Innovation Competence (Business Innovation through Value Propositions ) Walter Adamson June, 2003 Version B Contact: [email_address] Tel: +61 403 345 632

Opportunity for Innovation Value Propositions - an Opportunity for Innovation The process begins with collaborative discussions about the business, by the business – the Business Analysis phase CIOs can provide and promote VPs as a tool for business innovation IT Analysis provides the opportunity for CIO leadership in Business Innovation, through competence in innovation leadership IT Analysis Innovation Business Analysis Act Plan Do Check Maintenance Cycle Alignment Pre-Alignment Generate VP

Value Propositions - an Opportunity for Innovation

The process begins with collaborative discussions about the business, by the business – the Business Analysis phase

CIOs can provide and promote VPs as a tool for business innovation

IT Analysis provides the opportunity for CIO leadership in Business Innovation, through competence in innovation leadership

VP Model - Business Analysis A collaboration workshop, led by the Business Executives Facilitated by industry insights Insights into the structure of the industry, the strengths, weaknesses and threats of competitors, and the complex factors that drive the economics of individual companies Two questions are at the centre of discussion: What are the factors that drive the economics of the sector as a whole, and individual companies/competitors? How does the strategy, priorities, capabilities and performance of our organization compare and relate to those factors? Output is “Pre-Alignment” Information Output which is not in isolation from previous and current IT initiatives The information has some sense of informal alignment, and There will also be some sense of the emerging “gap” in alignment

A collaboration workshop, led by the Business Executives

Facilitated by industry insights

Insights into the structure of the industry, the strengths, weaknesses and threats of competitors, and the complex factors that drive the economics of individual companies

Two questions are at the centre of discussion:

What are the factors that drive the economics of the sector as a whole, and individual companies/competitors?

How does the strategy, priorities, capabilities and performance of our organization compare and relate to those factors?

Output is “Pre-Alignment” Information

Output which is not in isolation from previous and current IT initiatives

The information has some sense of informal alignment, and

There will also be some sense of the emerging “gap” in alignment

IT executives need to be able to answer 2 key questions: How does IT influence, enable and drive the individual factors identified in phase one, at both the sector level and organization level? What is the priority, sequence, timing and risk profile of IT investments needed to enable the factors identified by the business analysis, in order to achieve the organizational goals? VP Model – IT Analysis The CIO needs to know who the industry IT innovators are , why they can sustain that lead, and how that relates to the business factors, absorptive capability and risk appetite of their own organization.

IT executives need to be able to answer 2 key questions:

How does IT influence, enable and drive the individual factors identified in phase one, at both the sector level and organization level?

What is the priority, sequence, timing and risk profile of IT investments needed to enable the factors identified by the business analysis, in order to achieve the organizational goals?

The CIO needs to know the industry The competitive landscape and who is leading and lagging Industry trends, customer buying trends, and collaboration Technology trends and their economic impact Understand who is creating wealth in the industry One key is to understand Economic Value Add (EVA) Calculate the productivity of key resources Which services, products, assets have unusually high EVA? What can be learnt from those successes? Benchmark productivity – globally Best performance in the industry – key metrics, and why? VP Model - Industry Analysis Bringing this kind of information to a business unit is extremely powerful as most do not have the time and capability to study the industry and competitors. This type of information can underwrite a new value proposition and business innovation , as well as building outstanding relationships and demonstrating the value of IT.

The CIO needs to know the industry

The competitive landscape and who is leading and lagging

Industry trends, customer buying trends, and collaboration

Technology trends and their economic impact

Understand who is creating wealth in the industry

One key is to understand Economic Value Add (EVA)

Calculate the productivity of key resources

Which services, products, assets have unusually high EVA?

What can be learnt from those successes?

Benchmark productivity – globally

Best performance in the industry – key metrics, and why?

Innovation – Asking Questions Essential steps in developing an innovative value proposition: Asking the right questions, and Being competent in Business Innovation as systematic innovation Asking the right questions is necessary to generate the best VP Assess the current state of the business, and abandon yesterday Systematically review and assess business successes and failures Question and challenge opportunities Systematic Innovation Recording and appraising business innovations in the field Understanding how and where these innovations arose The CIO can take leadership in business innovation by asking the right questions, and bringing systematic innovation practice to the development of value propositions, at the “ IT Analysis and Innovation ” step.

Essential steps in developing an innovative value proposition:

Asking the right questions, and

Being competent in Business Innovation as systematic innovation

Asking the right questions is necessary to generate the best VP

Assess the current state of the business, and abandon yesterday

Systematically review and assess business successes and failures

Question and challenge opportunities

Systematic Innovation

Recording and appraising business innovations in the field

Understanding how and where these innovations arose

Innovation - Abandonment The objective is “organized abandonment” Abandon yesterday, when business demands it – be authentic The first abandonment task is continual assessment Ask two questions, of every product, service, business, venture, distribution channel, and relationship: Question 1 : If we did not do this already, would we do it now knowing what we now know? If NO then what action will we take? Question 2 : If we WOULD go into it, would we do it the way we are doing it today? If NO then what action will we take? The second task is the action of abandonment How to act, and in what timeframe? How to manage the abandonment – change leadership?

