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THE FUNNEL Powered by

the funnel shorts PAGE 4

It’s art, not science

Innovation strategy at Fiverr PAGE 6

Would innovation have saved Kodak? PAGE 18

Innovation in ZIM

It’s about the Business Summer 2018


CONTENTS Business Title


Opening Remarks


The Funnel Shorts


It’s art, not science Innovation strategy at Fiverr


To be or not to be A corporate disruptor


Fast boats, rapid changes, slow systems


Would innovation have saved Kodak?


Innovation in ZIM: It’s about the Business


Reinventing Aviation


Innovation gyms: Unconferences, Hackathons, and Everything in Between


OPENING REMARKS Hello and welcome to our second edition of the funnel! After last quarter’s edition, we had a lot of comments from different readers. One of the comments that truly stuck with me was the importance of sharing and communication in the corporate innovation community. By sharing and communication, I don’t mean trade secrets or innovative products, but rather the process - the successes, the failures, the hardships and the lessons learned. All corporations are struggling with the dissonance between stability and process in this fast-changing pace of our world, technology and markets. We are all in the same boat. Being able to discuss and learn from each other can help all of us, without disrupting growth or ruining our chances in the midst of the competition. Such interaction can push us further forward in the technological revolution we are all experiencing. In this issue we looked at how very different organizations, from the navy, to a venture fund or startup examine and structure their innovation processes, what challenges they are dealing with and more. I hope you enjoy the interviews, articles and stories we’ve chosen to share in this quarter’s edition – and I look forward to hearing your thoughts. Dan Balter Managing Partner

The Funnel shorts F

ortnite by Epic Games Productions is the

biggest video game in history with 45 million players worldwide (with more expected to join now that summer vacation is about to begin). The game is expected to make 3.5 billion dollars in revenue in 2018. The game takes place in a world where most of humanity has died and the remaining 2% are left to fight zombies. Most of the money is made from in-game purchases using V-bucks. The game is so popular that, when the servers went down for maintenance on May 30, it was reported on the main news. The game has been taken over by other media forms like Twitch and Youtube, where people spend hours watching others play the game. People across the world have spent more than 5,000 years watching Fortnite streams on Twitch over the past two weeks alone. The huge success of the game has created entire communities and a whole industry behind playing and watching


it, pointing to new formats of interaction between companies and their customers.



ollowing a couple of years of

controversy and under the leadership of a new CEO, Dara Khosrowshahi, Uber has declared its intention to go public in the second half of 2019. Khosrowshahi in outlining his vision, said Uber wants to be the Amazon of transportation. Part of Uber’s recent success has to do with services adjacent to the ride-sharing core, like UberEats. Khosrowshahi mentioned that, in the future, he hopes Uber will become a transportation


platform that public transportation, bikes and other forms of transportation are based on.



oice operated virtual assistance

(including toilets) has also made a leap this year. This means the way consumers perform daily tasks, from shopping to finding out the weather or playing music, is changing. Also changing is the way marketers tell a story, advertise online, observe how you interact with products and create new forms of content. This allows the companies making them to learn even more about you and your habits.


Interview by Talya Vaish with Amit Ashkenazi, VP strategy, Fiverr I met Amit, Vice President of Strategy at Fiverr in their Tel Aviv HQ just as people were finishing up breakfast. As we walked through the common area, balcony and working spaces, Amit discussed the layout and how it was designed to encourage connection and collaboration between colleagues and departments. Employees are often incentivized to work, mingle and hangout in the common areas. This is just one of the few things the company does to boost employee morale and camaraderie, while also reinforcing the company’s community driven mission. Fiverr is at that stage between its startup origin and becoming a corporation. It has matured into a company with multiple international locations, and more recently, has seen enough growth and success to make its own acquisitions. It’s a very interesting stage in the life of a company that is outgrowing its roots. Amit began working at Fiverr about 11 months ago as VP of Business Strategy. He began his career as a strategic

advisor at Ernst & Young where he consulted for larger public companies. He later moved on to Viola Group as a partner focused on investing and helping startups at the expansion phase. He came to Fiverr for the opportunity to facilitate the growth and development of one company versus working with multiple different entities. In his current role, Amit is responsible for business development and strategy, leading strategic initiatives (anything from M&A to strategic products) and innovation. Amit describes his role as the long term and outside of the box thinker at the company, whether that means finding new products for existing customers or unlocking new customers to use the existing products. As Fiverr grows, the process for innovation and building new products becomes more challenging, therefore the company really focuses on maintaining internal processes to encourage creative thinking (new products, new ideas, new innovations).


The Process:








Understand the vision and goal

Create consistent company-wide awareness of the businesses’ strategy, customer needs, ideas and opportunities

Identify the relevant stakeholders

Find ways to test new initiatives with minimal effort to get users’ feedback

Iterate and optimize

Make sure the resources to manage the initiative are in place so it won’t lose momentum or attention

Periodic assessment of long term strategy

This process is part of the internal ecosystem, rather than being seperate or removed from various departments.



Amit described some this ecosystem’s guiding principles: •

Working both bottoms up and top down to allow anyone in the organization come up with ideas

Finding the right internal partners

Appointing focal points in each of the relevant groups for strategic initiatives

Encouraging constant discussion about innovation and market trends

Nurturing opinionated discussions

Constantly reporting on feedback

WHAT IS INNOVATION THE FIRST STEP Innovation is defined as a new method, idea, product, etc. However Fiverr looks at innovation as the combination of many different processes and departments working together that, in turn, allow the organization to function successfully. These types of processes took time to develop and nurture. Some of the things Amit does to facilitate innovation across the company are: •

Periodic Q&A sessions with different departments in the offices across the world.

- In these sessions Amit discusses the priorities for his team in hopes of sparking interest and being challenged.

Sending emails or holding office hours to encourage ideation and creative thinking

A lot of thought went into designing an ecosystem that houses a matrix organizational structure. There isn’t one person you need to convince but rather a group of people who are busy with their day job and setting their own roadmaps. It comes down to bringing in the right people for the project and ensuring you have done all the proper research and preparation.



