CH 12 COLORING OUTSIDE THE LINES

1. CH 12 COLORING OUTSIDE THE LINES

2. I. INNOVATION MEANS TAKING RISKS • A. Add Color • Silicon Graphics wanted computer that looked high-end • IDEO added color: purple, green, red, blue • 10 years before iMac’s colorful monitors in 1998 • B. Sticking with Status Quo loses in Long Run • Seems safer • But after awhile can’t compete with other firms • C. Web is full of Examples • Hotmail: gambled that freee-mail could sell • Amazon: selling books • iWon.com: give away moneyin short run • Web customers: risked using credit cards online

3. II. FAIL YOUR WAY TO SUCCESS • A. Fail Often to Succeed Sooner • Embrace a culture of mini-failures • Heart of prototyping • Charles Schwab – many failures – “noble failures’ • Pocketerm: handheld stock-quote device • Schwabline: paper copies of people’s portfolios • Schwab Quotes: real-time quotes available for customers • Created accessory for Apple, then Apple made it free • Failed: too expensive, glitches, cumbersome • Failures kept Schwab on cutting edge • Failures teach • B. Never Ignore Worst Case Scenario • IDEO created accessory for Apple computer • Then Apple developed one and shipped it free

4. C. Don’t Fall in Love with Your Product • IDEO used famous Italian designer for new phone • The design won awards, appeared in movies • Was on cover of European design mags • Entered permanent collection of Museum of Modern Art • But made production errors • Used unproven manufacturer in Hong Kong • Used exclusive distribution agreement • phone cost $150 – big financial failure • D. Learn to Juggle • Practice with beanbags – small price for failure • Balls roll under couch • Rocks hurt your feet when fall • Practice prototyping lots of small projects

5. III. GROWN MEN AFRAID OF A LITTLE MOUSE • A. IDEO tried to introduce infra-redmouse in 1980s • Corporation liked it at first • Then rejected it out of fear • “I’ll be know for the rest of my career with the company as the guy with that stupid cordless mouse.” • B. Infra-red Mouse became Industry Standard Later • IV. MAKING NEW RIDES • A. Fear Doesn’t get You Down the Mountain • Thinking about what you might lose • Makes it impossible to take a leap

6. B. Snowboarding • Called a fad • Time magazine: America’s “Worst New Sport” • Ski resorts banned it • C. It was Time to Break the Rules • Skiing was slowing down, ticket prices rising, dated • Jake Burton Carpenter – evangelist for snowboarding • Researched and built boards in his garage • Went to Austria • Popularized sport • Answered 1-800 calls 24/7 • Campaigned to get ski resorts to acceptsnowboarding • Now leading manufacturer of snowboards • Millions enjoy snowboarding

7. D. Schwinn Blew Opportunity • Wrote mountain biking off as fad • Early mountain bikers had modified Schwinns • Others developed the fat-wheeled, comfortable bikes • Now very popular: 70% sold in US are mountain bikes • “Innovate or Die” • V. SPIRITED SKIES • A. Southwest Launched • Business plan on cocktail napkin • Use humor in operations and with customers • Personal touches with employees: birthday cards • Only rule is no rules • SW is tops in safety, price, on-time, baggage handling • Teamwork is high

8. VI. BEING BIG AND ACTING SMALL • A. Be Opportunistic, Flexible • Large corporation can create small firm • Can be formal or informal • Small department or division or new firm • Agile, risk-taking, adopts new ideas • B. Use Assets of Corporation toTake Risks • Gilette: spent $200 M creating 2-blade Sensor • Immediately began work on 3-blade razor • Spent $750 M on it, now has 70% of market • VII. BREAKING WORK RULES • A. Rules Leads to Bureaucracy • B. Bette Nesmith: bad typist created Liquid Paper

9. VIII. LINUX BREAKING THE RULES • A. Linus Torvalds Created Free Operating System • Young student in early 1990s • Couldn’t afford operating system so he created his own • Broke many rules • Made it ‘open source’ software • Freely available so many could use it and contribute to it • Today 15 million users • IX. GIVE AND RECEIVE • A. Websites offer Something Free • Search engines, greeting cards, e-mail, reviews, articles • Still make money • B. One Thing Leads to Another • Onsale website, like Sotheby’s failed, but led to eBay

10. X. COLORING OUTSIDE THE LINES • A. Subtle Mind-set • Doing things like you are supposed to does not lead to something new • Doing something different can • IDEO brought in toy division to developad for mattresses • Developed talking pillow • Big success • B. Strip Process/product to Basics • Vary mix • Don’t fall in love with a tool • Innovation team may use videos, art board, prototype • Laptop, hand drawing, going off-site

11. XI. 7 Rule Breaking Companies • A. Igloo • Developed room for 6-pack in small, dorm room fridge • Space Mate • B. Shoebox Greetings • Need to produce 20 new ideas a day • No rules about office dress, décor • Wander the halls, brainstorm wherever • Get movie passes in afternoon • Writers can take creative lessons – art, ceramics • C. Sephora • Reinvented how high-end cosmetics are sold • Perfumes are along the wall, with customers • Many samples

12. D. Target • Has become a design leader: Michael Graves and others • Broke out of the idea of a discount store • E. Swatch • Halved # of working parts in watch • Interchangeable faces • Led design and fashion craze • F. E-Schwab • Launched online brokerage with low commission rates • Regular brokers complained • Schwab lowered all commission rates • G. Rubbermaid • Goal: introduce 300 new items every year • 1/3 are entirely new, from the ground up

13. XII. NOT TOO FAR OUT • A. Gordon McKenzie “Orbiting the Giant Hairball” • Messy hairball: firm’s rules, regulations, policies • Mind-numbing • Can get tangled up in it and never make anything new • If spin out from it, go into space, can’t help anybody • But if orbit the hairball • Can influence the organization • Without being snagged into the morass