn scohn@rogers.com

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