©20101 ©2009 HP Confidential1

JANUARY 20, 2010

Innovation & Disruption to Win

Prepared for Hewlett-Packard

Feisal Mosleh

Fas@Juldee.comRights to trademarks referenced

herein, other than Juldee LLC

trademarks, belong to their

respective owners.

©20102

HP continues its astonishing

transformation under CEO Mark Hurd, from

an underperforming printer-reliant giant

into the world's largest tech company

(almost $130 billion a year in revenue),

thriving in multiple markets. Last year, it

surpassed Dell as the top PC seller and in

the process showed Apple-worthy design

chops with its sleek TouchSmart computers

featuring touch-screen functionality. HP's

$2.7 billion acquisition of 3Com -- a year

after the $13 billion deal for EDS made it

an instant IBM (#18) rival -- signals that it's

ready to take on Cisco (#17).

Source: Fast Company 2010

©20103

Agenda

– Digital – Importance of Innovation

– Innovation and Disruption

• Why innovation? What is disruption?

– Examples of Companies and Innovations

– Mobile Market Example

– Conclusion

©20104

What Does Digital Mean?

–Bits and bytes

–Not Analog

–Cool devices…

–Liberating…

–Democratization of Information

–Power to the People

©20105

What Does Digital Mean?

–Ruthlessly fast

–Low margins

–More value

• Consumers and enterprises

–Ultra competitive

• Globally

Grow sales, cost control, customer satisfaction, employee retention, or max shareholder value

©20106

– In a world of accelerating change, no competitive advantage is sustainable –

– Innovations and new technologies almost instantly reinvent industries, products, services, and offerings, and eliminate any competitive advantage the old ones may have had.

–Change and threats are constants, so must be innovation

©20107

–Creativity is the generation of new ideas.

–Innovation is the implementation of creative ideas

Creativity vs. Innovation

Innovation is the creative process that transforms new and existing knowledge

and technology into commercial value, and reconfigures existing processes in

new ways. (Source: National Competitive Council)

Value

©20108

Create Innovate Disrupt

©20109

Execution is Critical to Innovation

©201010

Innovation Being Executed

©201011

'A powerful new idea can kick around unused in a

company for years, not because its merits are not

recognized, but because nobody has assumed the

responsibility for converting it from words into

action. Ideas are useless unless used. The proof of

their value is only in their implementation.'

(Theodore Levitt)

©201012

Innovation Trinity

Source: Scient

Technical Financial

Market

©201013

Disruptive Innovations vs. ‘Displaced’ Technology

Disruptor Displaced/Marginalized

Automobiles Railway transport

Plastic Wood,metal,glass

Digital Photography Traditional Photography

Mini-Computer Mainframe

Desktop PCs Mini-Computer

Laptops Desktop PCs

CMOS video Sensors Photographic Film

Telephones Telegraphy

LEDs Light Bulbs

©201014

Why Innovate?

Fear of changing the status quo can be paralysing but if you

are not moving forward and innovating in today’s challenging

economic environment, it’s worse than standing still.

You’re effectively moving backwards.

©201015

Innovation isn’t some big bang thing. It’s something that

people do every day by challenging the system.

- Keith Yamashita, CEO & Founder, Stone Yamashita Partners

That means accepting that there is something to lose by changing the

status quo, but even more to lose from doing nothing.

Successful firms are constantly evolving - Embrace Change

©201016

The Requirements for Life

©201017

The Requirements for Innovation

and Business Creation

Diversity Environment

ViabilityTest - Execute

I

Fin

Mkt

Tech

Sponsorship

Risk taking

Resource

Plan

Execute

Iterate

Thought

Background

Perspective

©201018

Disruption

©201019

Examples of Sustaining Innovation

Satellite RadioHD TV

HD Video

RadioTV DVD

©201020

Audi Quattro Disrupts the Rally World!

5-cylinder turbocharged engine with permanent all wheel drive

4WD

Turbo

360-600

©201021

190e 2.5 16V

1980s – Mercedes Makes a Sports Car

©201022

Spectrum of Disruptive Innovation

DisruptiveSustaining

Degree of Innovation

WWW.

HDD Video

Nintendo Wii

Blackberry

©201023

Google’s Chrome – A Better Web Browser?

“Experience the internet faster, safer, easier, and with more stability.”

Browser Wars…

Search, Adwords, Chrome, Android

©201024

Google’s Chrome – A Better Web Browser?