The objective is “organized abandonment”

Abandon yesterday, when business demands it – be authentic

The first abandonment task is continual assessment

Ask two questions, of every product, service, business, venture, distribution channel, and relationship:

Question 1 : If we did not do this already, would we do it now knowing what we now know? If NO then what action will we take?

Question 2 : If we WOULD go into it, would we do it the way we are doing it today? If NO then what action will we take?

The second task is the action of abandonment

How to act, and in what timeframe?

How to manage the abandonment – change leadership?

Review and assess business successes and failures Find, research, discover, unexpected successes and failures Inside the organization, and From outside the organization, and discuss and note the reasons Note business incongruities In business processes, distribution, customer needs, and competition Changes in markets & customer demographics Changing meaning and perception about services, products, and brands Focus on changes in distribution and channels as these change fast Generate new knowledge about causes of success and failure Was the inside innovation chance, or planning and systematic? Are we able to generate business innovation as management practice? Where were the influences that we missed, and why? What better information, systems, processes and people do we need? Innovation - Review & Assessment

Review and assess business successes and failures

Find, research, discover, unexpected successes and failures

Inside the organization, and

From outside the organization, and discuss and note the reasons

Note business incongruities

In business processes, distribution, customer needs, and competition

Changes in markets & customer demographics

Changing meaning and perception about services, products, and brands

Focus on changes in distribution and channels as these change fast

Generate new knowledge about causes of success and failure

Was the inside innovation chance, or planning and systematic?

Are we able to generate business innovation as management practice?

Where were the influences that we missed, and why?

What better information, systems, processes and people do we need?

Question and challenge opportunities Is this an opportunity to innovate: Develop different products and services? New channels to market? More effective internal processes? New ways to align and partner? Better access to new technology and ideas? Does it indicate: Changing balances of power in the industry, or with consumers? Permanent changes in cost structures? New and different competitors are here to stay? New trends in customer perceptions and values? The beginning of new effects of technology? Innovation – Question & Challenge

Question and challenge opportunities

Is this an opportunity to innovate:

Develop different products and services?

New channels to market?

More effective internal processes?

New ways to align and partner?

Better access to new technology and ideas?

Does it indicate:

Changing balances of power in the industry, or with consumers?

Permanent changes in cost structures?

New and different competitors are here to stay?

New trends in customer perceptions and values?

The beginning of new effects of technology?

Record and appraise innovations in the field Which were truly successful? How many of them were ours? Is our innovation performance commensurate with our strategy? With the direction of the market? With our market standing? With our research spending? Are our successful innovations in the area of greatest growth and opportunity? How and where did these innovations arise? How many of the truly important opportunities did we miss? Because we did not see them? Because we saw them and ignored them or did not understand? Because we botched the chance? And how well do we do in converting an innovation into a commercial product? Systematic Innovation

Record and appraise innovations in the field

Which were truly successful?

How many of them were ours?

Is our innovation performance commensurate with our strategy?

With the direction of the market?

With our market standing?

With our research spending?

Are our successful innovations in the area of greatest growth and opportunity?

How and where did these innovations arise?

How many of the truly important opportunities did we miss?

Because we did not see them?

Because we saw them and ignored them or did not understand?

Because we botched the chance?

And how well do we do in converting an innovation into a commercial product?

The Innovation Test The test of an innovation is that it creates value Value = Benefits - Cost Benefits are Features + Advantages relevant to business needs Benefits have to be delivered with timing, sequence and risk which matches the business needs as they change Value is perceived differently between different people, segments and markets Therefore, Innovation within Value Propositions has to be matched to delivery performance, change management, risk management and changing perceptions.

The test of an innovation is that it creates value

Value = Benefits - Cost

Benefits are Features + Advantages relevant to business needs

Benefits have to be delivered with timing, sequence and risk which matches the business needs as they change

Value is perceived differently between different people, segments and markets

Therefore, Innovation within Value Propositions has to be matched to delivery performance, change management, risk management and changing perceptions.

Business Innovation by Steps Value “ The IT Analysis phase provides the opportunity for CIO leadership in business innovation” Business Innovation Value Proposition and IT Alignment IT Analysis and Innovation Pre Alignment Information Business Analysis CIO Leadership The Innovation Test VALUE Now 1 week 3 weeks 5 weeks Innovation, in the context of the organization, and its business ecosystem