Innotech

Went to Innotech today.  Glad I did.

The Secrets to Predictable Innovation

The first session I attended, presented by Anthony Ulwick, the author of "What Customers Want" and founder of Strategyn.  Great session.  There's an unending outpouring of articles and books talking about the importance of innovation, but not nearly as much discussion of how to innovate.

Ulwick defines innovation as "the process of devising a product or service concept that satisfies unmet customer needs", and goes on to stress that successful innovation requires an understanding of customer needs.  In his presentation he talked about what a customer need is: not specific tools or solutions, which change over time; but improvements to help them with the things they want to get done - their "jobs" - that don't change.  For example, people don't need microwave ovens.  Rather, they want to be able to cook their food faster.  The solution (currently microwave oven) may change, but the need (cook food faster) doesn't.

He discussed how to gain this understanding.  You do not ask people what they want.  Rather, find out what they want to get done, how they do it, and what their pain points are.  Watch them do their jobs.  Interview them about their jobs.

When you have this understanding, break down the job into subprocesses; and for each subprocess ask your customers how important it is and how satisfied s/he is with it.  Your best opportunities are those that are most important to the customer and with which s/he is most unsatisfied.

I like his process for creating a framework.  His process doesn't result in a set of requirements that can be used to create a product or service (more on this in the next paragraph), but it does create a context for ongoing analysis of your market.  It also helps reveal adjacent markets.  For example, rather than wanting to cook food faster, maybe the customer really wants to get food to the table quicker.  In this case, you can also look at the process of getting the food from the cooking device to the table as an area ripe for improvement.

So why doesn't his process result in product/service requirements?  Because it doesn't quantify the changes needed to create a successful solution.  For example, your customers may want to cook their food faster.  But if the product you are able to create doesn't provide enough increase in cooking speed to tip the scale against the perceived costs (e.g., money, size, attractiveness...), your product won't succeed.  So having knowledge of customers' general needs is a great starting point, but you need to determine the specifications that will result in success in the market.

Accessing Innovation in Oregon

Presentation by Dana Bostrom, Director Innovation & Industry Alliances, Portland State University (does this department have a web site?); Chuck Williams, Associate Director, Office of Technology Transfer, University of Oregon; and Rick Fisch, Managing Director, Northwest Food Processors Innovation Productivity Center.

Bostrom and Williams talked about the "Oregon Innovation Portal", a web site they are creating to communicate information about the research and IP being generated at Oregon universities.  Sounds like a good start, but I'm disappointed that they are not planning on developing a two-way conversation on the site.

The Changing Landscape of Venture Capital Investing

Christopher Logan, Entrepreneur, & Strategic Advisor; and Randall Lucas, Associate, Voyager Capital put on a good show, with Logan providing the entrepreneur's viewpoint and Lucas the VC's.

Logan started by saying he's noticed a rise in the number of professional angel investors and angel investment groups. He cautioned the audience to make sure working with them would be right for them. In contrast to traditional angel investors (friends and family), these people will want you to issue preferred stock (possibly sooner than you want), and they will expect you to put in place corporate governance structures that require time and overhead. He also cautioned the audience with regard to the micro vc's, who may want a disproportionate percentage of equity (up to 10%) for very little capital infusion.

Lucas compared these groups with traditional vc's, stating that vc's behave predictably. Voyager, for example, reserves an average of $8 million per deal (though they don't inject all of that at once); and you know that they are going to want preferred stock. He also made the point that the pedigree of the financial backer can affect the hype around the startup's future valuation and ipo.

An audience member asked if startups have to have IP to get vc funding. Lucas said they want to see sustainable advantage. It could be IP, a monopoly on knowledge in a specific space... Logan added that the rise of open source is changing thoughts on the value of IP.

Logan talked about the importance of having the right investors. When he was CEO of Driveway, the company received $68 million of vc funding. The dot-com boom ended and things got tough, but he thought he had a business model that could ensure survival. But the investors didn't want to be tied up long-term - they wanted a quick exit. So he was replaced.

Lucas stated that vc's like Voyager don't invest in R&D. If you want funding, you need a couple of credible people (management team), a product or service you can demonstrate, and possibly organizations who are customers or who will say that they will be customers if your business shows viability. He stated that vc's want to minimize 3 risks: technical, market, and execution.