•Word processing

•Spreadsheets

•Video editing

•(Gmail, YouTube)

•Higher performance

•Fewer crashes

•Easy access

©201025

Innovators and Disruptors

©201026

An Obsession with Customer Satisfaction

One of the ten most profitable companies in

the world (> sum of GM, Ford,

DaimlerChrysler, Nissan and Honda).

Loom

Founded by Sakichi Toyoda as a handloom company.

Began as Toyota Automatic Loom Works, a company whose looms were of the “highest quality,

lowest cost, and easiest to use.”

©201027

An Obsession with Customer Satisfaction

Oobeya (ooh-bay-yuh) = (“Big, open office”)

Cut costs, boost quality

Open discussion

•Retail turn rate- 27 vs 107

Toyota has a way of thinking. It’s not just a series of processes or incentives or targets. It’s a philosophy, a way of looking at life.

©201028

The Art of Tension

Ichre (Kaizen=continuous improvement)

Find a problem ! GREAT – Fix it

Vs. Find a problem – oops – hide/ignore it

Opposing stretch goals = creative tension

Needs innovation for a harmonious resolution

©201029

Toyota’s Target in 1988 –the Car That “Could Not Be Built”

BMW 7

Lexus LS

•5db

•120 lbs

•17 mph

•4 mpg

•Handling, acceleration and comfort

•$30,000

Speed

Weight

Styling

Acceleration

Noise

Handling

Comfort

mpg

©201030

Lexus - Not Innovating in Japan?

Lexus

2009 7 Series

GS, SC, IS

©201031

• $800

• $3.2

• #1

• Million Q1 revenues

• Billion 2008 Annualized revenues

• Retailer of Music in the USA (bigger than

WalMart for the first time)

“Apple’s music “tail” has been wagging the computer “dog” at Apple for a couple of years. The company makes more money today selling music and consumer electronics than it does with computers.”

Source: “The Perfect Thing,” Steven Levy, Simon & Schuster, 2006

Here doggie woggie…

©201032

Apple’s iPod/iPhone – Using an Innovation Network Successfully

•Toshiba

•Wolfson Microelectronics

•Synaptics

•Foxconn

©201033

Nokia

2008 Rank: 5

2008 Brand Value (Millions): $35,942

Parent Company: Nokia

iPhone has the buzz, but Nokia sells 8X as many smartphones.

Its reputation for quality puts it far ahead of rivals

©201034

Nokia’s Timeline

1865 Birth: Paper Mill Established

1898 Finnish Rubber Works Founded

1912: Finnish Cable Works Founded

1937: Verner Weckman Olympic Wrestler

1960: First electronics Dept. - computers

1962: First electrical device – pulse analyzer

1967: Merger founding Nokia Corporation

©201035

Nokia’s Phones

1989 2006

©201036

Nokia and Ovi

Nokia is moving from being a pure handset manufacturer to being a service provider.

©201037

Stay in Touch and Share … at Home and on the Move…

©201038

Dell & its Build to Order Sales Model

•Build to order

•Direct sales Direct

Horizontal

Custom

©201039

Renting Movies – Will It Ever Be The Same Again?

•Cinematch

•Fulfillment

3B

60M

©201040

Examples of Companies Who Are Successful Innovators

– HP

– Apple

– Google

– Toyota

– Samsung

– HTC

– Vodafone

– Netflix

– Dell

– IBM

– BenQ

• P&G

• 3M

• Johnson & Johnson

• BMW

• Nike

• SWA

• Microsoft

• Intel

• GE

• Starbucks

• Frito Lay

©201041

Five takeaways re: stimulating Innovation (3M)

1. "Give it a try--and quick!" - Essentially echoing on having a process to try out a lot of stuff, and keeping what really works.

The key here is to do something. Keep on trying something new.

2. "Accept that mistakes will be made." - Learn from the mistakes quickly, and move on. Failures are part and parcel of what

creates new innovation. Don't repeat the same mistakes.

3. "Take small steps." - Experiment, but on a small scale. When something looks promising, go all out and seize the

opportunity. This way one can do plenty of inexpensive experiments that create a funnel of would-be innovations.

4. "Give people the room they need." - Without entrepreneurship, there is no experiment. Without experiment there is no

success or failure. People need some time and room to experiment.

5. "Mechanisms - build that ticking clock!" - How do you harness creativity and build innovation? It cannot happen simply

by chance. Companies need to create practices and tangible mechanisms to experiment, try out new ideas and innovate.

Acknowledgement:Jim Collins and Jerry I. Porras - Built to Last - Successful Habits of Visionary Companies

©201042

The Importance of Failure

"Failure is our most important product."

