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  • Respondents were asked to say what percentage of their company’s innovation efforts (by quartile) had a positive material impact on their financial results
  • What We Find – Details:Most firms are continuing their innovation efforts despite the current economic climate: Innovation is a survival imperative – quotes: “What causes me to innovate? Hunger. All of us have people who depend on us and a business and employees we need to take care of.”; Innovation is a matter of “organizational sustainability”The most successful innovators align their innovation efforts with larger strategic initiatives which remain constant even in the face of recessionInnovation leaders are going a step further to use this recession as an opportunity to fundamentally transform their business: Companies are planning now for an anticipated “new normal” in a re-baselined global future – increase in regulation; credit contraction; nervous but hopeful customersChanges in landscape prompt rethinking of existing business modelsCompanies which continue to invest during periods of economic downturn emerge from recessionary periods stronger than their peers (source: McKinsey Quarterly, “Learning to Love Recessions”, June 2002)New opportunities times of crisis to acquire competitors, partners,, etc. with good ideas but limited cashIncreased B2B opportunities – how to help customers when their own customer are changing behaviorIn an environment where smart instincts say to conserve cash, how do companies decide what investments in innovation are wise?
  • In 2008, for the first time the US patent office issued more patents to foreigners than to Americans Peppers and Rogers, a consulting firm with only 230 employees worldwide has it largest office in Turkey, to take advantage of a labor force with high context knowledge of both western and eastern markets; Bottom of the pyramid innovation – new GE ECG machine was developed for rural India and Chinese markets; the goal was to produce something small lightweight, durable and portable; the MAC 800 has now been introduced to the US for use in doctors’ offices. It cost one-eighth the cost to develop compared to a traditional ECG, and was brought to market in only a few months vs. standard development time of 5 yearsP&G – Vicks Honey cough syrup was first introduced to the Mexico market to meet local preferences and substitute for local remedies. After initial success it was introduced to US markets with large His[panic populations, then expanded to the mass market and to EuropeBC Hydro is looking beyond Canada for new technology to support smart grid rollout and conservation platform
  • Procter & Gamble uses proprietary connect & develop tool to engage with independent inventors and labs; has a community of close to two million collaborators and an 80% innovation success rate as a result (source: P&G annual report 2008)
  • Ethnography example: Crayola color wonder paints are based on the consumer insight that while parents and teachers like the creativity of finger painting, they were reluctant to let children use finger paints because they create a mess. This led to the “no limits” platform to find ways to create a creative paining experience without mess. The platform teams, led by members of the marketing organization, worked across functions with R&D, external partners who provided knowledge around materials and chemistry, and other functional groups. This led to Crayola color wonder – clear gels that have the consistency of finger paints, but do not show up as color unless used with specially treated paper.Tesco (UK supermarket chain) has a sophisticated customer analytics and CLM system which allows them to take customized customer experience to new levels, e.g. its quarterly direct mailer has six million variations based on customer history, demographics, location, etc.; the store has reportedly identified over 1.2 million potential customer segments; their direct to consumer response rate is 20% compared to UK average of 1-2%Dell uses the Ideastorm community to solicit new product ideas from customers; users share ideas, collaborate on new products and vote for the most desirable options
  • Clayton Christensen explains that venture capitalists structure their work to account for an 80% failure rate, in order to incubate enough ideas to generate meaningful successes. He explains the “fail fast” concept – open the funnel for lots of ideas; quickly weed out the less viable options to dedicate resources to more promising ones; but understand that by its very natue, managing innovation is a lot about successfully managing failures
  • GE Healthcare’s introduction of the

Transcript

  • 1. Leader or Laggard:
    Innovation as a Competitive Success Factor During Recession
    Capgemini World Innovation Forum Survey
    Spring, 2009
  • 2. “Every organization needs one core competence: INNOVATION”
    ~ Peter Drucker
  • 3. Contents
    Introduction
    Drivers of Innovation
    Barriers to Innovation
    The People Principles of Innovation
    Importance of Inspiring Leadership
    Profiting from Partnerships
    Tools and Techniques
    Business Model Innovation
    Implications and Opportunities
  • 4. 0
    We assessed companies in multiple industries and asked respondents to self-identify based on innovation success rates
    Innovation Survey Respondents Representation by Industry
    What percentage of your firm's innovation has a positive material impact on business results?
    More than 75%
    14.1%
    Professional Services
    Life Sciences, Pharma, Med Devices
    10.9%
    Financial Services
    10.6%
    Less than 25%
    51-75%
    34%
    Consumer Products
    26%
    Telecommunications & Media
    Other
    Public Sector
    High Tech
    Marketing / Creative Services
    34%
    Education
    25-50%
    Transportation & Logistics
    Healthcare
    Not for Profit
    Innovation Leadership Assessment
    Aerospace & Defense
    Retail
    • Innovation Leaders: Over 75% success
    • 5. Highly successful innovators: 51-75%
    • 6. Moderately successful innovators: 25-50%
    • 7. Innovation laggards: Less than 25%
    Construction
    OEM
    Energy
    Automotive
    Utilities
  • 8. 0
    Most respondents have continued to innovate during the recession and leaders are using it as an opportunity to transform
    Impact of recession on innovation efforts
    “Our management team is using the current recession as an opportunity to fundamentally transform our business”
    We have had to cut back on our efforts at innovation
    13.7%
    We are continuing our efforts, but have changed focus / direction
    24.6%
    We have no plans to change our innovation strategy or approach
    28.1%
    We are using the slowdown as a catalyst to increase our efforts
    33.6%
    Innovation Leaders
    Highly Successful Innovators
    Moderately Successful innovators
    Innovation Laggards
  • 9. Respondents were consistent in their definition of successful innovation – “newness” is a necessary but not sufficient condition
    Shareholder Value Creation
    Innovation Success
    Customer Intimacy
    Intentionality
    Successful Innovation is
    Customer Focused
    “Redesigning new ways of thinking, processing and delivering that achieves greater results and resonates with our customers”
    “Co-creation of new experience, product / services, market, network and sustainable development with clients and customers.”
    “The most important measure of success for innovation is user adoption”
    Intentional and Future-oriented
    “Successful innovation is not only about introducing the idea; it’s a process”
    “Building discipline in the team to make time for the future in order to lead the industry ...”
    “Just having new technology is not innovation; it’s about what we do with the technology to change human behavior and create a new future”
    “There has to be a reason for what we’re doing; we believe in purpose-driven innovation, rather than innovation for innovation’s sake”
    Value Creating
    “Successful commercialization of game changing products (and / or business practices) that deliver in a significant way to the bottom line”
    “Successful innovation creates wealth, market share and the confidence to compete against new competitors”
    “… increases the likelihood of the long-term growth and sustainability of the company.”