For an innovation project to be successful it is important to first and foremost find the people that are passionate about it. Once an idea the company wants to innovate on emerges, they loop in all the relevant people from the organization. The goal is to have all parties included at the earliest stages. This serves to create personal investment and to make sure different perspectives and opinions are considered at the earliest stages.

While there are always a number of different stakeholders involved in various projects, Amit’s department typically takes on the responsibility of moving initiatives forward. They do this by building a roadmap and assigning goals to the project so that it stays top of mind for those involved. It’s also important to ensure everyone involved understands the end goal and the impact this project will have on the overall business.

CUSTOMER COMES FIRST At tech companies, it’s not uncommon to hear about ideas, projects or products that are never actually brought to life. That’s not something Fiverr invests in; rather Fiverr is all about making ideas happen; getting shit done. It’s a message that trickles down to the entire organization and ties in to Fiverr’s Doers motto - In Doers We Trust. The first stage of every project Fiverr embarks on is customer validation. Are we building something that the customer wants to see built? How does the customer see this impacting their business on Fiverr? How does the customer see this impacting the services they purchase on Fiverr? All these are questions that Fiverr ask its users prior to innovating. It’s after receiving feedback from the market that the company takes the next steps. Fiverr has full departments where the responsibility is to establish and maintain relationships with community members and collect feedback - what do they like, what they don’t like, what improvements they would like to see made to the platform, etc. These departments ensure this information is communicated company-wide.

MOTIVATION FOR INNOVATION It’s not about credit. People want to be part of change and they want to be part of the group to lead it. The spirit of welcoming ideas and involving all employees in innovation comes from the CEO, Micha Kaufman, who encourages people to think creatively and think big. Amit says one of the most common pieces of feedback Micha gives is to “think bigger and dream bigger; it costs the same.”

OBJECTIVES Amit says all innovation stems from Fiverr’s mission - to champion the entrepreneur in us all by giving entrepreneurs, freelancers, small businesses and even enterprises the resources they need to get things done quickly, flexibly


and fearlessly. Once you have defined that objective you can get to work on anything; whether that’s helping freelancers start and grow their business or helping them work more productively and on the other side of the marketplace, lowering barriers for individuals or small business owners to get more done faster and in a cost effective way.

TOO GOOD TO BE TRUE? One of the first tasks Amit faced coming into this role was helping to create the ecosystem described throughout the article. However Amit stresses that even today with a relatively comprehensive process and awareness amongst employees, innovation is not an easy thing to accomplish. It takes time, it takes money and most importantly it takes the talent. He stresses that all workers, especially tech workers, should think about how they can disrupt themselves so others won’t disrupt them.




By Talya Vaish

A simple google search of the word leads to more than 22 million results, most of which have to do with innovation, discoveries, new technologies and new business models. Very few of the results lead to large and long-lasting corporations. It’s pretty common to hear people from the startup ecosystem say they want to be the next Uber or the next Airbnb. But you rarely hear the CEO of an established food chain or a high-ranking government administrator aspiring to such goals. Why is this so? And shouldn’t that change? Maybe a good place to start would be by defining what we mean when we say disruption. It’s a pretty common buzzword nowadays, but it’s actually been around for a while. While popping up in research since the late seventies, the concept took hold in 1997 in “The Innovator’s Dilemma” under the title of disruptive innovation, referring to companies that are able to anticipate their clients’ future needs. In academic research, disruption can also be found in marketing, economics, entrepreneurship, organization theory and business management. The jaded have defined disruption as a tool for investors trying to find opportunities to make a large profit. So disruption covers many fields and is applicable to large established organizations just as much as smaller startups.

HOW DOES DISRUPTION WORK? Looking back in history – technological revolutions (or disruptive revolutions) have always existed. Discovering how to harness fire or inventing the wheel were pretty important disruptors, as were the printing press, the railways and more. What we learn from looking at these revolutions is that they happen with regularity and develop similarly, and that the market reacts to them in very similar patterns.


We live in the age of disruption.




Short bursts of innovative disruption from smaller companies, usually short lived with no significant impact.



Structural sector flaws that becomes more noticeable with more significant innovation activity; however, entry barriers still prohibit significant disruption. Investments start streaming in.



Disruption becomes a more noticeable threat to traditional organizations and widely used.




Disruptive model becoming common. Imitations pop up. Regulation kicks in to protect the market. Investment bubbles burst and the economy realigns itself.

Even following this pattern, not all disruption models reach all stages. It is also important to remember that disruption affects different parts of the industry differently. For example, when Apple’s iPhone changed the smartphone industry, it affected software and distributors but had a significantly smaller effect on companies making the parts.


FIGHT, FLIGHT OR FOSTER Be it blockchain, AR, AI, 3D printing or space travel – how will

Build it – Either in the beginning or later stages, organizations

your organization handle the next big disruption revolution?

sometimes try to emulate the disruptive model themselves,

It seems that for many large corporations Disruption is

with varying levels of success.

something to be feared. They know their market, they rule

Attend to your core – This is about focusing on your core

their market and they don’t want it to change. A survey has

business and strengthening the original value proposition

shown that about 93% of executives expect disruption in

or lowering your prices in order to increase the number of

their market in the upcoming years but only 20% think they

potential customers.

are ready to face it.

Periods of rapid change require a different type of innovation

Organizations have different options when dealing with

strategy from organizations. Right now, GM probably feels

disruption to their market. These options fit into the

an urgency to expand its core business much more than

spectrum of ignoring it, fighting it or embracing it.


Buy it out – Usually applies to

the early stages of

The main task for CEOs and innovation leaders is recognizing

disruption. New startups are bought and either dismantled

disruption in its early stages. Follow this by determining if

or incorporated into the organization.

it answers a wide enough problem so it can become a new

Invest in it – Investing in new startups in your field fits all

economic player or is just a passing trend, and by deciding

stages but works best in the earlier stages. Investing in startups that may prove disruptive lets you play both sides.

whether it can become a threat to the current business model and, if so, asking how the business model should

If it is successful you are part of the new market; if it fails

change to incorporate the new reality.

you haven’t risked too much.