R W Johnson, Jr.,

Former CEO, Johnson & Johnson, 1954

©201043

Opportunistic or Planned Innovations ?

– Johnson & Johnson's accidental move into Consumer Products with

discovery of "Johnson's Toilet and Baby Powder" and "Band-Aid“

– Marriot's opportunistic step into Airport Services from providing meals

in the airports to inside the airplanes,

– American Express's unintended evolution into Financial and Travel

Services - "American Express Travelers Cheque“,Tourism and Travel,

– HP's unplanned move into computers (designed its first small computer

simply to add power to its line of instruments products).

Not random luck - something bigger at work

Acknowledgement:Jim Collins and Jerry I. Porras - Built to Last - Successful Habits of Visionary Companies

©201044

The Importance of Movement

"Our company has, indeed, stumbled onto some of its new products. But

never forget that you can only stumble if you're moving."

Richard P. Carlton, Former CEO, 3M Corporation, 1950

©201045

Examples of Disruptive Innovation in Tech

©201046

Toyota Prius 1997

Top 10, 55mpg

Tax credits, 4 yr

To GO Before

©201047

Honda Insight vs. Toyota Prius

Prius $100k lux buyers

Green cred

94cu ft vs 85 cu ft

BT=$1000

Insight Prius

Price $19,800 $23,400

Nov Sales 1400 9600

mpg 41 50

Source: Companies, Autodata, U.S> Govt.

x6

©201048

I Google It 1998

Gmail

Maps, G Earth

Directions

©201049

The Modern Homewrecker Blackberry 1999

©201050

The Modern Walkman 2003

Cheap

Legal

Movies, tunes

podcasts

©201051

Walkman vs. MP3s

First there was the Walkman

MP3s squeezed it out..

©201052

iPod vs. MP3s

Enter iPod

Took over MP3s squeezing them

Created an e2e experience

iTunes

©201053

‘Walkman’ = Phones + MP3s

©201054

Skype 2003

2.5M users 1st 4 months

$2.6B eBay

©201055

The Ultimate Networking? 2004

24M employees

Platform…

©201056

See Yourself 2005

1.65B to Google

Ads

Promotions

©201057

Wii Disrupts Gaming 2006

Wii

“overthrow of the

gods”

Wii WW sales 33M

XBOX 21M

PS3 15M

©201058

Amazon Kindle

©201059

Two Alternative Approaches to the Camera Phone

iPhoneRazr

©201060

Sony Ericsson Xperia

•Win Mobile

©201061

Samsung Instinct

•Fast Data

©201062

LG Vu

•TV

©201063

LG Dare

•Handwriting

©201064

The Lost iPhone – PR ‘Innovation’?

During the March quarter, iPhone revenue grew 124% year-over-year to $5.4 billion,

40%

©201065

– A disruptor redefines the notion of performance by pulling an overlooked innovation lever

• Simplicity

• Convenience

• Accessibility

• Affordability

– All of these are hallmarks of disruptive innovation

– Mastering core concepts of disruption to defend and attack

©201066

Do you want to be disrupted?

Do you want to be the disruptor?

©201067

Mobile Market Example

©201068

The Sugar Cube Miracle

z

x

y

Lens

What matters?The cross sectional area (xy)Z-height (z)Z ht is affected by the lens

©201069

Laminate Substrate

CMOS CHIP

Lens Mount

Items come as an assembly

Sensor Area

IR Filter

3rd Lens Element

2nd Lens Element

1st Lens Element

Lens Barrel

Compact Camera Module (CCM)Advanced auto white balanceAdjusts for color shifts that affect white in different light sources

ArtifactA blemish in the image (e.g. defective pixel)

CIFCommon Intermediate Format (352 x 288 pixels)

FlexFlexible PCB (printed circuit board)

I-Pipe (Image Signal Processor)Image post processing to perfect the image

MPMega-Pixel, (1280 x 1024) pixels

PackageTotal camera module solution

VGAVideo Graphics Array (640 x 480 pixels)

©201070

CMOS Sensor Market Size by Segment

• Market approaches $4B in 2007

• Mobile >45% revenue, 75% volume in 2007

• CMOS everywhere

source: TSR 2007

TAM Volume by Application

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2004 2005 2006 2007 2008 2009 2010

Vo

lum

e (

mil

lio

ns

)

0

1,000

2,000

3,000

4,000

5,000

6,000

2004 2005 2006 2007 2008 2009 2010

$ (m

illi

on

s)