    TheCornerstones of Successful Innovation
  • 10. 8
    Companies recognized as leading innovators significantly outpace the financial performance of the market as a whole
    Five Year Earnings Growth Rates
    Five Year Net Income Growth Rate
    S&P 500
    S&P 500
    Apple
    Apple
    Research in Motion
    Research in Motion
    Google
    Google
    Hewlett-Packard
    Amazon
    Amazon
    Hewlett-Packard
    Nokia
    Procter & Gamble
    Microsoft
    Microsoft
    Procter & Gamble
    Novartis
    Novartis
    Nokia
    60%
    80%
    40%
    0%
    20%
    -20%
    100%
    Source: MSN Money, June 2009; Business Week 25 Most Innovative Companies, 2009
  • 11. The survey highlighted the key characteristics and behaviors of the most successful innovators
    Transform Business Processes with Partner Collaboration
    • Refashion internal processes to increase speed to market, customer service, or lower COGS
    • 12. Open the process to new, non-traditional partners
    • 13. Form alliances / partnerships to draw on outside ideas or access new customer bases
    • 14. Consider smart competitive collaborations
    • 15. Work with suppliers and distributors to improve upstream / downstream performance
    Create Unique Customer Experiences
    • Engage customers early in the development cycle
    • 16. Use ethnography and anthropology to understand how customers behave and what problem they are trying to solve
    • 17. Adapt existing products / services to serve new markets; consider non-traditional options
    • 18. Explore multiple definitions of value as macroeconomic conditions shift
    The Disciplineof Innovation
    Apply New Technologies
    • Find practical uses for today’s technological advances in a way that increases speed, efficiency, or convenience
    • 19. Take advantage of options like virtualization to support prototyping and experimentation
    • 20. Collaborate with the multiple partners by using social networking and cloud technology
    • 21. Explore options for open innovation with technology enabled idea marketplaces
    Utilize New Governance and Management Methods
    • Make innovation a leadership imperative
    • 22. Develop an environment that cultivates curiosity, creativity, tolerance for risk
    • 23. Restructure hierarchy to encourage idea flows (top-down, bottom-up, outside-in)
    • 24. Increase collaboration across functional groups
    • 25. Recruit and train with an eye to innovation, regardless of business function
    • 26. Build the discipline of portfolio management
  • Contents
    Introduction
    Drivers of Innovation
    Barriers to Innovation
    The People Principles of Innovation
    Importance of Inspiring Leadership
    Profiting from Partnerships
    Tools and Techniques
    Business Model Innovation
    Implications and Opportunities
  • 27. Innovation is driven primarily by customer and technological changes
    What are the primary drivers of your firm’s innovation efforts?1
    Executive direction / internal demands
    Macroeconomic / external factors
    Changing supplier capabilities
    Globalization
    Technological advances and changes
    Evolving customer needs
    Key Insights
    • Since customer changes are the primary driver for innovation, innovation is a survival imperative, not just a “nice to have”, for successful businesses
    • 28. The role that technological advances play in innovation supports Capgemini’s Technovision 2012 approach, which identifies many of the key technology enablers for innovation, e.g. social networking, cloud computing, collaborative tools
    • 29. Firms continue to innovate in response to the evolving macroeconomic environment and its impact on internal business conditions
    1 Does not sum to 100% – respondents could select more than one response
  • 30. 0
    The most successful innovators are more likely to view globalization as a catalyst and enabler of innovation
    What We Find
    What are the drivers for your innovation efforts?
    Catalysts with greatest variance between innovation leaders and laggards
    • Innovation leaders are much more likely to cite executive direction and globalization as catalysts for innovation than less successful innovators
    • 31. Globalization is a catalyst for innovation in three major areas
    • 32. New customers and markets
    • 33. New partners and sources of insight
    • 34. New talent and labor with diversity of ideas and capabilities
    • 35. The extended ecosystem expands the context within which to innovate new business models
    • 36. Greater engagement with the developing world is spurring increased “bottom of the pyramid” innovation to the developed world
    • 37. Even companies which are confined to a local market (e.g. utilities) are taking advantage of the exchange of talent and technology across borders to innovate in response to local customer needs
    Executive Direction
    Macroeconomic Factors
    Globalization
    Innovation Laggards
    Innovation Leaders
    What We Heard
    • “We cannot only listen to ourselves; we have to bombard our brains with new ideas.”
    • 38. “We search the globe for new technologies, and to evaluate demos and pilots that we can use in our home market.”
    • 39. “We actively seek out cross border collaborations – finding people everywhere who want to learn together.”
    • 40. “Our goal is to serve clients brilliantly. The only way for us to do that is to move people around. For it to be done right, we need people who have different backgrounds and understand different cultures.”
  • Companies like GE and Procter & Gamble are taking advantage of “trickle-up” innovation to unlock new markets at home
  • 41. Contents
    Introduction
    Drivers of Innovation
    Barriers to Innovation
    The People Principles of Innovation
    Importance of Inspiring Leadership
    Profiting from Partnerships
    Tools and Techniques
    Business Model Innovation
    Implications and Opportunities
  • 42. O
    Day-to-day business operations are the greatest barrier to achieving breakthrough innovation
    What most constrains your company’s ability to achieve breakthrough innovation?
    Failure to gain buy-in at lower levels of the organization
    Inadequate leadership commitment
    Lack of formal processes
    Lack of skills within the organization
    Financial constraints
    Urgency of pressing day-to-day business demands
    Inadequate technological capability
    Other
    Key Insights
    • Additional constraints include: company culture and partners’ / customers’ lack of acceptance; inadequate supply chain support; risk aversion and fear of failure
    • 43. Most companies point to day to day business pressures as a key constraint; therefore, additional on-demand support (new labor models) can help to strengthen innovation efforts
    • 44. But equally important, innovation efforts should be built into the corporate DNA as a regular part of the business, rather than being treated as an extra or “add-on” separate from the organization’s core activities
    Note: Does not sum to 100% – respondents could select more than one response
  • 45. Contents
    Introduction
    Drivers of Innovation
    Barriers to Innovation
    The People Principles of Innovation
    Importance of Inspiring Leadership
    Profiting from Partnerships
    Tools and Techniques
    Business Model Innovation
    Implications and Opportunities
  • 46. e
    There was little difference between laggards and leaders in citing barriers to innovation except with regard to people factors
    What most constrains your company’s ability to achieve breakthrough innovation?
    Lack of skills within the organization
    Inadequate leadership commitment
    Innovation Laggards
    Innovation Leaders
    Key Insights
    • Leadership alignment / commitment is one of the most important correlating factors for successful innovation
    • 47. Many innovation leaders speak about the importance of hiring the right mindset (risk-taking, open to the art of the possible, resilient ) and building skills as part of the organization’s overall mandate
    • 48. “Creating creativity” is a learned skill; innovation leaders teach formal innovation development and management skills to people across the organization, regardless of function and title
    • 49. Tools like the Accelerated Solutions Environment can be used to build leadership alignment across functions, which is critical for ongoing innovation success
  • v
    Even when companies do make a commitment to innovation they are constrained by the lack of people with the right skills
    What are the greatest challenges your business faces in delivering successful innovation?1
    Difficulty in finding the right people to drive the effort
    Failure to get budget approval for up front
    Inability to commercialize the best ideas
    Failure to achieve breakthrough results
    Failure to deliver in a timely manner
    Going over budget
    Key Insights
    • This again shows the value of contracting specialized assistance to support internal innovation efforts
    • 50. However, specialized support is not enough; the organization must also build internal capabilities with appropriate training, performance management and incentives
    • 51. Additional challenges include: inability to articulate the value proposition, regulatory concerns and lack of leadership commitment
    1 Does not sum to 100% – respondents could select more than one response
  • 52. r
    Broader engagement with employees at all levels is positively correlated with successful innovation
    Employees at all levels and functions throughout the organization are actively involved in our innovation efforts
    26%
    15%
    8%
    42%
    35%
    28%
    20%
    Innovation Laggards
    Moderately Successful Innovators
    Highly Successful Innovators
    Innovation Leaders
    Strongly agree
    Agree
    Key Insights
    • Innovation leaders engage employees at all levels by deliberately designing forums which allow employees to work across levels
    • 53. Developing an innovation ethos means providing employees with the skills needed to be successful; creativity can be a learned skill, but it requires practice and reinforcement
    • 54. Collaborative tools provide new opportunities for employees to interact and engage across functions, divisions & locations
    • 55. However, organizations should not underestimate the importance of in-person engagement; forums like the ASE provide a focused, high context environment with a bias for action
  • Creating innovation energy is a conscious act of leadership that impacts and drives people throughout the organization
    Articulate, encourage and reward innovation behavior:
    • Freshness: Be willing to explore the new and challenge what has always been done
    • 56. Greenhousing: Protect ideas when they are most vulnerable
    • 57. Signaling: Tell others how you want them to react to ideas – challenge? Build?