The difficulty usually is that large organizations often take

Make it pay – Usually makes more sense in the later stages of

note of a disruption when it’s too late and then have a hard

disruption. This is when the disruption has already become

time pivoting, and so have fewer options open to them.

common enough to use regulatory and legal means to make it less profitable. For example, Airbnb is now unwelcome in many of the larger cities.



Interview with Rear Admiral Yosef Ashkenazi, Head of Material Command Israeli Navy

Rear Admiral, Yosef Ashkenazi, Head of Material

they are engaged in and the opportunities ahead. His

Command in the Israeli navy has a unique challenge.

enthusiasm is catching and, while I never saw myself

He has to be at the forefront of innovation, while dealing

discussing boats for any period of time, we ended up

with very long term planning and procurement realities.

deep in discussion about all the exciting developments

People’s lives literally depend on it. We sat down to talk

happening above and below the water as well as in

and understand how he does it.

headquarters. From new radar technology to designing

The Israeli navy is one of the few armies in the world

a customized battle ship to a one-of-a-kind development

that has to both deal with constant enemy attack in an area 3 times the size of the state of Israel and, more

emphasis on changing the way things are done.

recently, to defend civilian areas in the sea (oil rigs and

Ashkenazi believes that innovation needs to be part of

fields) in a hostile neighborhood. They understand that

the values the navy upholds. The way to handle these

this responsibility demands that they always be one

challenges is not necessarily to focus on technology but,

step ahead and break through the barriers traditionally

rather, to encourage innovative thinking and so is leading

associated with government or military.

an effort to do things in way that other navies are not

RAdm. Yosef Ashkenazi has a BSc in mechanical


engineering from the Technion, Israel’s Technology

The navy is currently undergoing a major force build-up

Institute, and has served in the navy for 33 years. As

and overhaul. There are many fronts to achieve, while

head of material command, he is in charge, among other

remaining innovative from their bases, to boats and

things, of technology and innovation in the navy. It’s

submarines. Green energy is one area they are exploring

his job to keep navy innovation afloat (pun intended).

and they have quite a few successes under their belt.

It is clear to see how passionate he is about the work


of a missile defense strategy, the navy is putting an


CHALLENGE: One field, which has been evolving in recent years, is submarines. A submarine’s main attribute is its ability to become invisible. Each submarines movement underwater provides a unique acoustic signature which can be identified by sonar. For decades, the main effort when building submarines was to create them as smooth and round as possible to avoid detection by sonar. To counter this strategy, ten low frequency sonars have been developed, whose sound is able to reach greater distances underwater, making it possible to detect submarines better and over longer distances.

INNOVATIVE SOLUTION: Above water, a significant advancement in vessel design takes its cue from the wings of a bat, whose angles are so contrived as to appear smaller. It is possible to apply this angle concept to submarine design so that the low frequency sonar breaks in a way that misleads the enemy. Ashkenazi believes that in the future we will even be capable of designing diamond-shaped submarines that will bounce sonar waves to the water surface and not back to the source. The added benefit is that submarines will be able to dive deeper.


Other challenges posed for submarines involve the

discussions gain in respect compared to the past

use of satellites for detection, and new methods

methods. Different perspectives are welcomed and

of detection through materials, propulsion and

appreciated. Ashkenazi is also trying to change

so on. Putting all these new challenges together

orthodox mindsets so that criticism and mistakes are

describes the submarine’s target strength. The

seen as an opportunity for learning.

navy is investing a lot of energy into designing new submarines that include technologies that can handle these challenges as well as implementing creative solutions to existing submarines. One of the most exciting solutions now being implemented is replacing heavier diesel engines with new materials and chemical reactions in order to propel submarines. By combining oxygen and hydrogen, you can create AIP - Air Independent Propulsion.

Similarly, cooperation is becoming a central part of the navy’s planning. For example, when designing a new boat which was built in Germany, the Israeli navy sent subject matter experts to work with the Germans, from conception, to change and adjust the boat’s shape. Creating a product uniquely suited to Israel’s needs and designed to coast. One area where this new thinking is being implemented

is in making navy bases more


ENTREPRENEURSHIP COMES IN DIFFERENT FORMS As part of a large bureaucratic system, Ashkenazi admits that the navy cannot usually employ the tricks and methods that are often used in smaller more agile systems. They do, however, implement entrepreneurship tools in order to problem solve. Learning about internal motivation and evolving from Fredrik Taylor’s theory, the navy is working on changing the organizational culture. Its main concern is how to handle technology that is becoming obsolete within shorter and shorter time spans. Ashkenazi says there are a number of actions he is taking in order to make sure his commanders and soldiers are able to address



and implementing creative green energy solutions. Through this simple change, the navy has already been able to implement several cost and energy saving projects. This officer found a system to remotely monitor energy usage, and the implementation of this system in one of the bases has been able to save over 6 megawatts of electricity. Another project is using old submarine batteries instead of throwing them away, thus creating battery farms that can be used independently to make electricity. Another project the navy has the unique ability to explore and operate is the use of energy generated by waves. Ashkenazi showed me a video of a prototype for using a system of buoys and a platform to harness waves and tides in order to produce electricity.

this and other challenges. One is cultivating a

This project has led to a productive outcome in that

culture of freedom – both in fostering a strong

the navy is able to provide electricity for its own

sense of independent thought and allowing others,

purposes as well as other parties. And here is another

regardless of rank, to express their opinion. While

aspect of innovation that armies rarely deal with:

the navy is still a hierarchical organization, there is

creating a business model and forming partnerships

also a need to create, alongside it, a culture where

with other organizations.

opinions and ideas are not partial to rank, and where

Ashkenazi sees this potential partnership with

younger, junior soldiers can sit in a meeting with the top brass as equal partners in the discussion.



an officer who is largely dedicated to researching

civilian organizations as one that still needs to be developed. One area where this could be further

In this way, joint brainstorming is becoming

explored is partnerships with startups, creating a

more important in the decision-making process.

platform where the navy can post challenges and

As egos are put aside, the outcomes of such

Startups can suggest technological solutions. He

accomplish this – expanding knowledge sharing and even seconding officers to relevant startups to learn and experience their culture and technology and to bring that experience back into the navy. One of the navy’s limitations is, of course, the security aspect. They realize they are not able to take as many risks as private entities, which slows them down. However, they are more conscious of it now than in the past and are willing to try out new models of thought and action to overcome such constraints. Thus they aim at becoming a pillar of knowledge and an example of innovative users of cutting-edge technology.