TAM Revenue by Application

Other

Medical

Security

Auto

DSLR

DSC

PC Camera

Camcorder

Mobile >=4MP

Mobile =3MP

Mobile =2MP

Mobile <=1MP

©201071

Handset Segments & Trends 2008 - 2009

Midrange

Entry

High End

>1MP

VGA-2MP

3-5MPAF

1g, 2p

VGA + 5-8MP, AFOpt. Zoom, Video

Image Stab., slomoRed-eye reduction

2g,2p

Market %& ASP

15%> $199

45%$100 - $199

40%</= $99

MicronSamsung

OVSTM

Magnachip

Typical CompetitorsFeatures Marketing

“DSC Class”Smart Phone

with best quality phone camera

“DSC-like”Camera Upgrade

“Free” PhoneCell Phone with basic Camera

FREE

3MPDig Zoom

Xe Flash

I.S.

Flash

SEGMENT

(Premium)

(Prestige)

(Value)

8MP

O. Zoom

MicronSamsung

OVSTMSony

ToshibaMagnachip

MicronSamsung

OVSony

Toshiba

1.3MPDig Zoom

Source: Feisal Mosleh, Videsignline Magazine 2008

Copyright Juldee LLC 2010

©201072

Evolution of Phone Camera Systems – Industry Response

Toy

• CIF, VGA, MP• Poor display• Poor features• Many suppliers

2002-2005 Emerging

• 2MP, 3MP, 5MP, 8MP• Better image quality, resolution• Autofocus, Zoom, Xenon flash, IP• Printable images

DSC-like

Mainstream

Today

2007-2008

• DSC image quality• DSC user experience• HD, wide • Powerful I-pipes (IS etc.)

>2008/2009

DSC-class

2010/2011

• DSC/DVC IQ• DSC/DVC experience• Enhanced connectivity• MM Capture

DSC/DVC

Source: Feisal Mosleh, Videsignline Magazine 2008

©201073

Handsets - Innovation

3G, 5MP, 3xOZ, Xenon

G800

HSDPA, 7MP, 5xOZ, GPS,

Wi-Fi

3.5” touch screen, nVidia 3D

N98

2MP 3.5”lcd, Wi-Fi, 8GB flash

Gmaps, Widgets, Photo editor

iPhone

HSDPA Vblogging, 5MP, AF, BestPic, PhotoFix, Xenon,

auto rotate, noise cancel, intelligent search

850i

5MP

120 fps @ QVGA

Super Slow MotionSchneider Kreuznach optics

xenon flash

AF

Digital image stabilizer

ISO 800 night/dark shots

LG Viewty

©201074

Strategy

©201075

Strategic Vectors to Win

EXECUTEOvercome natural barriers to entry

Hit time windows every time

Die size, power, Image quality

Competitive price/performance

LEVERAGE TECHNOLOGYHigh IQ, Low light performance

Competitive die size

Wafer level interconnect

Create barrier to entry for competition

LEVERAGE Market TREND

PENETRATE MOBILE

INNOVATION

EXECUTION

DIRECTION

©201076

Approach to Creating Strategy & Roadmap

+

– Disruption to incumbents

– Focus where they aren’t

– Use historical proof points and data

BUT

– Intelligently ‘connect the dots’ of major trends

– pattern recognition

©201077

Don’t underestimate the human condition

–Human emotions vs. engineering specs

–Appeal is important!

–”Cool” sells

–Video is cool

©201078

Whose Job is Innovation?

– Technologists

– Labs

– Engineering

– Development

– Manufacturing

– Marketing

– Sales

– Support

Everyone

©201079

"Innovation comes ultimately from a diversity of

perspectives. So when you combine ideas from

different industries or different cultures, that’s when

you have the best sense of developing

groundbreaking ideas"

Frans Johansson, Author, The Medici Effect

©201080

Recent Examples of HP Innovations

©201081

©201082

Ranier

Boelzle

Cyrille de

Brebisson

Tim

Wessman

Congratulations to Ranier, Cyrille, and TimQ3 EBU INNOVATION CHAMPIONS!

This team was responsible for development and implementation of HP

Calculators (12c, 15c, and 12c platinum) on the iPhone Apps Store.

©201083

Sneak Attack on iPad Debut?