    • 58. Realness: Share, be open and embrace learning opportunities and teachable moments
    • 59. Momentum: Momentum is contagious; but so is inertia
    • 60. Courage: Provide a safe space for people to stretch their comfort one regularly and deliberately
    Create the right conditions in the organization:
    • Be smart in selection and allocation of initiatives
    • 61. Promote transparency
    • 62. Put structures in place to reward innovation
    • 63. Leaders must walk the walk
    • 64. Find and celebrate success – be big in celebration
    Behavior
    Organization
    Innovation Energy
    Attitude
    Nurture people with the right attitude:
    • Be deliberate about feedback
    • 65. Foster confidence and an appetite to do things differently
    • 66. Recruit for attitude – curiosity, courage, resilience, risk appetite
    • 67. Instill a sense of passion – give people something to care about
    Note: Adapted from: ?WhatIf! Consulting, World Innovation Forum 2009
  • 68. Contents
    Introduction
    Drivers of Innovation
    Barriers to Innovation
    The People Principles of Innovation
    Importance of Inspiring Leadership
    Profiting from Partnerships
    Tools and Techniques
    Business Model Innovation
    Implications and Opportunities
  • 69. 47%
    Innovation leaders are more likely to have a dedicated innovation group, although this is uncommon among all businesses
    As separate innovation division is involved in our innovation efforts
    We have someone at the executive level who is formally accountable for innovation
    Innovation Leaders
    Highly Successful Innovators
    Moderately Successful Innovators
    Innovation Laggards
    Innovation Laggards
    Highly Successful Innovators
    Moderately Successful Innovators
    Innovation Leaders
    Key Insights
    • Most firms do not have a dedicated innovation division, or someone at the executive level who is formally accountable for innovation; however, innovation leaders are more likely to do so than other firms
    • 70. The formal role responsible for innovation is not necessarily defined as innovation-specific (though some are, such as the Innovation Chief, Director of Foresight); in many cases the innovation lead is the CEO or a high-level line executive in the organization
    • 71. Although embedding innovation in the organization may be more effective than trying to create a separate division, having a formal innovation organization increases focus and resource commitment
    • 72. Companies must balance the benefits of a dedicated division, vs. silo’ing innovation as something for which only one group is responsible
  • 6
    While having a dedicated executive responsible for innovation does not guarantee success, it certainly improves the odds
    Innovation Success Rate
    Innovation Type
    24%
    45%
    76%
    55%
    Some big hits and many incremental improvements
    Ongoing incremental improvements
    Regular breakthrough innovation
    Limited innovation success
    Dedicated Innovation Executive
    No Dedicated Innovation Executive
    Has a dedicated innovation executive
    Less than 50%
    Greater than 50%
    Does NOT have a dedicated innovation executive
    Close to 40% of respondents at firms without a dedicated executive self-identify as laggards (bottom quartile success rate).
  • 73. 0
    Even where there is no formal innovation role, executive commitment is a key differentiator for innovation leaders …
    We have a high degree of executive level commitment to innovation
    100%
    82%
    68%
    46%
    Innovation Leaders
    Very Successful Innovators
    Moderately Successful Innovators
    Innovation Laggards
    Strongly agree
    Agree
    Key Insights
    • The chief executive and leadership must make a public and visible commitment to innovation as a business imperative
    • 74. To ingrain a commitment to innovation, KPIs must be designed to measure and reward the desired behaviors, e.g. creativity, risk-taking, creating a learning culture
    • 75. The most successful innovators cascade commitment to innovation to the middle and lower levels of the organization, creating a culture of leadership among equals
  • 0
    … And successful innovators are more likely to align their innovation activities with the company’s overall strategic vision
    “Our innovation efforts are clearly defined in line with our overall corporate vision”
    17.3%
    42.1%
    10.0%
    52.7%
    4.5%
    49.4%
    36.8%
    23.6%
    Moderately Successful Innovators
    Highly Successful Innovators
    Innovation Leaders
    Innovation Laggards
    Agree
    Strongly agree
  • 76. Contents
    Introduction
    Drivers of Innovation
    Barriers to Innovation
    The People Principles of Innovation
    Importance of Inspiring Leadership
    Profiting from Partnerships
    Tools and Techniques
    Business Model Innovation
    Implications and Opportunities
  • 77. g
    Innovation leaders take advantage of external sources of innovation more than other firms
    What are the primary sources of innovation / new ideas for your organization?
    Source of Ideas – Suppliers
    Source of Ideas – Third Party Partners
    Innovation Laggards
    Moderately Successful Innovators
    Very Successful Innovators
    Innovation Leaders
    Innovation Leaders
    Moderately Successful Innovators
    Very Successful Innovators
    Innovation Laggards
    Key Insights
    • Involving suppliers and other third party partners in ideation is positively correlated with innovation success
    • 78. The use of open innovation and collaborative business tools and techniques provides enhanced innovation capability
    • 79. Experimentation with non-traditional innovation partners, e.g. individual inventors, specialty design firms, opens new opportunities for innovation
  • 7
    Higher innovation success rates are achieved when customers are more proactively involved in innovation efforts
    How involved are your end consumers in your innovation efforts?
    7.4%
    We do not actively engage customers in our innovation efforts
    Customers are involved in test marketing following initial design
    We use market research / focus groups to generate ideas which we develop in-house
    Customers are proactively involved in design and development
    We maintain ongoing customer conversations to support multiple elements of our innovation processes
    10.5%
    11.7%
    19.8%
    5.3%
    11.1%
    21.6%
    26.3%
    17.3%
    17.1%
    17.1%
    10.8%
    47.4%
    45.7%
    37.8%
    28.8%
    Innovation Leaders
    Innovation Laggards
    Highly Successful Innovators
    Moderately Successful Innovators
    Key Insights
    • Opportunities for more active customer involvement in innovation efforts include: closed-loop marketing, user-based design, customer anthropology surveys
    • 80. Social networking technology creates new avenues to engage customers as participants in the innovation process
    • 81. Social anthropology, ethnography, and user experience / user-designed innovation are growing in importance – the key is to understand how customers behave, why they do what they do, what problem they are trying to solve, not what they say they want
    • 82. More systemic and business model changes are being driven by customer insights, e.g. Tesco
    • 83. Hot housing, experimentation and real world living labs provide additional opportunities to engage customers throughout the innovation process
  • Contents
    Introduction
    Drivers of Innovation
    Barriers to Innovation
    The People Principles of Innovation
    Importance of Inspiring Leadership
    Profiting from Partnerships
    Tools and Techniques
    Business Model Innovation
    Implications and Opportunities
  • 84. 9
    Innovation leaders have well defined innovation processes built into their business operations
    We have a well defined process for promoting and harvesting innovation in our company
    10%
    35%
    7%
    51%
    1%
    32%
    29%
    22%
    Innovation Leaders
    Very Successful Innovators
    Moderately Successful Innovators
    Laggards
    Strongly agree
    Agree
    Key Insights
    • Close to two-thirds of innovation leaders have defined innovation processes built into the organization
    • 85. Innovation processes should be: intentional, clearly defined, action-oriented, easily understood, accessible, repeatable
    • 86. Many companies need help in designing an effective method for incorporating innovation into day to day operations – Capgemini’s 5E model can provide a framework to institutionalize the innovation process
  • %
    Just as important to successful innovation is a defined way to prioritize and measure the success of innovation projects
    We have a clearly defined way to prioritize ideas and drive innovation
    We have well understood methods / approaches to evaluate the success of our innovation efforts
    11%
    11%
    14%
    4%
    10%
    4%
    67%
    42%
    1%
    2%
    32%
    30%
    36%
    33%
    27%
    16%
    Innovation Leaders
    Innovation Laggards
    Innovation Leaders
    Highly Successful Innovators
    Moderately Successful Innovators
    Innovation Laggards
    Highly Successful Innovators
    Moderately Successful Innovators
    Agree
    Strongly agree
    Key Insights
    • Portfolio management tools and processes help set direction, improve transparency and build alignment across divisions and functional areas
    • 87. To be effective the prioritization system must be aligned with overall corporate objectives as well as individual divisional goals
    • 88. Defining success criteria, key metrics and measures a priori provides a mechanism to “fail fast” while leaving room to continue to explore promising ideas
    • 89. The most effective processes not only measure innovation success but capture and integrate the learning from “smart failures”
  • Contents
    Introduction
    Drivers of Innovation
    Barriers to Innovation
    The People Principles of Innovation
    Importance of Inspiring Leadership
    Profiting from Partnerships
    Tools and Techniques
    Business Model Innovation
    Implications and Opportunities
  • 90. Business model innovation fundamentally redefines the business elements that shape the company’s value proposition
    Resources
    Customer
    Offer
    Co-creation
    CustomerRelationship
    PartnerNetwork
    BusinessFunctions
    Distribution Channels
    Value Proposition
    CustomerSegment
    Core Capabilities
    Financial Performance
    CostStructure
    RevenueStreams
    PROFIT
    Note: Adapted from Alexander Osterwalder, The Business Model Ontology, a proposition in a design science approach
  • 91. Govindarajan's “three-box” model1 provides an effective framework for undertaking business model innovation
    • The future should be treated like a marathon. Steps must be taken today to shape the future
    • 92. Business model innovation is driven by companies’ answers to known unknowns
    • 93. “What does my customer want that today they cannot get from anyone at any price?”
