ORGANIZING FOR INNOVATION Nishan Subedi Head Of Algorithms | VP of Technology Overstock, Inc

AGENDA ¡What is and isn’t innovation ¡A story on innovation ¡Essentials of Innovation ¡Innovation practices ¡Innovative organization

ORGANIZING FOR INNOVATION What is innovation? ¡ ≠ Technology ¡ ≠ Science ¡ Must lead to a change in economic or social environment ¡ Is the delivery of value to the customer ¡ Innovation in a business enterprise must be market focused. 'What is our business and what should it be?’ ¡ True innovation is rarely an extension of an already existing business practice.

INNOVATION: CONTAINERIZATION Before Containers – ships used to spend more time at port than at sea. The first major shipment of CONEXes, containing engineering and spare parts, was made by rail fsuppliesrom the Columbus General Depot in Georgia to the Port of San Francisco, then by ship to Yokohama, Japan, and then to Korea, in late 1952; shipment times were almost halved. By the time of the Vietnam War the majority of supplies and materials were shipped by CONEX. By 1965 the US military used some 100,000 Conex boxes, and more than 200,000 in 1967.[20][24] making this the first worldwide application of intermodal containers.[17] After the US Department of Defense standardized an 8-by-8-foot (2.44 by 2.44 m) cross section container in multiples of 10- foot (3.05 m) lengths for military use, it was rapidly adopted for shipping purposes.

INNOVATION: CONTAINERIZATION

INNOVATION: STRUGGLES To fund innovation, a company’s executives may make resource allocation decisions, but the implementation of those decisions is in the hands of a staff whose wisdom and intuition have been forged in the company’s mainstream value network: they understand what the company should do to improve profitably. Thus, until alternatives that appear to be more financially attractive have disappeared or have been eliminated, managers will find it extraordinarily difficult to keep resources focused on the pursuit of a disruptive technology. - Clayton Christensen

INNOVATION IS DIFFERENT FROM INVENTION The capitalistic achievement does not typically consist of providing more silk stocking for queens but in bringing them within the reach of factory girls in return for steadily decreasing amounts of effort. - Joseph Schumpeter (1942)

ESSENTIALS OF INNOVATION ¡ Innovation is gradual. ¡ Innovation is often serendipitous. Some inventions result from unexpected events and the ability to recognize these and use them to advantage. - Stephanie Kwolek (Developer of Kevlar) ¡ Innovation is recombinant. Innovation in one technology borrows whole, working parts from other technologies, rather than resigning them from scratch.

WHERE IS THE OPPORTUNITY FOR INNOVATION?

ALGORITHMS OBJECTIVES | STAGE-SETTING FOR INNOVATION ¡ Create the best in class organic search and nav experience ¡ Create the best in class sponsored marketing experience for Overstock ¡ Increase machine learning integration and automation in customer facing products and internal platforms ¡ Improve and automate our testing procedures

INNOVATIVE ORGANIZATION | A WAY OUT? The innovative organization is one that resists stagnation rather than change. - Peter Drucker

INNOVATION APPROACH : BUILD FOR EXPERIMENTATION ¡ Most innovative ideas fail, so aim to fail fast. ¡ Make experimentation easy. ¡ Systematically validate assumptions & share learnings. ¡ Build & deploy in small, incremental iterations. ¡ Validate the difference between hypothesis and observations.

INNOVATION: ATTITUDES AND PRACTICES Approach to Design: ¡ Favor simplicity (KISS) and speed to ship. ¡ Build in the ability to test from the start. ¡ Break a complex problem into small, manageable pieces, and design with a specific time frame in mind. Be very conscious of scope creep. ¡ You get what you measure, so measure what you consider important. ¡ Build composable pieces.

INNOVATION: ATTITUDES AND PRACTICES ¡ Autonomy also means willing to take responsibility for: ¡ Delivery, ¡ Organizing the task, ¡ Keeping management fully informed on the progress of the project ¡ Time - bounded ¡ Purpose driven We need to strive to achieve these when engaging in work.

INNOVATION DETERERENTS Resistance to change is grounded in ignorance and fear of the unknown. Overcome fear by managing risk: ¡ Define risks and confine them circuit breakers, graceful degradation, offline experimentation, gradual rampups ¡ Develop confidence in ability to recover from failure ¡ Reduce mean time to discovery ¡ Reduce mean time to resolution

RISK ¡ The more complex a system, the more difficult it becomes for people to even know whether they still have adequate control or not. ¡ Risk perception is in the eye of the beholder. ¡ Before being wrong it feels like you’re right. Error is not a choice. ¡ Risk is a game played between different values (stability, security, better customer experience) and frames of reference (analyst, tester, developer, scientist, operator). Make your values explicit, and you will have a constructive risk game.

LEARNING FROM FAILURE Failure is only the opportunity to begin again more intelligently. – Henry Ford

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INNOVATIVE ORGANIZATION Change = opportunity ≠ threat Change = norm ≠ exception Don’t try to innovate for the future. Innovate for the present!

THANKYOU!