FREDRICK TAYLOR MANAGEMENT THEORY One of the most influential people in modern business is Frederick Taylor, an American mechanical engineer who lived from 1856-1915. As an engineer, Taylor was committed to efficiency and making processes as simple and successful as possible. Taylor’s scientific management theory analyzed and synthesized workflows. Simply put, his management theory stated that workers should hold the positions they are best at and their remuneration should be commensurate with the amount of work they complete. Taylor was once quoted as saying, “We do not want any initiative. All we want is for workers to obey the orders we give them, do what we say, and do it quick.” Furthermore, Taylor recognized that people were primarily motivated by money and, if they were thus rewarded based on their productivity (piece rates), they would work harder. While Taylor’s actual practices and theory may not be widely accepted across the globe today, many of his ideas still influence the business world. A good illustration of this reward system would be professional sports. Players are paid based on how they play and how much they contribute to the company or the team. Furthermore, many of their contracts include bonuses, incentivizing them to play hard and meet certain statistical levels. Also, many players specialize in certain skills which fill a role or a position on a team. The best teams usually consist of motivated players who do their specific jobs well. While this is not what Taylor may have envisioned, many of his theories and ideas greatly affect the sports world. Pure scientific management theory may not exist in today’s society, but many of its ideas weigh heavily in the minds of business owners.


is also thinking of even more innovative models to




By Avichay Cohen // with contribution by Rose Needle



Companies across the globe are making a significant change. Instead of perfecting a certain technology or service and later focusing on selling techniques, they are personalizing products and services by zeroing in on customer needs first. Nike has demonstrated this alteration in their changing mission statements. Today, Nike’s vision is to “bring inspiration and innovation to every athlete in the world;” seventeen years ago, in a much more directed statement, they aimed to be “the world’s leading sport and fitness company.”

mentality as it is based on the notion that, although new medical needs are continually arising, there is still potential revenue in concentrating on a medical need that has already been solved, and solving it better. This traditional method was so embedded in Teva’s core strategy that the company purchased the generic division of pharmaceutical company Allergan for $45 billion in 2016. The CEO of Allergan, Brent Saunders, said of the purchase:

The change from a product-oriented to customer-oriented approach is on the rise in every market and industry. The trend requires flexibility and creativity as such a strategy by its nature does not dictate to the company what to produce, only who to serve. If organizations are able to adapt to the customer’s needs decisively, a relationship in which customers are able to tell the organization what they require—or even simply what they lack—is achievable.

“Allergan underwent a change, and the market also underwent change. We saw much consolidation among generic companies, and much consolidation also among innovative companies. We gradually became a much more innovative company, and we knew that, if we had to decide where we would put our next dollar, we would prefer to buy innovative activity and not generic. We stopped being a generics company... Teva, on the other hand, is built on its generics business, and is suited to lead consolidation in the industry, and so the sale was very appropriate.”

In the field of medicine, the most influential pharmaceutical companies are implementing major changes by focusing on three new areas: personalized medicine, preventive rather than reactive treatments, and biological medicine. Teva, one of the world’s most prominent pharmaceutical companies, has led the way in the generic pharmaceutical market for decades. The generic market rejects the growing customer-oriented

Saunders’ statement demonstrates Allergan’s newfound commitment to developing new products for specific clients. The company chose a strategy of innovation rather than a generic product strategy. As a result, its market share has retained its value despite Allergan giving up a significant portion of its activity to Teva. Meanwhile, Teva has lost 50 percent of its market share and continues to plummet since the purchase. Teva’s

The example of Teva and Allergan can open discussion about customer-oriented strategy versus generic strategy. In the case of pharmaceuticals, the generic approach does not necessarily equate with the productoriented strategy, as medicines designed for the same purpose can vary greatly. But the specialized aspect of product-oriented thinking is not in the medicine— it’s in the business model. The business model of generic pharmaceutical companies is rigid and requires competition on price between the generic company and the producer of the original drug. Therefore, Teva’s specialization is in making drugs cheaper than other pharmaceutical companies, and marketing them more effectively. Teva places no thought in unfulfilled customer needs — the original drug producer had already discovered those needs years before. The generic pharmaceutical market is well-established, and Teva is skillfully navigating the existing market to meet fixed needs in an improved way. The difference between Teva and Allergan is made even clearer by an unusual business decision made by Saunders soon after the sale of Allergan’s generic division to Teva. Saunders independently announced through his blog that he intended to limit the rise of Allergan’s product prices to single-digit percentages each year. When asked about his motivation for a move that seemed to serve solely his customers rather than the company, Saunders answered: “The health care industry has had a

long-standing social contract with patients, physicians, policy makers and the public at large. It is vital for our most important constituents—the medical professionals and the patients who count on us to continue finding new treatments for their most pressing medical needs. It will provide an appropriate return on capital for those taking risks by investing time and talent in the arduous and uncertain task of developing new treatments.” Saunders’ bold strategy marks Allergan as the company leading the pharmaceutical industry into customeroriented thinking. This kind of thinking sees increasing market share, not from raising prices for medicine or by selling generic medicine for cheaper than the competition, but by solving the needs of customers. At its core, this strategy aligns with the current market trends mentioned earlier—an increased focus on customer service and personalization. Every R&D director today across industries might mention the cases studies of Teva, Kodak, Nokia, and Blackberry at the launch of an innovation plan as anecdotal warnings for what happens when a company fails to innovate. Innovation is a process which requires being attentive to the client and the employees, while allowing ideas to grow, and seizing on revolutionary trends that will eventually alter the industry. In practice, corporate innovation concentrates on ideation in a flexible environment; it emphasizes a new, groundbreaking idea that considerably improves upon the status quo. Integrating systematic entrepreneurial practices alongside the ideation process allows for not only successful ideation but also supports a flexible validation platform and MVP development in a more dynamic environment than the standard R&D

Allergan underwent a

change, and the market also underwent change. We saw much consolidation among generics companies, and much consolidation also among innovative companies.


choice to remain in the generic field does not fully explain the loss of the market share, but it speaks volumes to the differences between the two companies in their business models and the results that this can yield.


process that was customary in most organizations. Innovation is basic today in the corporate agenda, and recently employee-driven entrepreneurship—or “intrapreneurship”—has been discussed at length in the corporate setting. But would intrapreneurship and innovation have prevented the downfall of major case studies? Would an innovative idea have saved Kodak or Teva or the others?