    • 94. “If the current governmental or regulatory environment were to change dramatically from today, what would it take for my business to succeed?”
    • 95. How would my business be different if the margins or cost structure mirrored those of a radically different industry?
    • 96. Which company that is not currently my competitor has the potential to completely reshape the environment and take my most profitable customers away?”
    • 97. Globalization is forcing companies to rethink their business models as more innovation emerges from the “bottom up”. i.e., from the developing world
    Box 1:
    “Manage the Present”
    Box 2:
    “Selectively Forget the Past”
    Box 3:
    “Create the Future”
    Address current business challenges
    Respond to non-linear changes in the industry and in the macro environment
    • Compete for the present
    • 98. Benchmark and address performance gaps
    • 99. Perform corporate restructuring
    • 100. Dedicate 50-55% of corporate effort
    • 101. Address the steps to create the future
    • 102. Create fundamental business model changes
    • 103. Requires bold strategic intent: direction, passion, challenge
    • 104. Dedicate 10 -20% of corporate effort
    • 105. Identify “next practices” not best practices
    • 106. Expand into areas adjacent to existing business
    • 107. Dedicate 10-25% of corporate effort
    Source: 1. Vijay Govindarajan, Tuck School of Business, Dartmouth
  • 108. Access to global resources, combined with a focus on co-created customer experiences, is driving new business models
    Two pillars of innovation: Focus on individual customer experiences to create a market of one N(=1) and take advantage of global resources (R=G)
    R=G
    N=1
    • First pillar of innovation demonstrates shift in customer preferences
    • 109. Co-create product / service with each consumer based on individual preferences
    • 110. Focus on one customer at a time through
    • 111. Flexibility
    • 112. Collaborative networks
    • 113. Simple customer interface
    • 114. Anticipating evolving customer needs
    • 115. Second pillar of innovation enables co-creation
    • 116. Access high quality resources at low cost from multiple sources globally
    • 117. Shift from owning all necessary resources to ability to access specialized suppliers as needed
    • 118. Results in
    • 119. Quick turnaround
    • 120. Scalability
    • 121. Innovation arbitrage
    R=G
    N=1
    Source: Prahalad, C.K., Krishnan, M.S. The new age of innovation. 2008
  • 122. Contents
    Introduction
    Drivers of Innovation
    Barriers to Innovation
    The People Principles of Innovation
    Importance of Inspiring Leadership
    Profiting from Partnerships
    Tools and Techniques
    Business Model Innovation
    Implications and Opportunities
  • 123. Innovation leaders succeed because their approach to innovation is intentional, consistent and well-defined
    Engage with Customers
    • Develop a customer-focused, rather than a product or process-focused mindset
    • 124. Take advantage of web 2.0 (collaboration, social networking) and web 3.0 (open innovation, connectivity, “relationality’ to engage in customer-driven conversations
    • 125. Use analytics to identify customer behaviors that suggest new opportunities for innovation
    • 126. Explore ethnography and anthropology as tools for user experience innovation
    Take Advantage of the Extended Ecosystem
    • Reach beyond traditional partnership to find new avenues of innovation – third party labs, individual members of the inventor community, academic institutions, etc.
    • 127. Explore opportunities for smart competitive partnerships or industry colloquia
    • 128. Embrace globalization as a source of intellectual capital; challenge assumptions around traditional models of innovation
    Establish Formal Processes but Don’t Be a Slave to Process
    • Define a portfolio management system that is aligned to your firm’s strategic objectives
    • 129. Institutionalize involvement form employees at all levels
    • 130. Develop a simple model to incorporate the key elements of innovation: ideation, selection, experimentation, commercialization
    • 131. Define schedules to drive accountability and action
    Build Experimentation into the Process
    • Use an iterative design approach to enhance results: visualize and design, experiment, iterate
    • 132. Take advantage of purpose-built experimental environments – experience labs, innovation factories, solutioning centers
    • 133. Experiment with virtual prototyping and non-traditional options offered by new technology
    Remember the People Principles of Innovation
    • Establish the importance of innovation as a strategic imperative; set the tone at the executive level
    • 134. Encourage bottom-up innovation – support efforts from employees at all levels and functions
    • 135. Align performance measures and KPIs to reward smart failures as well as successes
    • 136. Hire the right mindset – future-focused, curious, open – and teach the skills needed to manage innovation
  • We encourage clients to evaluate their innovation efforts based on the four P's highlighted by the Leader / Laggard survey …
    • What technology changes are shaping our industry?
    • 137. What problems do our customers’ behavior suggest they are trying to solve?
    • 138. What macro changes are shaping what our industry and our customers will look like five years from now? Ten years from now?
    • 139. How should our business model change to support more effective innovation?
    • 140. Do we have a balanced portfolio with an appropriate mix of incremental improvements, intermediate opportunities and visionary long-term innovation?
    • 141. Is there a defined way to identify what projects we should terminate?
    • 142. Can we define and learn from smart failures?
    • 143. How do we estimate the value of our innovation portfolio?
    Innovation Platforms
    Innovation Portfolio
    The four P’S of innovation
    • How can we institutionalize the process of innovation?
    • 144. What are the most effective ways to engage partners and customers in our innovation efforts?
    • 145. What tools are available to support more effective innovation?
    • 146. How can we strengthen our approaches to ideation / portfolio management / experimentation?
    • 147. Do we have a culture that supports innovation?
    • 148. What are the most effective ways to engage employees at all levels?
    • 149. How do we build a curious, learning organization?
    • 150. What metrics and KPI’s can be used to support more effective innovation?
    Innovation Processes
    People Principles
  • 151. … And to assess where their organization fits on the journey towards a mature and sustainable culture of innovation
    Maturity of Innovation Culture
    Innovation engrained in corporate DNA
    Innovation made into a repeatable process
    Governance structures in place
    • Innovation built into training, recruiting and performance evaluations
    • 152. Rewards structure implemented that recognizes both innovation success and “smart failures”
    Organizational alignment achieved
    • Tools widely diffused and accessible across organization
    • 153. Process creates a large enough pipeline and manages failures effectively
    • 154. Process routinely evaluates lessons learned and measures successes
    • 155. Individual(s) made responsible for providing innovation tools and techniques
    • 156. Oversight and monitoring implemented
    • 157. Leadership show commitment
    • 158. Input sought from all employees at all levels
    Degree of Complexity
  • 159. Innovation projects can be structured to meet the needs of clients based on their individual business needs and industry dynamics
    Evaluate Current Innovation Capability
    Establish Framework for Key Innovation Capabilities
    Transform for Innovation
    Text
    Text
    Illustrative
    4-6 weeks
    6-8 weeks
    TBD – time boxed
    • Define strategic intent
    • 160. Conduct environmental scan
    • 161. Conduct customer experience evaluation
    • 162. Define strategic platforms
    • 163. Conduct alignment workshops on strategic intent
    • 164. Refine strategic innovation platforms
    • 165. Define business model required to support strategic platforms
    • 166. Ensure shareholder value management by reviewing and monitoring platforms and strategy
    • 167. Identify new opportunities based on strategic innovation platforms
    • 168. Assess portfolio balance (Box 1-2-3)
    • 169. Review investment and value projections
    • 170. Evaluate “kill criteria” and “fail fast” approach
    • 171. Maintain transformation management office for portfolio management
    • 172. Develop failure feedback loop and incorporate learnings into revised portfolio and updated strategy
    • 173. Revise portfolio in line with strategic platforms; identify new opportunities
    • 174. Develop portfolio evaluation and kill criteria
    • 175. Define smart failure
    • 176. Perform culture assessment
    • 177. Conduct employee interviews
    • 178. Conduct capability assessment
    • 179. Evaluate innovation org structure and diffusion / .execution models
    • 180. Identify performance blocks and design interventions
    • 181. Perform leadership coaching
    • 182. Conduct organizational change management in support of revised organization design
    • 183. Facilitate “creating creativity workshops”
    • 184. Redefine performance metrics and KPIs – reward risk & curiosity
    • 185. Design recruitment & development plan
