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>> When I was a kid and almost until I went to the university, in order to do my homework, especially when I had to be nice and well represented, I use a machine called a typewriter. I don't know if you've seen it, but this is how they used to sound.

[ Typewriter Sounds ]

For some of us, that kind of sound is nostalgic to the point that I have a software in my computer that imitates that sound when I type. But, anyway, those machines were great. The first ones were mechanical. Everything has to be done manually. Few years later, they came with electric ones which basically was the same idea. The only thing is you didn't have to roll the paper manually. But other than that, it was the same. But then [typewriter sounds], one day, they vanished. They were gone. Nowhere to be found. And up to today basically, they just become a collectible item. Hard to find at homes, hard to find in organizations. They disappeared. So what happened? What make this common, useful, accessible, easy to use, easy to find, affordable device disappear? And that's what we call a disruptive innovation. Something happened that it wasn't just an improvement, it was a transformation of a whole industry or the whole market that make some companies disappear and some new companies to flourish.

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I use this particular example to introduce the topic of innovation. And the reason is because innovation has become a common word. We always talk about innovation, we want people that are innovative. We want organizations that are innovative. We want something that is new. Again, innovation is not just a new gadget. It's not even a new product development or even R&D as many companies talk about. We have to separate that idea, it goes beyond that, basically when we talk about business innovations. Sometimes innovation can be just simple thing that when we put it together creates something special. And typical example that you can find everywhere is the idea of the Post Its. Those yellow sticky notes that we leave to our colleagues in the office, we leave to our roommates, we leave to our children when we need it. But at the end of the day, it's not just more or less than a piece of paper with a kind of glue that we can stick somewhere. Again, those became a huge success. But, again, the components of it were just very basic available there. Now today someone even think, oh, gee, that was a trivial idea. But up to that point, no one has ever thought about it. So when we talk about business innovation, we have to consider three main points. First, they have to provide new value for customers. And that doesn't mean just new stuff, new devices, new things. They have to provide new value. Another thing to consider is that this business innovations, they can come in many flavors. What I mean by that is the innovation itself can be just the process about

how I get that particular product or that particular service. Or it can be who provides that, that is different how it was done before. Again, it can be something that is not just a particular product, but everything that goes around it. And another important thing about business innovations, is that they have to be systemic. Meaning that is a whole package. You have to be great in everything. It doesn't matter that you have a great idea for the great product that you would really produce and is out there. But if I cannot find it or if I cannot get it, because your distribution is very poor, then doesn't work anyway. So you have to be the whole package.

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And when we talk about disruptive innovations, basically we mean radical innovations that disrupts, we say before, whole markets or industries. And when we were talking about the typewriters, they were replaced by the word processor. Two different things. They do the same thing, help us to write a document. But they are done in a very different way to the point that today, typewriters are basically banished. And they have been replaced by word processors that basically we find in every single computer today.

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One thing that we have to be very clear about is that ideas are not the same as innovations. A lot of organizations, a lot of people, we all have ideas about new products. Sometimes we have ideas about the next book that we want to write about. But if those just stay in our head, they are worthless. At least for the purpose of organization. A company with a lot of ideas that is unable to implement any is the same as a company with no ideas. And that's why we make sure that ideas are not just innovations. Ideas might be the first step, but from there, we have to create, we have to develop, we have to execute those ideas into reality. Again, it can be a product, it can be a service. But, then, we have also have to validate those. Maybe we come up with something the people don't really appreciate and no one buys. Then no one cares about it. So that doesn't work either. So for the purpose of an organization, we have to have three steps. Ideate. You have to come up with the idea. Second, create, you have to convert that idea into reality. And, third, you have to validate it. That idea that has to become something real has to be, has to appeal to your customer base. If it doesn't and you don't sell any, basically you've lost more money than what you were thinking about in the beginning.

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Innovation is important because it's the way we make progress. Organizations cannot keep selling the same forever and ever. Not just was they can't. It's because someone else will come up with something better, cheaper, or a combination of both. And we need to keep always

improving ourself. Either our products or our services, we need to come out with new things. Because we need to keep moving on, we need to go ahead. And especially if you are a public company, you need to grow. And you need to grow and to grow you have to come out with new products and new services. You have to make them appealing to your customers, and you have to keep going. You think about it, for example, Apple keeps coming pretty much every year or every 18 months with a new iPhone or a new iPad. And now they're coming with the new iWatch. They keep coming with new products. Because what they sold a few years ago, it was good then. But now they need to keep selling. So they need to coming up with new products, new services that are appealing to their customers or new customers. Because you have to also have to satisfy your stakeholders. You need to keep going. And that's where innovation plays a great role.

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