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In 3 payback & d for-tomorrow

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Payback - The Cash Curve and the 4S Factors

Payback - The Cash Curve and the 4S Factors

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  • 1. Innovation –Processes &Tools A Two-Day Workshop Session 2B: Making Innovation Work
  • 2. Program Overview
    • 1. 9.30 – 9.40 Introduction
    • 2. 9.40 - 11.00 NABC Group Exercise
    • 3. 11.00 - 11.15 Tea Break
    • 4. 11.15 - 12.30 Group Presentations
    • 5. 12.30 - 1.30 Lunch Break
    • 6. 1.30 - 3.00 Making Innovation Work
    • 7. 3.00 - 3.30 Case Study Air Deccan
    • 8. 3.30 - 4.30 Payback - Introduction
    • 9. 4.30 - 4.45 Tea Break
    • 10. 4.45 - 5.30 Design for Today – Toyota
    • 11. 5.30 Close of Day 1
  • 3. Framework for the Practice of Innovation
    • Day 2
    • Manpower
    • 10 Faces
    • Frooti Case
    • Mindspace
    • E-Choupal
    • Day 1
    • Methods
    • 5 Disciplines
    • 7 Rules
    • Money
    • Payback
    4Ms: Methods, Money, Manpower, Mindspace
  • 4. The 5 Disciplines of Innovation The Definition of Innovation A relentless focus on the creation and delivery of new customer value to the marketplace within a framework of business viability
  • 5.
    • How much should you invest in an innovative product or service?
    • How fast should you push it to market?
    • How quickly can you get to optimal value ?
    • How much additional investment should you pour into sustaining and building the product or service?
    Making Innovation Work Payback , or the profitability of investment, is the only decisive indicator for success in innovation
  • 6. Making Innovation Work Measuring Payback with the Cash Curve The most effective tool to measure payback on innovation is the cash curve
  • 7. Making Innovation Work Source: Payback: Reaping the Rewards of Innovation (James P. Andrew and Harold L. Sirkin, Four S Factors have a direct impact on Cash Payback
  • 8. Making Innovation Work Tata Motors - New Product Introduction (NPI) Process
    • Structured process for speed - faster product innovation
    • Brings in greater discipline in the start-up stage
    • NPI has helped Tata Motors create a new segment in Tata Ace – India’s first mini-truck
  • 9.  
  • 10. Making Innovation Work Source: Payback: Reaping the Rewards of Innovation (James P. Andrew and Harold L. Sirkin, Prelaunch $ 5 Billion expense swallowed Cash to sink Iridium
  • 11. Making Innovation Work Source: Payback: Reaping the Rewards of Innovation (James P. Andrew and Harold L. Sirkin, Microsoft had difficulty scaling the Xbox volumes to get Payback
  • 12. Making Innovation Work Source: Payback: Reaping the Rewards of Innovation (James P. Andrew and Harold L. Sirkin, Linde uses the cash curve to time the launch of new products
  • 13. Making Innovation Work
    • 3 Types of Risks in Innovation
    • • Executional. Can the company actually develop, produce, distribute, and support the new product or service as scheduled?
    • • Technical. Will the product or service work or perform as intended or promised?
    • • Market. Will the product or service be accepted by customers in the amounts, at the prices, and within the time, desired?
    Source: Payback: Reaping the Rewards of Innovation (James P. Andrew and Harold L. Sirkin,
  • 14. Making Innovation Work Source: Payback: Reaping the Rewards of Innovation (James P. Andrew and Harold L. Sirkin, The cash curve identifies the size and relations between 3 risks
  • 15. Making Innovation Work Source: Payback: Reaping the Rewards of Innovation (James P. Andrew and Harold L. Sirkin, Ideal! Low start-up cost, high speed and scale, low support cost
  • 16. 1993 1998 2003 2011 Launch Breakeven
  • 17. Making Innovation Work Group Exercise based on spreadsheet Cash Curves for: ACE World Truck Nano
  • 18. 2001 2005 2013 Breakeven Launch
  • 19. 2003 2008 2011 2015 Breakeven Launch
  • 20. 2009 2004 2016 2012 Launch Breakeven
  • 21. Making Innovation Work In the Peacock and Elephant Projects, using the Payback Cash Curve, discuss the following: • Can the team complete the development of the product on time in order to get it into production at the targeted date? • Will the product really meet the customer-derived spec? • Will our production process be able to get the hoped-for yield? • Can we produce as many units as we think we can? • How much capital investment will be required - and how might that fluctuate? • When will we sell the first unit? • How many units will customers buy? At what price? • When are we going to go cash positive? • In short, does this invention look as if it can generate cash payback? If so, when and how?
  • 22. Making Innovation Work Design for Today Innovation is about designing solutions for customer problems. Can you see when and why such designs might deliver outstanding customer value?
  • 23. Changing Market and Customer Requirements Yesterday’s Problems, today’s solutions Flyovers Making Innovation Work
  • 24. Changing Market and Customer Requirements Yesterday’s Problems, today’s solutions Flyovers Making Innovation Work Today’s Problems, yesterday’s solutions Yoga