THE DIFFERENCE BETWEEN AN IDEA AND A STRATEGY In 1980, Kodak indisputably dominated the market for photography in the United States, maintaining up to 80 percent of camera sales and 90 percent of film sales. Alongside their main products, Kodak offered a range of development and printing services, manufactured paper for photos, and maintained several factories that produced millions of gallons of chemicals for photograph development. 1980 was far from the first successful year for Kodak, for the company had led the photography industry for over a hundred years. The financial success of Kodak inspired innovative trends such as the first personal camera, taking photos with a click, color film, developing machines, and printing solutions. Kodak’s slogan in 1888 was “You press the button, we do the rest.” Their slogan represented a similar vision to that of Henry Ford—to make technology accessible to the customer in order to serve the business model. In the case of Kodak, the business model was almost entirely based on selling film and development chemicals. In fact, their business model represented more of a chemical company than a photo company, and the company’s activities honed in on serving the financial goals of the chemical division. The slow decline of Kodak’s stock value began in the 90s with a rise in competition from Asian companies, led by Fujifilm. The irreversible downfall of the film photography industry began only 15 years later in the early 2000s, due to digital photography technology overcoming the barriers of quality and price.


In 1981, Sony launched the Mavica, the first commercial electronic camera. The Mavica took images in black and white, with no film on a floppy disk (VR) and allowed viewing of the pictures on a television screen. The camera was not digital, as the

sensor used an analogical signal. Kodak examined the new technology, and a team of researchers led by the vice president of marketing mapped the field of digital photography and presented their findings. Their conclusions proved to be remarkably accurate about the future of their industry. The report laid out the good and bad news for Kodak: the bad news was that digital technology was certain to replace film. The good news was that the shift would take at least 10 years to fully come into fruition; until then, prices of digital photography would be too high, while quality would be too low. The quality of printing and displays, the size of the sensors, the speed of the memory, computing, communication, and more would not improve to a satisfactory level for years to come. The extraordinary story behind the collapse of Kodak is not attributed to the company missing the digital era. Their failure lies in their knowledge of the inevitable rise of the digital revolution (including when, how, and why it will happen) and failing to adapt accordingly. In several ways, Kodak actually led the digital revolution. They put out the first electronic camera in 1975, and the first commercial digital camera that shot in color (QuickTake 100) was sold by Apple but developed by Kodak. In 1996, Kodak incorporated a fresh memory for the first time in digital cameras (DC25) which also had an internal LCD screen. In spite of these and countless other notable innovations that Kodak produced, a steep decline in Kodak’s share began in 1999 until 2012, when Kodak ultimately filed for bankruptcy.

SO WHAT HAPPENED THERE? In 1996, film sales were at an all-time high, as was Kodak’s share value. But between 1995 and 2005, digital photography strengthened to the point that in 2003, more digital cameras were sold in the world than film cameras. In 2005 alone, film camera sales declined from 900 million to under 100 million, and the price of digital cameras settled to under $200, making the adoption of digital photography accessible and affordable. In one decade, digital photography had overcome the obstacles that the digital media industry had posed, and had enhanced technology to defeat the hypothesized technical issues that Kodak had articulated in their 1981 report. The quality of digital photos was still far behind that of film photography;

While this technology revolution swept the world, the business model of photography companies changed to the point of no recognition. Film ceased to be included in the value proposal, as did film chemicals. For digital cameras, the majority of the earnings were collected on selling cameras and developing photos on paper; thus, the new business model saw a dramatically lower profit margin, but required a much smaller operating expense. Despite Kodak leading the technological breakthrough from film to digital, the company fell behind in the transition from a chemical-based to a camera-based business model. Out of the 120 thousand workers employed at Kodak, most labored in the areas of chemicals and paper. In the 2000s, the biggest portion of profit for the company was still from selling film and film products. The operations of the company had always revolved around film and film products; therefore, Kodak’s managerial attention focused almost exclusively on film, as did their marketing efforts. An example of this detrimental managerial focus came in 1996, when Kodak developed a hybrid camera (APS) that shot on film, then stored the data on a digital file. The product was innovative and novel— but it maintained the business model perception of film at its core. Kodak soon came to realize that its customers would not prove as loyal to their decadesold business model as the company was. Once the digital era came to full fruition, the customers disappeared in droves. Unlike the analog world, Kodak discovered that technology in its industry grows exponentially, and much faster than management believed-even though the R&D department was fully

Despite Kodak leading

the technological breakthrough from film to digital, the company fell behind in the transition from a chemical-based to a camera-based business model


but markedly, the end user appeared satisfied by the relatively low quality of digital photography in exchange for the ease of use and dollar savings on buying and developing film.


aware of the rapid change that had swept their industry. Before Kodak could act fast enough to radically reduce its activity and close its factories, it had found itself in a collapsing film market without the trust of its shareholders. In 2007, when Kodak had already lost 60 percent of its value, it set into motion a drastic change that included the closure of most of its factories: Kodak laid off tens of thousands of workers, and sold patents, divisions and more. It was too late for Kodak. The market had lost all trust in the company, and its competitors had proven themselves as worthy opponents and had grown rapidly. In effect, Kodak did not lose its credibility as a technology leader, but as a business leader.

INNOVATION AS A STRATEGIC COMPONENT Kodak did not miss out on a revolutionary idea. The idea had rested on the CEO’s table since 1975, before any other company. Directly before its downfall, Kodak was at the height of its power. The company’s loss of momentum was not noteworthy in the technological sense, as it led the digital revolution throughout its ascent in the industry and could have continued to lead if it had chosen to do so. However, Kodak did not choose to continue leading—it chose the film business model. This case study is especially striking and is used to describe what is in store for companies who lack innovative processes and ideas.


