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  1. 1. Perspectives on Innovation ASME IAB Meeting October 4, 2006
  2. 2. Innovation is the fundamental driver of growth and profitability <ul><li>Competitiveness will continue to be based on a company's ability to innovate - There is no more important capability a company can develop to improve performance and to fuel growth … </li></ul><ul><li>… sustained growth and profitability cannot be achieved through cost cutting alone </li></ul><ul><li>Truly standout innovators have developed capabilities to consistently target superior new products and bring them to market with speed and efficiency </li></ul><ul><li>The challenge is to select, build, and deploy this differentiating set of innovation capabilities </li></ul><ul><li>Yet, senior executives are often uncertain of the answers to key questions about their innovation strategy and capabilities </li></ul>
  3. 3. Senior executives recognize the importance of innovation to their objectives
  4. 4. In aggregate, companies’ top innovation priorities are on product leadership
  5. 5. The performance bar is being set very high
  6. 6. However, executives are only marginally satisfied with current improvement initiatives
  7. 7. Spending more money on R&D is not the answer …
  8. 8. Superior performance is linked to superior capabilities in innovation value stream activities Key Capability Questions <ul><li>How to grow/defend existing markets and customers? </li></ul><ul><li>How to extend into new markets? </li></ul><ul><li>How to Leverage market/technology disruptions? </li></ul><ul><li>How to create differentiation and avoid “me too” products? </li></ul><ul><li>How to identify unmet/ emerging customer trends/ needs? </li></ul><ul><li>How to balance variety and complexity? </li></ul><ul><li>How to maximize ROInnovation – first to market with best ideas </li></ul><ul><li>How to maintain focus and alignment with strategy? </li></ul><ul><li>How to avoid high WIP and low throughput? </li></ul><ul><li>How to the market window to maximize economic value </li></ul><ul><li>How to rapidly respond to competitor moves or market shifts? </li></ul><ul><li>How to deliver products & services on-time, at target cost and performance with high initial quality? </li></ul>Identify New Markets and Growth Platforms Generate Ideas for Differentiated Products & Services Prioritize Opportunities to Maximize Return Fast and Effective Development & Commercialization INNOVATION VALUE STREAM
  9. 9. Some Useful Guidelines for Effective Innovation Metrics <ul><li>Metrics should be tied to the overall business objectives and lead managers to clear actions based on their results </li></ul>Meaningful Balanced Across Multiple Dimensions Accurate and Repeatable Partially Suited for Benchmarking Few in Number <ul><li>Metrics should able to be consistently and repeatably collected with existing systems </li></ul><ul><li>“ Benchmark-able” for internal and external comparisons </li></ul><ul><li>Focus on the most critical few metrics – data availability often leads to metrics overload </li></ul><ul><li>Balanced by level (strategic vs executional, leading vs. lagging, current vs historical) </li></ul>
  10. 10. Frequently Used Measures – all have their limitations Source: APQC Benchamarks MOST FREQUENTLY USED INNOVATION METRICS
  11. 11. Example Balanced Scorecard <ul><li>R&D as % of Sales </li></ul><ul><li>Patent Filings </li></ul><ul><li># of areas with Tech. Leadership </li></ul>Leading Outcomes Strategic Portfolio Executional <ul><li>Profits from new products/New Product R&D </li></ul><ul><li>Cost reduction/CR R&D spend </li></ul><ul><li>Value creation/R&D spend </li></ul><ul><li>Portfolio balance (balance vs risk, etc.) </li></ul><ul><li>Portfolio alignment (investment vs strategic objectives) </li></ul><ul><li>% of Gate Criteria Completed </li></ul><ul><li>% Open Requirements </li></ul><ul><li>In-Process Sched. & Budget SLIP </li></ul><ul><li>Staffing % </li></ul><ul><li>Time-to-market </li></ul><ul><li>Customer Satisfaction </li></ul><ul><li>Warranty/quality Claims </li></ul>EXAMPLE INNOVATION SCORECARD <ul><li>Measures tailored to objectives: e.g. growth/share in targeted markets, geographies, etc. </li></ul>Overall measures of R&D effectiveness at creating value “ What’s the return on our innovation investment?” Alignment of development projects and spending with company strategic objectives “ Are we working on the right things?” Performance of project execution in terms of time, cost, quality and value “ Are we delivering products/services on time at a quality and cost customers will pay for?
  12. 12. Our service offering helps clients improve performance all along the Innovation Value Stream GG Innovation Service Offering: Identify New Markets and Growth Platforms Generate Ideas for Differentiated Products & Services Prioritize Opportunities to Maximize Return Fast and Effective Development & Commercialization INNOVATION STRATEGY PROFITABLE INNOVATION FAST INNOVATION INNOVATION VALUE STREAM Unique, Market-Based Approach to Identifying Growth Opportunities Proprietary Methods for Optimizing Portfolio Value and Business Complexity Proven Tools to Maximize Development Performance
  13. 13. About George Group <ul><li>Since 1986, George Group has been accelerating the pace of improvement for a diverse and growing list of global clients. Our goal is to help our clients create rapid and sustained improvements in shareholder value and customer satisfaction. </li></ul><ul><ul><li>Fully integrated Lean Six Sigma corporate deployment </li></ul></ul><ul><ul><ul><li>Our deep Value Based Management knowledge provides us with a clear framework to connect from the CEO's highest value creation priorities to Lean Six Sigma project selection, definition, and execution. No other firm provides this combination. </li></ul></ul></ul><ul><ul><ul><li>Our global reach is unmatched. We have established a reputation for excellence in complex, global engagements providing services in 54 countries and a methodology available in 13 languages. </li></ul></ul></ul><ul><ul><li>Strategic consulting </li></ul></ul><ul><ul><ul><li>Our engagement teams bring deep expertise in assessing customer needs and value creation of the product/service portfolio. Our project teams are not composed of new consultants, but seasoned, experienced experts who understand both the strategic and operational side of the solution. </li></ul></ul></ul><ul><ul><ul><li>Conquering Complexity: Our unique approach is the only true method that provides a quantitative understanding of what complexity is costing your organization and rapidly drive execution that gets results. Our complexity diagnostic brings together the critical elements of strategy, shareholder value, voice of customer, deep process knowledge and a patented analytical method to provide a completely unique, fresh point of view on the problem. </li></ul></ul></ul><ul><ul><ul><li>Fast Innovation: We offer a systematic, analytical, repeatable approach to: accelerating cycle-time to-launch and improving quality & market acceptance, building a robust pipeline of truly differentiated products/services, and creating deep & enduring capability in client organizations. Our process oriented view covers the entire new product/service value chain from early business development through full scale production. </li></ul></ul></ul>