  • 25. Changing Market and Customer Requirements Yesterday’s Problems, today’s solutions Flyovers Making Innovation Work Today’s Problems, yesterday’s solutions Yoga Today’s Problems, today’s solutions Antibiotics
  • 26. Changing Market and Customer Requirements Yesterday’s Problems, today’s solutions Flyovers Making Innovation Work Today’s Problems, yesterday’s solutions Yoga Today’s Problems, today’s solutions Antibiotics Today’s Problems, tomorrow’s solutions Hybrid Car
  • 27. Changing Market and Customer Requirements Yesterday’s Problems, today’s solutions Flyovers Making Innovation Work Today’s Problems, yesterday’s solutions Yoga Today’s Problems, today’s solutions Antibiotics Today’s Problems, tomorrow’s solutions Hybrid Car Tomorrow’s Problems, tomorrow’s solutions Solar Car Which block represents innovation? And why?
  • 28. Changing Market and Customer Requirements Yesterday’s Problems, today’s solutions Flyovers Making Innovation Work Today’s Problems, yesterday’s solutions Yoga Today’s Problems, today’s solutions Antibiotics Incremental Innovation (Improving yesterday’s solutions)
  • 29. Changing Market and Customer Requirements Yesterday’s Problems, today’s solutions Making Innovation Work Today’s Problems, yesterday’s solutions Today’s Problems, today’s solutions Today’s Problems, tomorrow’s solutions Tomorrow’s Problems, tomorrow’s solutions Solar Car Which block represents innovation? And why? Prototypes (Testing tomorrow’s solutions)
  • 30. Changing Market and Customer Requirements Yesterday’s Problems, today’s solutions Making Innovation Work Today’s Problems, yesterday’s solutions Today’s Problems, today’s solutions Today’s Problems, tomorrow’s solutions Hybrid Car Tomorrow’s Problems, tomorrow’s solutions Which block represents innovation? And why? Innovation
  • 31. Changing Market and Customer Requirements Making Innovation Work Today’s Problems, tomorrow’s solutions Hybrid Car Toyota Prius
  • 32. Making Innovation Work
    • Key Learnings
    Source: Making Innovation Work (Davila, Epstein, Shelton)
  • 33. Framework for the Practice of Innovation
    • Day 2
    • Manpower
    • 10 Faces
    • Frooti Case
    • Mindspace
    • E-Choupal
    • Day 1
    • Methods
    • 5 Disciplines
    • 7 Rules
    • Money
    • Payback
    4Ms: Methods, Money, Manpower, Mindspace
  • 34. Making Innovation Work
    • 7 Innovation Rules of good management
    • Exert strong leadership on the innovation strategy and portfolio decisions.
    • (Tata Motors – led by Ratan Tata’s leadership)
    • 2. Integrate innovation into the company’s basic business mentality.
    • (Tata Motors – numerous innovation initiatives and programs)
    • 3. Align the amount and type of innovation to the company’s business.
    • (Tata Motors – Nano and World Truck focused on vehicles as a business)
    • 4. Manage the natural tension between creativity and value capture.
    • (Tata Motors – innovation carefully evaluated by committees)
    • 5. Neutralize organizational antibodies .
    • 6. Recognize that innovation is a network that includes people and knowledge -- both inside and outside the organization. (Tata Motors – intranet – Internet – Social Networking - LinkedIn forums)
    • Create the right metrics and rewards for innovation.
    Source: Making Innovation Work (Davila, Epstein, Shelton)
  • 35. The 5 Disciplines of Innovation The Definition of Innovation A relentless focus on the creation and delivery of new customer value to the marketplace within a framework of business viability
  • 36. Making Innovation Work Design for Today Innovation is about designing tomorrow’s solutions for today’s problems. Payback Payback , or the profitability of investment, is the only decisive indicator for success in innovation
  • 37. SCAMPER – Tool for Innovation
  • 38. Making Innovation Work
    • References
    • 1. Making Innovation Work: How to Manage It, Measure It, and Profit from It
    • by Tony Davila, Marc J. Epstein, Robert Shelton
    • 2. Payback: Reaping the Rewards of Innovation
    • by James P. Andrew and Harold L. Sirkin
    • 3. The Elegant Solution: Toyota's Formula for Mastering Innovation
    • by Matthew May
  • 39. Making Innovation Work
    • Glossary
    • 1. ERC - Engineering Research Centre
    • 2. NPI - New Product Introduction
    • 3. TMETC – Tata Motors European Technical Center [UK, 2005]
  • 40. Program Overview
    • 1. 9.30 – 9.40 Introduction
    • 2. 9.40 - 11.00 NABC Group Exercise
    • 3. 11.00 - 11.15 Tea Break
    • 4. 11.15 - 12.30 Group Presentations
    • 5. 12.30 - 1.30 Lunch Break
    • 6. 1.30 - 3.00 Making Innovation Work
    • 7. 3.00 - 3.30 Case Study Air Deccan
    • 8. 3.30 - 4.30 Payback - Introduction
    • 9. 4.30 - 4.45 Tea Break
    • 10. 4.45 - 5.30 Design for Today – Toyota
    • 11. 5.30 Close of Day 1
  • 41. Framework for the Practice of Innovation
    • Day 2
    • Manpower
    • 10 Faces
    • Frooti Case
    • Mindspace
    • Mental Models
    • Day 1
    • Methods
    • 5 Disciplines
    • 7 Rules
    • Money
    • Payback
    4Ms: Methods, Money, Manpower, Mindspace