    • 186. Evaluate processes related to ideation, assessment, experimentation and rollout
    • 187. Assess technology capabilities and strategy
    • 188. Build influence and diffusion maps
    • 189. Define technology strategy and processes to support strategic intent
    • 190. Establish breakthrough operating model
    • 191. Configure and implement supporting tools
    • 192. Roll out revised processes
    • 193. Design and coordinate CLM pilots and living lab experimentation
    • 194. Revise processes based on strategic objectives and existing gaps
    • 195. Design experimentation models, e.g. CLM, virtual prototypes
    • 196. Conduct package selection for appropriate tools
    • 197. Conduct new partner scan and selection
  • Capgemini applies its consulting, facilitation, and networking capabilities to assist clients at each step in the innovation process
    Ideation
    Prioritization & Portfolio Management
    Incubation & Experimentation
    Innovation Realization
    Innovation Enculturation
    • Put the appropriate measurement mechanisms in place
    • 198. Pilot, learn, adjust – build experimentation and iteration into the process
    • 199. Break down functional silos
    • 200. Use a different perspective
    • 201. Engage outside help
    • 202. Customers
    • 203. Partners
    • 204. Suppliers
    • 205. Competitors
    • 206. Independent third parties
    • 207. Identify options most aligned with strategic goals
    • 208. Gain team alignment / management buy-in
    • 209. Commit the necessary talent and financial resources
    • 210. Break old habits
    • 211. Put reward structure in place
    • 212. Put a repeatable process in place
    • 213. Build innovation into the firm’s day to day operations
    Capgemini Tools
    • Accelerated Solutions Environment (ASE)
    • 214. Consumer Relevancy
    • 215. Customer Experience Transformation
    • 216. GrowthWorksTM
    • 217. TechnoVision 2012
    • 218. GrowthWorksTM
    • 219. Customer Experience Transformation
    • 220. Consumer Relevancy
    • 221. Mergers and Acquisitions Strategy
    • 222. Product Lifecycle Management
    • 223. Accelerated Solutions Environment (ASE)
    • 224. Business Innovation Center
    • 225. Closed Loop Marketing
    • 226. Product Lifecycle Management
    • 227. Rapid Innovation Centers (RAIN)
    • 228. Rapid Design and Visualization (RDV)
    • 229. TechnoVision 2012
    • 230. Accelerated Solutions Environment (ASE)
    • 231. Business Transformation
    • 232. Employee Transformation
    • 233. Organizational Change Management
    • 234. Product Lifecycle Management
    • 235. Shareholder value Management
  • Please feel free to contact us for further information
    Dianne Inniss
    Managing Consultant – Strategy & Transformation WIF Innovation Survey Lead
    3500 Lenox Road, Suite G2
    Atlanta, GA 30324
    Phone: 404 806 4986E-Mail: dianne.inniss@capgemini.com
  • 236. Appendix – Capgemini Capabilities and Tools
  • 237. The Capgemini ASE can be used at multiple points in the innovation process to facilitate creativity and accelerate realization of value
    Applications to the innovation
    What it is?
    Fostering creativity by …
    • Facilitating clients through exercises that apply different perspectives to problem solving
    • 238. Getting everyone involved and working against group think
    Accelerating the innovation process through ...
    • Rapidly building leadership alignment
    • 239. Building innovation roadmaps within 1-3 ASE timeframe
    An environment …
    • Enabling small, exclusive teams as well as large groups of people with common or diverse backgrounds to focus on particular issues of mutual interest
    • 240. Inducing an intensely productive atmosphere designed to foster creative thinking and collaboration
    • 241. Delivering implementable solutions weeks or months faster than of conventional approaches
    A radically different way of collaborative work
  • 242. The ASE promotes the spirit of creativity in innovation by promoting new ways of thinking about problems
    Use Different LensHow would either someone else view this problem or if so-in-so were here how would they see it
    Use Analogiesby asking if there is an analogy you change the context of the problem and bring solutions that are different
    Change Focusby refocusing the problem you generate different thought
    Take Excursionsby getting away from the problem, you facilitate incubation
    Force Fit by explicitly combining something random with the problem you generate different thought
    Change Scale by changing scale (either larger or smaller) you cast the problem in a different light
  • 243. GrowthWorksSM is Capgemini’s comprehensive assessment to identify the right platforms and business models for innovation
    GrowthWorksSM
    Executive BusinessJudgment
    Analysis of
    QualitativeFacts
    QuantitativeFacts
    Growth Platform Discovery
    Content
    Innovations
    Context
    Innovations
    4 Key Criteria
    • Market Attractiveness
    • 247. Competitive Position
    • 248. Economic Value
    • 249. Strategic Fit / Value
    Med. Risk
    High Risk
    Growth Platforms
    Low Risk
    Med. Risk
    Market Offerings
    New
    Markets
    New
    Channel
    New
    Product
    New
    Business
    Evaluate andPrioritize Growth Opportunities
    Make Intentional Choices to Balance Portfolio
    Identify Growth Platforms and Fill the Pipeline
  • 250. Consumer RelevancyTM provides insight into the customer needs and expectations that direct consumer-led innovation …
    Access
    Experience
    Price
    Product
    Service
    The importance of prioritizing and making strategic choices
    The Consumer RelevancyTM Framework
    • Research within customer behavior shows that a market leader shall dominate on one attribute, differentiate its offering on another and meet the clients expectations on the others
    • 251. The scale is 1-5, where 1 and 2 is under the customers expectations and this can damage the brand name and customer loyalty
    Value attributes
    1. Dominate on one primary attribute
    Dominate
    Customers Seek…
    2. Differentiate on one secondary attribute
    5 – Dominate
    5
    5
    5
    5
    5
    5
    3. Meet expectations on the rest
    Differentiate
    Customers Prefer…
    4 – Differentiate
    4
    3 – Industry par
    3
    3
    3
    Industry Par
    Customers Accept…
    3
    4
    3
    3
    5
    1 & 2 – Does not meet clients expectations
    Price
    Product
    Service
    Access
    Experience
    5.
    Authority
    Inspiration
    Customization
    Solution
    Intimacy
    4.
    Consistent
    Reliability
    Education
    Convenience
    Care
    3.
    Honest
    Credibility
    Accommodation
    Ease
    Respect
    • If a company operates at an industry par, trust evolves over time and customers accept the company and consider using them again
    • 252. If the company differentiates, the customers prefer them and will literally go the “extra mile” to do their business
    • 253. Dominating on an attribute implies that customers not only prefer the company over another, but will actively seek them out
  • ... And forms the basis for dramatic customer experience transformation using our CET methodology
    Customer Needs
    Current status
    Prioritizes
    • Insight
    • 254. Behaviors (segmentation)
    • 255. Journeys (based on needs)
    • 256. Channels used
    • 257. Cost to serve (by channel by CJ)
    • 258. Traffic light the Customer Journeys
    • 259. Development of Roadmap to achieve the vision
    External Influences
    Vision for the future
    I want my provider to:
    Be simple
    §
    Be reliable
    §
    Know and understand me and
    §
    anticipate my needs
    Be friendly and easy
    §
    Keep promises and delight me

    §
    Successful innovators continue to move from a product-oriented focus to a customer-oriented focus; customer experience transformation provides the tools to identify and meet unmet needs.
  • 267. Closed Loop Marketing (CLM) enables experimentation to unlock the benefits of customer centricity
    Analytics
    • Sophisticated and holistic deeper analysis of data with powerful tools and dedicated talent
    • 268. Analysis of channel feedback, sales and demographic data stored in vast central repository
    • 269. Continuous creation, testing, and refinement of narrow customer segments
    Marketing Planning
    • Few, long marketing cycles replaced by multiple short iterations
    • 270. Messages, channel and product mix tailored to narrow segments
    • 271. Increased accuracy in resource allocation
    • 272. Greatly improved ability to run multiple prototype campaigns and quickly refine them
    Analytics
    MarketingPlanning
    Closed Loop Marketing Cycle
    Execution
    • Closer functional alignment between Sales and Marketing, on message generation, delivery, and analysis
    • 273. Individualized messages and personalized services delivered through only the most response-driving channels
    Feedback
    • Customer information continuously and automatically collected from all channels
    • 274. Feedback cycles greatly accelerated
    • 275. Immediate, high quality feedback is generated, resulting in almost real-time market research from channels; who is using them and how
    Feedback
    Execution
    Customer Centricity
    With CLM, companies can combine their marketing communications with automatic data-gathering and analysis techniques to develop highly targeted campaigns based on customer behavior.