Win 7 – apps, multitasking

USB, SDHC – printers/cams

5 hours battery

SIM card-3G modem

©201084

HP Download Store

Choice

100’s titles. Huge selection of software &

games to personalize your PC

Quick & Easy

No driving or waiting for mail

Immediate download

Green

No wasted packaging or CD’s

Copyright Juldee LLC 2010

©201085

Packaging Innovation

Blister packaging with Natralock material

Clamshell packaging

• Renewable packaging, retains security, durability, visibility

• 37% less weight

• 85% less plastic

+$

$

©201086

Keyboard EMEA Print on Demand

Brown box /

Sleeve

Ergo Warning labels on rolls (proprietary)

Product#/UPC lables

SKU Labels

Flextronics POD

AMO production

(Foxconn)

Laser printing

QSGCD

Warranty

card

Blank KB

Violator label- Affix by Foxconn

EMEA PODChina Suppliers

©201087

HP Value • $300M-$500M annual revenue at maturity in land-

based seismic applications

• Additional sell through in storage, servers, and high

performance computing

HP Sensing Solutions

Market Need• Large scale, highly

sensitive, distributive

sensor nodes

• Improved ttm, business

efficiencies

Pilot Vertical: Oil & Gas ($1.2B TAM by 2015)

Customer Solution• 1 million node land based wireless

seismic imaging system

• Game changing: Highest sensitivity;

lowest weight; lowest power; all

wireless

• 50 TB/day, largest seismic field

network

Customer Value• Less risk, better economics in

new fields

• Shell achieves game changing

competitive advantage in

obtaining new, high quality leases

• Improved flexibility of deployment

HP wide business solutions based on sensor networks

Pilot: Shell

Market opportunity and HP disruption

HP Disruption in Seismic Imaging• Highly disruptive sensing technology

based on MEMS

• 4-100x more sensitive; 3-10x lower

frequency; 80% less power

• Increases resolution of imaging with high

density and large networks

• Improves resolution of key formations

with lower frequencies

Vertical Applicability• Land Based Seismic

• Infrastructure Health Monitoring

• Condition Based Monitoring

• Inertial Navigation

Source: IPG

©201088

http://h30406.www3.hp.com/campaigns/2009/hho/photosmart/sites/en_us/index.html?jumpid=ex_R11400_go/touchprinting#/demo

©201089

Rules for Enabling Innovation

– Experiment – many times

– Invite serendipity

– Fail – and Fast

– Take your chances - Planning vs. chance

– Planning for success• Execute the innovation impeccably

©201090

So What Can I Do? you ask yourself…

–An open mind is the most powerful innovation tool

• Challenge the norm

• Do it differently!

–Bring different points of view to the creative process

–Be a leader at all levels

–No recipe for innovation

• Need to try multiple approaches

–Success doesn’t end with Creativity

• To make technology work it must be implemented (execution!)

–Take risks - Managers need to empower

©201091

Try An Experiment – Think Differently

– What hasn’t been done vs. what has been done?

– What might they need vs. what do they want?

– What is appealing vs. what is logical alone

– Where is the future headed vs. what has been done?

– Tapping human emotion vs. using rationale

– What we can do vs. what we can’t do

– What our network can do vs. what we can do alone

©201092

"Innovation is trying to figure out a way to do

something better than it's ever been done before.“

David Neeleman, founder and CEO of JetBlue

©201093

Conclusion

– Innovation critical in new digital world• Activate in all disciplines• Engage the network

– We can all encourage it• Innovative ideas come from everywhere – enable them

– To innovate effectively we must have the right• Strategy• Environment• Execution capability - Testing

– Execution and value creation are key

©201094

©201095

©201096

©201097

Think think think… vs. Doing it

Tick tock tick tock

Whoops

Someone else already did it !

©201098

The End

©2010100

Further Reading

– http://www.forbes.com/2007/08/31/christensen-disruption-kodak-pf-

guru_in_cc_0904christensen_inl.html

– http://www.gartner.com/research/fellows/asset_93329_1176.jsp

– http://www.businessweek.com/chapter/christensen.htm

– The Innovator’s Dilemma by Clay Christensen

– The Innovator’s Solution by Clay Christensen

– Leading Change, John Kotter

– Connections, James Burke, BBC/Discovery

– Serious Creativity, Edward de Bono

©2010101

Ask not where the past has been,

but where is the future headed?

When will technology business people realize that historical data and

spreadsheets denoting past results do not guarantee that the future will evolve

accordingly?

©2010102

Source: Business Week Feb 2010

50 Most Innovative Companies

©2010103

Source: Business Week Feb 2010

50 Most Innovative Companies – Business

Week

©2010104 ©2009 HP Confidential104

JANUARY 20, 2010

Innovation & Disruption to Win

Prepared for Hewlett-Packard

Feisal Mosleh

Fas@Juldee.comRights to trademarks referenced

herein, other than Juldee LLC

trademarks, belong to their

respective owners.