Today, it is apparent that innovation by itself, in the manner it is usually carried out - focusing on idea generation and products, would not have saved Kodak. Large companies are more inclined to generate ideas and innovations when it comes to products; in some cases, innovation gravitates toward manufacturing processes and marketing efforts. But rarely are these large organizations invested in challenging their own business model and growth strategy. The business model of big businesses is deeply rooted in KPI process knowledge structures, which are supported by thousands of activities both on the front and back end of the organization. Challenging the business model, as a result is so complex that organizations inherently oppose even the mere discussion of it. Looking back on the big case studies (Kodak, Teva, Nokia), it becomes apparent that the only corrective course of action would have been to challenge the company’s own business model.

LAYERS OF INNOVATION A popular theory in successful business transformation suggests approaching innovation in layers using McKinsey’s Three Horizon model. Horizon 1 centers on improving and fine-tuning the current value proposal. Horizon 2 focuses on new business opportunities in the current field of specialization. Horizon 3 concentrates on disruptive opportunities that alter the market, or are unrecognizable from the core activities of the organization. In most companies today, a process devoted to the first horizon can be found that consists mainly of gathering ideas and handing them over to the R&D department. Some organizations also feature a unit dedicated to Horizon 3 in the form of an elite innovation unit full of visionaries, constantly searching for outstanding opportunities in which to grow. However, neither of the above-mentioned activities challenges the business model. The former is based on the current business model, while the latter is committed to a business model for a completely novel product. In the current literature, Horizon 2 is usually described as the mediator between Horizon 1, where the organization prepares to embrace innovative processes, and Horizon 3, where the organization is executing those processes. However, the second horizon is often not mentioned as an independent activity. When analyzing the case studies, Horizon 1 and Horizon 3 are clearly at work. The companies do not lack ideas or vision. But in none of those companies was there a plan that aimed to transform their standard business model. In the case of the past generation’s success stories such as Airbnb, Gett, or Amazon, each has offered an existing service under a new and destructive business model. Airbnb, for example, did not invent renting rooms or the hospitality industry; they instead totally reinvented the business model of typical organizations in their field. In reaction, hotels all over the world are currently doing whatever they can to improve their service (Horizon 1) and invest in new fields (Horizon 3). But they have still failed to convert their business model (Horizon 2) because no one dares to question milking the cow. Facebook announced recently that it is examining the distribution of balloons with transmitters to provide Internet access to remote areas. Amazon is changing their distribution model, and Microsoft are shifting from

When HBS professor Clayton Christensen introduced the concept of disruptive innovation in his book The Innovator’s Dilemma, it was a revelation. In his study of why good firms fail, he found that what is normally considered best practice - listening to customers, investing in continuous improvement, and focusing on the bottom line - can be lethal in some situations. In a nutshell, what he discovered is that, when the basis of competition changes, because of technological shifts or other changes in the marketplace, companies can find themselves getting better and better at things people want less and less. When that happens, innovating your products won’t help - you have to innovate your business model.

SO HOW DO YOU INNOVATE A BUSINESS MODEL? Innovating a company’s business model must be fueled by a managerial understanding that there is always a high probability anyone could enter and change the game of the market. It is impossible to know how, or when, but it is likely to happen despite consulting clients being skeptical of the possibility. Based on an organization’s past experience, upper management can produce a million reasons why the new business model is impossible to execute; and by the time they can be convinced otherwise, it is too late. The realization that

the imminent transformation of the market is lurking is all that can lay the foundation of the mandate that the organization gives to its innovation division. The innovation division’s mandate primarily aims to disrupt the company’s business model assumptions and collaterals. This division must be led by an entrepreneur who is independent in his or her pursuit to transform the organization and liberate it from the constraints of the R&D division. Alongside the entrepreneur must stand a manager that believes in the entrepreneur, and is aware of how to communicate to the company and lead the steering committee in an innovation process that leverages the resources and advantages of the organization. The process of developing innovative solutions must be presented linearly so that employees can easily measure it, discuss it, and scale it, but must be executed chaotically for true innovative output. The innovation unit requires a group devoted to second horizon solutions who continually attempt to prove that the current business model is obsolete. The trick to this effort is that the group must simultaneously advocate for a new business model’s efficacy. In other words, you must sell the business model to management rather than sell a technology to customers. This inevitably means that the group dedicated to Horizon 2 competes with its own organization—with the same clients and the same service. The tactic is extreme, but is the only prevention for the failure of the companies like Kodak. Once or twice a year, a representative of the Horizon 2 group must put on a suit, arrive at the board meeting, and present a plan to defy the company’s current business model. The more the board members appear uncomfortable with the proposal, the more effective it is likely to be. It may be naïve to believe in the ability of the organization to give a mandate to the entrepreneur to potentially undermine its own existence, but the approach is manageable, given the combined understanding of large organizations and entrepreneur enterprises.


a purchase business model to a membership business model. The leading companies in their markets are openly renovating their business models and focusing on the second horizon. But this approach is rare, and not the generally accepted norm. Amazon is an exemplar of an organization that does not rest in its effort to expand and challenge all horizons. The beauty in their approach is that they do not ask their employees which new products to develop, or which new market to find; instead, they ask what methods they can use to change how they operate.


IT’S ABOUT THE BUSINESS Interview with Eyal Ben Amram, CIO of ZIM

ZIM IS PART OF WHAT MAKES THE WORLD GO ROUND – LITERALLY. ROUGHLY 90% OF WORLD TRADE IS CARRIED OUT BY THE INTERNATIONAL MARITIME SHIPPING INDUSTRY AND THERE ARE OVER 50,000 MERCHANT SHIPS TRADING INTERNATIONALLY, TRANSPORTING EVERY KIND OF CARGO As an industry, maritime shipping is not known for its technological advancement or commitment to innovation. However, Chief Innovation Information Officer, Eyal Ben Amram says there is an understanding that the industry, which has hit hard times in the past few years, needs to embrace the new vision. Zim is now taking a few cues from the aviation industry, exploring revenue management and dynamic pricing. They are also exploring working with bots, digitizing, and expanding their e-commerce presence in order to reach smaller Small/Medium Enterprise (SME) customers.