  • 276. Our Business TransformationTM framework helps us to address innovation and transformation in a comprehensive framework
    Envision the future
    • Translate the innovation vision into a transformation plan
    • 277. Use an evolution process with clear deliverables for each stage
    • 278. Gain and align key stakeholders to support the innovation vision
    • 279. Commit to the targets of the transformation
    E
    Establish key capabilities
    • Free up and identify your talents
    • 280. Recruit your vision
    • 281. Install collaboration at peer level
    • 282. Push for co-creation
    • 283. Establish capabilities to coordinate insourcing and outsourcing
    • 284. Use KPIs to adjust progress
    Energize people
    • Translate the vision into people benefits
    • 285. Create networks inside and outside R&D to support change and innovation
    • 286. Engage the hearts and minds
    • 287. Accelerate from thoughts to action
    E
    E
    Expedite growth
    • Focus on the big topics to reach targets faster
    • 288. Permanent market screening for identifying opportunities
    • 289. Introduce organizational elements to foster innovation (e.g. idea generation process)
    • 290. Manage risks through a portfolio approach
    • 291. Anticipate showstoppers in the early stages
    Enhance competitiveness
    • Connect to become faster and better
    • 292. Be measurable to beat defined benchmarks
    • 293. Use capacity restrictions as opportunities
    E
    E
  • 294. Employee Transformation includes solutions to mobilize, enable and optimize talent
    Renew Capabilities
    • Leadership Development
    • 295. Vision Engineering
    Workforce Alignment
    • Learning Solutions
    • 296. Inspire Leaders
    • 297. Leadership Alignment
    Energize People
    • Workforce mobilization
    • 298. Branding and communications
    Mobilize
    Organizational
    Change Management
    Enable
    Optimize
    Enable the Right Talent
    Workforce Analytics and Strategy
    • Measure current capabilities
    • 301. Plan for the future
    • 302. Design the optimal workforce
    Workforce Analytics
    and Strategies
    HR Transformation
  • 303. Manage creation, approval and deletion on of specification information and documentation
    Capgemini’s approach to product lifecycle management (PLM) uses multiple ‘modules’ to create a holistic solution
    Product Data Management
    Lifecycle Program Management
    Design and Sourcing Management
    Integrating design and sourcing functions internally and externally within the supply chain to optimize component selection and cost of procurement
    Effective project program management within product lifecycle of innovation, growth, maturity and decline
    Product Lifecycle Management
    Portfolio Management
    Collaborative Design and Visualization
    Rationalization of product and project portfolios to control complexity
    Sharing of design data for increased innovation success
    Product Requirements Management
    Managing consumer aspirations around product for design and lifecycle
  • 304. Technovision identifies the 17 information technology trends that we believe will be most relevant to business going forward
    From transaction to interaction
    Mash-up Applications
    Mashup applications
    Real-Time
    Business
    Process
    Control
    Real-time
    business
    process
    control
    Youexperience
    Real-time
    Integrated
    Business
    Intelligence
    Real-time
    integrated
    business
    intelligence
    Composite
    Applications
    Composite
    applications
    Sensing Networks
    Sensing networks
    Process-on-the-fly
    Thriving on data
    Packaged Sector /
    Segment Solutions
    Packaged sector /
    segment solutions
    Smart Business Networks
    Smart business networks
    Free Agents Nation 
    Free agents nation 
    Role Based User Portals
    Role-based user portals
    Social Collaboration Tools /
    Wikinomics
    Social collaboration tools /
    Wikinomics
    iPodification
    iPodification
    Software as a Service
    Software-as-a-service
    Google-fication
    Google-fication
    Utility
    Business Infra-structure
    Utility
    business infra-structure
    Mastered
    Data Management
    Mastered
    data management
    Jericho Style Security
    Jericho style security
    Sector-as-a-service
    Rich Internet Applications
    Rich Internet applications
    Invisible infostructure
  • 305. Appendix – Additional Perspectives from Academia
  • 306. d
    Looking at innovation as broadly as possible allows companies to determine the most valuable dimensions on which to focus
    The innovation radar identifies twelve ways for companies to innovate
    • The “Innovation Radar” presents and relates all of dimensions through which a firm can look for innovation opportunities
    • 307. Focuses on 4 key business anchors, and embeds 8 other avenues of pursuit
    • 308. Comparative assessments help determine how firms compare with regards to innovation. With this assessment a company can identify opportunities and prioritize dimensions on which to focus efforts
    • 309. Allows for the identification of key innovation avenues that have been overlooked by the industry as a whole
    • 310. When companies identify and pursue neglected dimensions, it can change the basis of competition and leave other firms at a distinct disadvantage
    • 311. Successful innovation strategies tend to focus on a few key, high-impact dimensions, rather than a multi-dimensional approach
    Offerings
    (What)
    Platform
    Brand
    Solution
    Networking
    Presence
    (Where)
    Customers
    (Who)
    Customer Experience
    Supply Chain
    Org.
    Value Capture
    Processes
    (How)
    Source: 12 Different Ways for Companies to Innovate, Sawhney, Wolcott, Arroniz, MIT Sloan Management Review, Spring 2006
  • 312. Companies which find ways to institutionalize innovation create differentiation and substantial shareholder value
    Success requires the ability to go beyond isolated wins to develop deep capabilities allowing companies to disarm disruptive threats and seize new growth
    Develop a balanced portfolio
    Create a growth Blue print
    1
    2
    • The portfolio must become a mix of projects that satisfy the growth objectives
    • 313. 50% core improvements
    • 314. 30% logical extensions
    • 315. 20% new growth initiatives
    • 316. Articulating what the organization “wants to be” and allocating resources to achieve that vision
    • 317. Must define strategic goals through concrete scenarios and estimates
    Institutionalize innovation
    Construct an innovative engine
    Support the new growth engine
    3
    4
    • Screen for development
    • 318. New growth initiatives need to go through a more iterative development process, with a focus on identifying and addressing key assumptions and risks
    • 319. Structure for success
    • 320. Deep senior management involvement
    • 321. A common language
    • 322. Extensive external input
    • 323. Supportive human resource policies
    Source: Institutionalizing Innovation. Anthony, Johnson, Sinfield, MIT Sloan Management Review, Winter 2008
  • 324. The right approach to institutionalizing innovation is determined by the company’s strategic objectives and internal capabilities
    Support
    Low
    Low
    Create
    High
    High
    Source: Institutionalizing Innovation. Anthony, Johnson, Sinfield, MIT Sloan Management Review, Winter 2008
  • 325. Innovation in management principles can create sustainable advantages and dramatic shifts in competitive position
    Why Management Innovation Matters …
    What Management Innovation is …
    Competitive advantage:
    A management breakthrough can deliver a potent advantage to the innovating company and produce a seismic shift in industry leadership
    Marked departure from traditional management principles, practices, and process
    Management practices:
    Management orthodoxies have become so deeply ingrained in executive thinking that they are nearly invisible and are so devoutly followed that they are practically unassailable, breeding complacency
    Departure from customary organizational forms that significantly alters the way work is performed
    Changing how managers work to reinvent the process that governs the work they do
    Commitment to development:
    For every truly radical idea that delivers a big dozens of competitive advantage, there will be dozens of other ideas that prove to be less valuable. Innovations is a numbers game – the more of it you do, the better your chances of reaping a pay-off
    Source: The Why, What and How of Management Innovation, Hamel, Harvard Business Review, 2006
  • 326. The principles of innovative thinking can be applied to designing new management principles just as to other areas of innovation
    How to Become a Management Innovator …
    • While big problem don’t always produce big breakthroughs, little problems never do
    • 327. It takes fortitude, perseverance and imagination to solve big problems. These qualities are most abundant when the problem is
    Commit to a Big Problem
    • Any problem that is pervasive, persistent, or unprecedented is unlikely to be solved with hand-me-down principles
    • 328. Novel problems deserve novel principles
    Search for new principles
    • A lot of what passes for management wisdom is unquestioned dogma masquerading as unquestioned truth
    • 329. Subject each management belief to 2 questions
    • 330. Is this belief toxic to the ultimate goal?
    • 331. Can you imagine an alternative to the reality the belief reflects?