CHALLENGES The main challenge Zim is facing is a price decline, which affects the entire industry. Its only chance to recover is to become more profitable. One of the main ways of doing that is reaching the end customers directly and cutting out the middle man, as well as enlarging the customer pool.


But doing this is easier said than done. Shipping is considered a low-tech industry that is behind on technology. It needs to “skip a step” and move directly to current technology, rather than adopting the previous generation. The good news is that they have taken up the challenge and are carrying out different complementary processes. Their present focus is on digitization (easy to do business) and smart systems.

THE MOVING PARTS OF INNOVATION Innovation is a company-wide effort. Zim has adopted the design thinking method and is now in the process of implementing Agile management techniques in the different departments. There are a number of different departments and processes, both internal and external, put in place in order to insure the best results. While they don’t have an incubator per se, working with startups plays a big part in what they do. Eyal says they usually try to be the startups’ first large partner. They don’t have a specific focus but work with a variety of startups dealing with AI, predictive analytics, cyber and more. One area they are excited to take part in is blockchain and they will soon be the first carrier to implement a bill of lading. At the same time, Zim have set up a new department within the IT to define the technology, vision and to help select and implement external innovation tools. This department has proven to be very dominant in the innovation processes Zim is performing. Zim is also ramping up their e-commerce activity and creating a new website. This will provide more digital services and will be accessible to private and smaller end customers. Recently Zim recruited a Chief Digital Officer, whose role will focus on plotting a digital roadmap for the company.

HOW TO MEASURE SUCCESS It is a challenge to quantify the direct contribution of innovation to the company’s revenue, but Zim management work hard to define KPIs in advance. They also choose projects based on ROI estimations and make sure to establish standards and measure implementation.

WHY INNOVATE? Eyal mentions that Zim has several objectives when it comes to innovation. Part of their goal is to create an innovative brand. Another component is to improve productivity and increase their revenue profitability. Their projects usually have a combined objective. For example, their work with blockchain stems both from the future profit potential and from their desire to be industry leaders in that field. For Eyal, Innovation is not just about technology: it is largely about business, and business-oriented thinking. Even with the most exciting technology, if the business partner is not there it’s not going to work.


For innovation to be successful, it has to be business savvy. So, apart from working with startups and the technology vision department, an important part of the innovation mechanism in Zim is the BI unit. This is a strong unit, which is able to provide business tools – analyze a customer’s profitability and create accurate analysis. Eyal says its importance cannot be stressed enough. No matter how innovative the technology, it is likely that implementation will fail if it is not strictly aligned with the business goals and the business units.

REINVENTING AVIATION Interview with Henry Chen Weinstein, CEO at Cockpit Innovation

A couple of years ago, El-Al airlines took the bold step of setting up its own venture fund dedicated to finding new technology and ventures in the field of Aviation. It set up Cockpit, headed by Henry Chen Weinstein. Cockpit is the first aviation industry venture fund with the mission to support and invest in entrepreneurs with disruptive technologies in digital travel, aviation and aerospace. In addition, El Al cockpit partnered with other major airlines such as Lufthansa, Jet Blue and other players in the aviation industry. Cockpit works as a strategic venture fund with startups anywhere between seed and B stage. Their goal is to reinvent the aviation and aerospace industries.

TRANSFORMING THE AVIATION INDUSTRY Much like other industries, aviation, specifically, and travel, in general are going through a digitization process. It is very much a human-based industry where much of the work is carried out by skilled technicians rather than being automated. But there is still a lot of room for improvement. Aviation used to be at the forefront of e-commerce about a decade ago but has seen stagnation since. It’s interesting to note that the travel industry, and civil aviation as a segment of that, has been very active in the past few years, seeing some of the biggest startups that have emerged, for instance, Uber, Airbnb and others.


STRATEGY AND INVESTMENT Cockpit has a dual purpose - finding promising investment opportunities as well as finding strategic growth opportunities for El Al and the other partners. Although these two goals may appear to be conflicting at times, Henry Chen Weinstein has found that, while short

term strategies may not align, investments can still be valuable in the long-term, industry-wide strategy. The partners also strive to provide value for the startups they invest in, and will sometimes help a startup even if they are not investing in it. The players are also working closely with El-Al’s innovation unit, which is a close partner. Henry believes that, without the close cooperation with them, there would be significantly less implementation. Bringing Startups and corporations together can be challenging on both ends. From the corporate side, it’s about changing minds - making people who are used to working in a certain way realize there is opportunity in a new way of thinking and working, and embracing it. The initiative has to come from management and work its way down. the challenges from the startup side are mainly about working with different people on understanding the corporate value chain and creating value for different people along that chain. The main tool is cooperation with people within Cockpit’s team and with their partners. Henry believes that cooperation among leading actors is crucial in order to make the big changes the industry needs.

Henry Chen Weinstein CEO @ Cockpit Innovation (Corporate VC) // Founder @ TLV StartUp Challenge // Forbes 30 Under 30. Started his career in technology roles in government and the in the startup ecosystem. Worked with Different Organizations on incorporating startups





By Yifat Tubiner

THE ABILITY TO INNOVATE IS THE SECRET SAUCE FOR SUCCESS IN BUSINESS From time to time we are exposed to impressive entrepreneurial stories. These men and women thought of a brilliant idea, brought it to fruition and received glory and a tidy sum of money. Most of our readers are probably thinking to themselves that the ability to be an entrepreneur and innovator is a God-given talent, bestowed upon a chosen few - either you have “it” or it’s not for you.