    Deconstruct your management orthodoxies
    • If your goal is to escape conventional management thinking, it helps to study the practices of organizations that are decidedly unconventional
    • 332. Your challenge is to hunt down unlikely analogies and suggest new ways of tackling thorny management problems
    Exploit the power of analogy
    Source: The Why, What and How of Management Innovation, Hamel, Harvard Business Review, 2006
  • 333. I
    Sustaining corporate growth requires both ‘Big I’ and ‘small ‘i’ innovation
    Long established, incumbent firms may suffer from tunnel vision and miss early signals of market opportunities, creating openings for rivals
    • There is an inherent focus on exploitation (“small i”) activities over “exploration” (“Big I”) activities; however “Big I” innovations disproportionately contribute to revenue and profitability growth
    • 334. Firms tend to become risk averse and opt for incremental product and service improvements instead of major initiatives
    • 335. Risk is an inherent aspect of innovation, and is proportional to the pay-off: bigger risk, bigger pay-off
    • 336. Long-term investments in innovation may decrease when companies use time and resources to react to urgent, short-term requests from customers and salespeople
    • 337. Companies can avoid lackluster growth by better understanding the risk inherent in different levels of innovation and achieving a balance
    Big ’I’ Innovation
    14%
    86%
    Small ’i’ Innovation
    Revenuesgeneratedby small ’i’ innovation
    39%
    Revenuesgeneratedby big ’I’innovation
    61%
    Source: Sustaining Corporate Growth Requires 'Big I' and 'small i' Innovation, George Day, Knowledge @ Wharton, February 2007
  • 338. An innovation risk matrix allows companies to evaluate the balance of their portfolio between big and little “i” innovations
    A portfolio review team evaluates each project to determine where it fits on the matrix
    • Portfolio review board comprises executives with strategic oversight and budgetary authority
    • 339. Reviews are completed individually and then reviewed as a group – team members explain the rationale for their scores and open for discussion
    • 340. A series of questions are used to score degree of risk based on
    • 341. Intended market
    • 342. Customer behavior
    • 343. Sales and distribution
    • 344. Competition
    • 345. Brand promise
    • 346. Product and technology
    • 347. Current capability and technological competency
    • 348. Intellectual property protection
    • 349. Manufacturing / service ability
    • 350. Product and service functionality
    • 351. Quality standards
  • Schrello’s R-W-W screen is another valuable tool to assess business potential and risk exposure for innovation projects
    Is the market real?
    • Is there a need or desire for the product?
    • 352. Can the customer buy it?
    • 353. Is the size of the potential market adequate?
    • 354. Will the customer buy the product?
    Is it Real?
    Is the product real?
    • Is there a clear concept?
    • 355. Can the product be made?
    • 356. Will the final product satisfy the market?
    Can the product be competitive?
    • Does it have a competitive advantage?
    • 357. Can the advantage be sustained?
    • 358. How will competitors respond?
    Can we Win?
    Can the company be competitive?
    • Do we have superior resources?
    • 359. Do we have appropriate management?
    • 360. Can we understand and respond to the market?
    Will the product be profitable at an acceptable risk?
    • Are forecasted returns greater than costs?
    • 361. Are the risks acceptable?
    Is it Worth Doing?
    Does launching the product make strategic sense?
    • Does the product fit our overall strategy?
    • 362. Will top management support it?
    Source: Managing Risk and Reward in an Innovation Portfolio, George S. Day, Harvard Business Review
  • 363. Organizations which use “design thinking” develop ways to embrace risk and increase the odds of innovating successfully
    Designers embrace risk, and their process of thinking actually mitigates it
    To incorporate design thinking into the organization
    • Cultivate an obsession with desirability – what do real people need and value?
    • 364. Become comfortable acting on informed intuition
    • 365. Prototype; iterate quickly and gather “risk-killing” information
    • 366. Think big, but start small – use constraints such as schedule, headcount and scope to learn what it will take to execute the big-picture value proposition
    • 367. Treat money as a positive constraint – limited budgets spur creativity
    • 368. Make a list of the best things that could happen
    • 369. Seek challenges – balance clear, achievable goals with just enough task challenge to create a risk of failure
    Source: “Embracing Risk to Learn, Grow, and Innovate”, Rodriguez, Jacoby, Rotman Magazine, Spring 2007
  • 370. Appendix – Case Studies
  • 371. Reversing the Traditional Path of Innovation – GE’s Trickle-Up “Bottom of the Pyramid” Innovation in Healthcare
    GE turned traditional innovation model on its head by repurposing a product designed for developing nations for successful rollout for the rest of the world
    The Innovation
    • GE’s portable MAC 800 electrocardiograph was originally designed specifically for rural clinics in India and China
    • 372. The machine weighs less than 7lbs, compared to traditional ECG machines which weigh over 65lbs
    • 373. In the past development time for a new ECG machine was as much as 5 years, and development costs were up to eight times higher
    • 374. Now being made available, with some minor modifications, for use in primary care physician’s offices throughout the U.S
    The Pay-Off
    • Adapting the Chinese model for the U.S. cost approximately $225,000 and time to market was reduced to only a few months; original development took only 22 months and cost $500,000
    • 375. The MAC 800 will opens new targets beyond GE’s 34% share of the seemingly tapped out US conventional ECG market (hospitals and large health facilities)
    • 376. GE projects first-year sales of $2.5 million in the U.S. (retail price – $2,500)
    What We Find
    • Innovation leaders are more likely to cite globalization as a key driver of their innovation efforts
    • 377. “Bottom of the pyramid” innovation, as defined by Prahalad, continues to accelerate
  • Experimentation in a New World – Palomar Pomerado Health Experiments in the Virtual Realm
    Palomar West, a new healthcare facility that is being built by Palomar Pomerado Health in San Diego has begun life as a completely virtual facility
    The Innovation
    • Palomar Pomerado Health is in the process of building a new health facility, Palomar Medical Center West
    • 378. The hospital will be constructed with the concept of sustainable design, with design elements being tested and validated by “champion teams” of physicians and employees
    • 379. Before beginning physical construction, the company has constructed a virtual facility in secondlife.com
    • 380. Visitors can create avatars and tour the virtual facility, testing some of the new design concepts and technology (including current technology which has low adoption rates in existing hospitals)
    The Pay-Off
    • The virtual facility lets the hospital test patient reaction to and acceptance of several healthcare and technology innovations as part of the iterative design and building process
    What We Find
    • Companies can manage some of the risks and constraints of innovation by using controlled experiments or hot housing. Virtualization offers new opportunities to experiment
  • Boeing – Crowdsourcing Aircraft Design
    By utilizing external sources from its extended ecosystem, Boeing successfully collaborated to create the 787 Dreamliner
    The Innovation
    • Applying the concept of ‘crowdsourcing’ Boeing facilitated engineers from approximately 100 companies to come together and collaborate through face-to-face meetings and systems tests during the early stages of design
    • 381. In the past Boeing followed an extended development process, with designers creating designs and drawings and sending them to suppliers only when final decisions had been made
    The Pay-Off
    • The collaboration resulted in a series of impressive innovations: a new wing made from lightweight composite material, which Boeing developed with Mitsubishi and a new maintenance system that beams data about non-critical repairs to ground crews via satellite
    What We Find
    • Innovation is more likely to emerge when firms reach beyond their corporate and industry boundaries to take advantage of intersections across different fields, cultures, people and industries.