This is where the good news comes in for those of us who haven’t yet discovered our innovative skills. There is hope for you yet! It turns out that, contrary to the notion that entrepreneurs and innovators were born that way, innovation and entrepreneurial abilities can be taught. Even if you are not one of the lucky few who are naturally creative and innovative, don’t despair; it is possible to learn, nurture and enhance these skills. What’s more, it is possible and even recommended to do so inside organizations. How? By actively adopting certain patterns of behavior. An eight year collaborative study set out to examine the roots and formation of innovative and groundbreaking business ideas. Researchers looked at about 100 inventors of breakthrough products and services as well as CEOs and founders of companies who had changed their markets (most of them well known to the public). The study found that five “Discovery skills” make all the difference between the ground-breaking innovators and the rest. It is important to note that not all entrepreneurs

are innovators – for example, opening a KFC branch is entrepreneurial but not innovative, while starting Amazon is innovative and requires a different set of skills. These skills, according to the researchers, form what we tend to refer to as the innovator’s DNA.

THE GOOD NEWS: ACT DIFFERENT, THINK DIFFERENT Surprisingly, researchers discovered that these “discovery skills” are actually well defined patterns of behavior. The first one is Asking questions. Not just any question but rather ones that challenge the status quo and attempt to reach the root of the problem, challenge assumptions or preconceived notions: Why is it like this? What would happen if...? The second skill is Observation, in the anthropological sense of the word, like conducting an in-depth examination of phenomena or different actors as a source of inspiration. Innovators, according to the research, continuously and consistently search for the little behavioral patterns of customers, service providers and other business entities in order to gain insight into new ways of doing things. The third skill is Experience. This basically means viewing the world as a huge lab where you can experiment with new ideas in order to gain knowledge and experience. In this lab, failures are a part of the process. The fourth skill is Networking. It means actively seeking to meet other people from varying fields, devoting time and energy to discuss new ideas,

The researchers recommend practicing such behaviors until they become automatic, and part of our natural behavior. In this way, they claim, we can improve our entrepreneurial and innovative skills and, as a direct result, our organization’s performance. While we can agree that these skills are important and I want to practice them, often, urgent tasks keep pushing them back. Similar to going to the gym the daily to-do list keeps pushing my practice back. What can be done?

IN JEANS AND T-SHIRT Turns out that beneath the surface, some will say, in the “entrepreneurial ecosystem’s twilight zone” are the “training arenas.” These arenas are actually events where entrepreneurship and innovation events take place in a less formal setting, which some of us know as meetups, hackathons, unconferences etc. Gatherings and meetings between entrepreneurs are hardly a new phenomenon and can be traced back to early

civilization (whether it was the marketplace in ancient times, medieval guilds or Renaissance cafés). In our day, the accelerated pace of technological development has, paradoxically, enhanced the spread of people-to-people events in a physical space, in addition to and separate from the digital space and online communities. Cross-checking different sources of information teaches us that, in the last decade, meetups and other physical interactions are becoming more and more common worldwide, and there are hundreds of thousands of events being conducted every week. Many of these gatherings happen after work hours and are an almost perfect arena to practice discovery skills. They are characterized by an open atmosphere and a flexible format which invites people (usually strangers) to be active, ask controversial questions, give their opinion, share their knowledge and experience, and meet people from different disciplines who they probably would not have met otherwise. Even though different researchers agree that these events have a significant impact on the formation and activity of the innovation ecosystem, measuring their effects, even in a small system like Israel is a challenge. Many times, these are organized from the bottom up – spontaneous initiatives that grow and are led by different players in the ecosystem and their location and schedule are distributed in a very informal way, usually on social media (and not likely on official channels). Having said that, the fact that most of the participants (consciously or subconsciously) practice their discovery skills, improving and enhancing their innovation and entrepreneurship skills may suggest their cumulative effect beyond the single participant - on the innovation ecosystem as a whole.

Even though different

researchers agree that these events have a significant impact on the formation and activity of the innovation ecosystem, measuring their effects, even in a small system like Israel is a challenge


and validating them through a network of people who have different viewpoints and can add to and enrich our knowledge. Associative thinking is the last skill – the ability to successfully connect problems, questions or ideas from different fields, which seem to be disconnected. Associative thinking is a mental muscle that can grow by using the other four skills, which are mostly behavioral. When we act on these behaviors, the researchers claim, we are actually creating and improving our ability to grow new ideas by connections from different sources.

MULTIDISCIPLINARY LESSONS FROM POLLINATION If we try to examine other worlds, botany, for example, we discover that we can describe these meetings as “The innovation ecosystems pollination mechanism.” In nature, pollination refers to the process where pollen is transferred from flower to flower. This is an important step which precedes fertilization in plants. Fertilization itself occurs when a male reproductive cell merges with a female reproductive cell. A zygote develops from the fertilized egg, which develops into an embryo. Similarly, in the field of innovation and entrepreneurship, pollination happens by transferring information from one individual to the next. The pollination stage will usually precede the ideation stage. Fertilization will occur when different pieces of information merge into an idea. The idea might grow into a venture or more. The plant world teaches us that, even though plants can self-pollinate (when pollen fertilizes a plant with the same genetic makeup), this is not an ideal situation for most plants. It creates genetic copies instead of new gene combinations. What about innovation? Here too, working in a closed, homogenous network is not the ideal environment as it usually brings more of the same ideas. The ideal situation is what botany calls “cross pollination.” This happens in the entrepreneurial world when individuals act in an open, heterogenous network in which information flows in and out to create new knowledge combinations that can evolve into successful innovative ventures and projects.


To conclude: if you haven’t yet, make sure to take part in events like the ones described in this article. Go to meetups that deal with things that interest you, make sure to participate in hackathons, unconferences or events like them. Treat them like workouts for your innovation skills. That’s exactly what they are.

Yifat turbiner is a PhD candidate in the Gilford Glaser Faculty for Management in Ben Gurion University. In addition, she is a mentor in different acceleration programs. She specializes in innovation and entrepreneurship ecosystems; open innovation and international cooperation. Yifat has 20 years’ of experience in Business development roles in hightech. The Innovator’s DNA. Dyer, Jeffrey H., Gregersen, Hal and Christensen, Clayton M. 2009, Harvard Business Review

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Summer 2018

Profile for duco innovation

The Funnel - Corporate Innovation magazine | Summer 2018  

The Funnel - Corporate Innovation magazine | Summer 2018