    • 382. Most firms are not taking full advantage of their extended ecosystems in their innovation efforts
  • Crayola – Coloring Outside the Lines Leads to Innovation Based on Consumer Insights
    At Crayola, the goals of more effectively meeting consumer needs has led the company to reorganize in ways that facilitate greater collaboration across functional teams
    The Innovation
    • The company has been reorganized around consumer platforms which are based on specific consumer insights – one such platform was based on insight that mothers did not like their children to play with paint because of the potential for messiness
    • 383. The company created the “No Limits” platform as a result
    • 384. Cross-functional teams are led by members of the marketing team to solve the problems related to an individual consumer platform
    The Pay-Off
    • Crayola introduced Color Wonder Paper and Paints - Clear drying gels that replicate the tactile sensation and play experience of real paints, but only appear in color on specially treated paper
    • 385. The innovation has led to the introduction of several other Color Wonder products based on the “No Limits” platform
    What We Find
    • Innovation leaders make a conscious effort to integrate multifunctional teams
    • 386. Innovation leaders have a highly customer-centric focus on innovation
  • Novartis – Radically Remakes its Business Model and Redefines the Drug Development Process
    Taking a calculated risk, CEO Daniel Vasella, turned Novartis’ R&D model upside down, resolving to push drugs through testing only if they are backed by proven science
    The Situation
    • Drug companies have exhausted easy targets, and poised to lose an estimated $140 billion in sales in the next 5 years as patent expire
    • 387. Drug companies have historically dedicated research and development efforts to seeking blockbuster drugs for major illnesses that impact millions
    The Innovation
    • The focus of Novartis’ research is on illnesses with very small patient groups (“orphan diseases”), using the proven science to develop more targeted and effective therapies for small patient classes
    • 388. When drug therapies prove successful in one small patient group, the company expands them to other potential therapeutic areas
    • 389. Novartis has 93 drug candidates in the pipeline, 40% more than 3 years ago, and 80% of Novartis’ drugs in 2008 made it from early testing to late stage development
    “Well designed drugs just keep on giving.”
    • Mark Fishman, Head of R&D
    What We Find
    • Companies struggle to balance the tension between having to deliver immediate short-term business results and innovating for long-term sustainability
    • 390. Business model innovation is becoming more of strategic differentiator in the quest for improved profitability
  • Procter & Gamble – Capitalizing on the Benefits of Ethnography and an Extended Ecosystem
    The connect & developTM platform has effectively expanded Procter & Gamble’s R&D organization from 7,500 people inside to 7,500 plus 1.5 million outside
    The Innovation
    • Executives create consumer needs lists, with input from unit managers, that are developed into science problems to be solved by technology entrepreneurs
    • 391. Researchers use “Living it” immersion process: researchers live with shoppers for several days to come up with product ideas based directly on consumer needs
    • 392. The company is a member of four open networks (Nine Sigma; Innocentive; YourEncore; Yet2Com) to solicit solutions for defined science problems
    • 393. P&G’s proprietary networks shares problem briefs with top it 15 suppliers, who collectively have 50,000 R&D staff, to collaboratively create solutions
    The Pay-Off
    • R&D productivity increased by nearly 60%
    • 394. Doubled success rate of P&G research & development efforts to about 85%
    • 395. More than 100 new products introduced in the last 2 years
    • 396. 45% of initiatives contain key elements discovered externally
    • 397. 1100 leads generated by the Entrepreneur Network the first year
    “Innovation is our lifeblood – new ideas and new products that make consumer lives better”
    – AG Lafley, CEO
    What We Find
    • Innovation leaders make more use of extended networks in their innovation efforts
    • 398. Innovation leaders have a highly customer-centric focus on innovation
    • 399. Innovation leaders have well defined processes and supporting tools
  • IDEO – Integrating User Experience, Design Thinking and Experimentation Into the Process of Innovation
    IDEO includes the user experience as a fundamental principle in support of innovation and does rapid prototyping to evaluate how innovations meet behavioral needs
    The Innovation
    • Uses “human-centred design” to support the ideation and prototyping process; uses anthropologists to study human behavior and identify what problems people are trying to solve
    • 400. Methods include observation, prototyping, building, and storytelling, and are used across industries and with multiple functional and skills groups
    • 401. Brings together people from different disciplines within and outside the client organization to effectively explore new
    The Pay-Off
    • Successful innovations include
    • 402. Kidney transporter
    • 403. New vaccine delivery method
    • 404. Kraft supply chain improvement which led to 162% increase in sales
    • 405. First Mac mouse
    • 406. IDEO has received over 1,000 patents issued since 1978
    • 407. Winner of over 350 awards since 1991
    “Fail often in order to succeed sooner”
    –David Kelley, IDEO founder
    What We Find
    • Innovation leaders maintain ongoing customer conversations to determine what problems consumers are trying to solve and identify unmet needs
    • 408. Successful innovators build frequent experimentation and iteration into the process
  • Hewlett-Packard revamped R&D and the portfolio management process to surpass Dell as leading PC maker
    Overview
    Results
    Solution
    • HP cut costs dramatically in 2005 to decrease operational spending
    • 409. Slow-moving HP Labs (R&D group)
    • 410. Inefficient project process
    • 411. Project approvals mainly relied on personal relationships between 600 scientists
    • 412. Few formal milestone reviews
    • 413. Excessively long projects hinder new project staffing due to lack of available resources
    • 414. Link HP Lab’s annual $150 million budget to 20-30 major projects with high expected pay-offs
    • 415. Implement business plan review process
    • 416. Compile business plans to compete for budget and staff
    • 417. Instigate central review board to approve ideas and monitor progress of projects
    • 418. Implement technology transfer office
    • 419. Speed promising projects into product groups
    • 420. License projects HP cannot use through “entrepreneur in residence” program with venture capital firm to commercialize technology
    • 421. Measure productivity across product line by measuring research spending as percentage of gross margin
    • 422. Flatter hierarchies
    • 423. Seven global outposts report directly to HP Labs director
    • 424. Focus on five key strategic areas
    • 425. Intensive data analysis
    • 426. Build clusters of machines for complex problems
    • 427. Transform analog into digital content
    • 428. Mobile computing
    • 429. Environmentally friendly machines
    • 430. Increased accountability
    • 431. Termination of projects with insufficient progress
    • 432. Transfer unproductive researchers
    • 433. Overall company stock price tripled in two years to beat Dell as leading PC maker
    “We [are] trying to get innovation to the highest level we can” – Mark Hurd, CEO HP
    Source: Business Week, Apr 2008; Business Week Mar 2009
  • 434. Dyson developed a new technology and used iterative development to create a new product class
    Business Description
    • Dyson Ltd. specializes in manufacturing of innovative vacuum cleaners which have patented multi-cyclone technology instead of conventional suction technology
    Drivers – product enhancement
    • Vacuum cleaner bag often clogs with dust affecting its operation, this was noticed by James Dyson
    • 435. Dyson went about investing time for developing bagless vacuum cleaners which would enable smoother operation of the vacuum cleaners
    Major changes undertaken
    • James Dyson designed and built an industrial cyclone tower, which removed the powder particles by exerting centrifugal forces greater than 100,000 times that of gravity and applied the principle to vacuum cleaner
    • 436. Dyson spent 5 years and developed 5,127 prototypes of his vacuum cleaner till the bagless model finally arrived
    Success achieved
    • Dyson went on to become the largest selling brand of vacuum cleaners in UK and the Western European region, accounts for 20% of all vacuum cleaner sales in America and has achieved sales of over USD 10 b worldwide
    Criteria
    Low High
    Industry requirements
    Dyson fulfillments
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    Price
    Technology Innovation
    Market Access
    Customer Convenience
    Environmental Friendliness
    Maintenance
    “Anyone developing new products and new technology needs one characteristic above all else: hope.” – James Dyson.
    Source: Dyson website, Best vacuum cleaner reviews website; CEA CS.SHOP Analysis
  • 437. Bayer has successfully implemented the Greenhouse concept of transferring innovative ideas to an independent entity – Lyttron
    How Bayer Material Sciences overcame organizational hurdles to institutionalize innovation
    Criteria
    Low High
    Business Description
    • Bayer is a global enterprise with core competencies in the fields of health care, nutrition and high-tech materials
    • 438. Bayer MaterialScience AG is a renowned supplier of high-performance materials and innovative systems
    Drivers
    • Bayer MaterialScience developed luminescent films which are uniform area light sources characterized by homogeneous light emission
    • 439. It could foresee the immense potential the innovation possessed but decided to carve it out as it did not form a part of its core business
    Major changes undertaken
    • Bayer MaterialScience established Lyttron to begin production of luminescent films on industrial scale and developing individual solutions for customers, with an investment of EUR 24.5 m
    Success achieved
    • Lyttron develops, produces and distributes highly flexibleelectroluminescent films: luminous films that are characterized by their soft, constant light and durable, failsafe and compact nature
    Industry requirements
    Fulfillments
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    Technology Innovation
    Product Features
    Market Access
    Business Model
    Leveraging parent’s brand value
    Operational Efficiency
    Source: Bayer website; Bayer MaterialSciences website; Lyttron website; CEA CS.SHOP Analysis