Intelligence-Driven Innovation & Product Development: an Exercise-Driven, Interactive Workshop Arik R. Johnson SCIP – SNE/CT Chapter Workshop Development & Leadership Institute Innovation Presentation/Workshop CEO & Managing Director, Aurora WDC New Haven, Connecticut USA [email_address] Thursday 5 October 2006

Defining Objectives for Today Understand the Techniques Used to Understand & Produce High-Impact Analysis Based on the Core Theories of Innovation Practice Applying those Techniques in Real-Life “Vignettes” as well as a Simulated Scenario Example using the Core Theories of Innovation as the Analytical Framework

Understand the Techniques Used to Understand & Produce High-Impact Analysis Based on the Core Theories of Innovation

Practice Applying those Techniques in Real-Life “Vignettes” as well as a Simulated Scenario Example using the Core Theories of Innovation as the Analytical Framework

Competitors, Customers & Technologies Are Complex Interdependencies CI is about “Seeing Clearly” through Market Illusions

Research Collection Sources Where does the information come from? Primary Research We may share customers, prospects and suppliers who can be interviewed. Every company has knowledgeable employees with loose lips. Secondary Research Companies release information for promotional, image and regulatory purposes. No Company Operates in Isolation Information is exchanged everywhere money is exchanged.

Where does the information come from?

Primary Research

We may share customers, prospects and suppliers who can be interviewed.

Every company has knowledgeable employees with loose lips.

Secondary Research

Companies release information for promotional, image and regulatory purposes.

Analysis is Key The Difference Between Data and Intelligence “ The competitor would make a good acquisition candidate. Its lean & mean structure would fit well with our current operations.” Intelligence: The insight that will allow you to make an informed decision “ After gathering more operational information and running a side-by-side profit & loss analysis, it appears the competitor has become highly efficient. It exceeds industry standards and has become a best-in-class facility.” Analysis: Distilled information “ Based on the D&B and the salesperson’s report, it appears the competitor has lost business.” Information: A pooling of these bits of facts, observations and rumors 2001: “The D&B report told us that the competitors plant had 100 employees.” 2004: “One of our salespeople just passed by the competitor’s plant and spotted only 30 cars in the lot.” Data: Scattered bits and pieces of facts, observations and rumors

The Ideal Analyst = Investigative Journalist e.g. Maria Bartiromo (CNBC) Argument/Idea Evangelist Entrepreneurial Passion Quick Study with Intense Curiosity Instinctive but Empirical Project/Deadline Manager Librarian/Information Manager Hard-Core Interviewer Pattern Recognizant Great Communicator Persuasive Position Advocate

e.g. Maria Bartiromo (CNBC)

Argument/Idea Evangelist

Entrepreneurial Passion

Quick Study with Intense Curiosity

Instinctive but Empirical

Project/Deadline Manager

Librarian/Information Manager

Hard-Core Interviewer

Pattern Recognizant

Great Communicator

Persuasive Position Advocate

What is Investigative Journalism? Watergate: Woodward & Bernstein Going Undercover vs. Open-Source Intel Whistleblower, Axe-Grinder, “Anonymice” Scooping & “Girl Marries Prince” Reporting Sniffing out the Story to Convey Implications Rise of Citizen Journalism (Blogging) Lots to Learn for Intelligence Professionals

Watergate: Woodward & Bernstein

Going Undercover vs. Open-Source Intel

Whistleblower, Axe-Grinder, “Anonymice”

Scooping & “Girl Marries Prince” Reporting

Sniffing out the Story to Convey Implications

Rise of Citizen Journalism (Blogging)

Lots to Learn for Intelligence Professionals

What is Investigative Journalism? An investigative journalist may spend a considerable period researching and preparing a report, sometimes months or years, whereas a typical daily or weekly news reporter writes items concerning immediately available news. Most investigative journalism is done by newspapers, wire services and freelance journalists. An investigative journalist's final report may take the form of an exposé.

An investigative journalist may spend a considerable period researching and preparing a report, sometimes months or years, whereas a typical daily or weekly news reporter writes items concerning immediately available news. Most investigative journalism is done by newspapers, wire services and freelance journalists. An investigative journalist's final report may take the form of an exposé.

What is Investigative Journalism? The investigation will often require an extensive number of interviews and travel; other instances might call for the reporter to make use of activities such as surveillance techniques, tedious analysis of documents, investigations of the performance of any kind of equipment involved in an accident, patent medicine, scientific analysis, social and legal issues, and the like.

The investigation will often require an extensive number of interviews and travel; other instances might call for the reporter to make use of activities such as surveillance techniques, tedious analysis of documents, investigations of the performance of any kind of equipment involved in an accident, patent medicine, scientific analysis, social and legal issues, and the like.

What is Investigative Journalism? Investigative journalism requires a lot of scrutiny of details, fact-finding, and physical effort. An investigative journalist must have an analytical and incisive mind with strong self-motivation to carry on when all doors are closed, when facts are being covered up or falsified and so on.

Investigative journalism requires a lot of scrutiny of details, fact-finding, and physical effort. An investigative journalist must have an analytical and incisive mind with strong self-motivation to carry on when all doors are closed, when facts are being covered up or falsified and so on.

What is Investigative Journalism? Investigative reporting seeks to gather facts which someone wants suppressed. It seeks not just the obvious informants who will be uncontroversial or economical with the truth, but the less obvious who know about disturbing secrets and are angry or disturbed enough to divulge them.

Investigative reporting seeks to gather facts which someone wants suppressed. It seeks not just the obvious informants who will be uncontroversial or economical with the truth, but the less obvious who know about disturbing secrets and are angry or disturbed enough to divulge them.

Different Missions, Different Approaches Specialist Slower Production Less Output, More Analytical Agenda Driven by Contact Network Lots of Subject Matter Knowledge Seeks Explanation of the Subject Investigative Very Slow, Curious, Historical Little Output, Highly Analytical Questions Official Positions, Listens to Nonspokesmen Operates Outside Routine Agenda of the Publisher Generalist In a Hurry Lots of Output, Less Analytical Agenda Driven by the Publisher Little Knowledge of Subject Matter Seeks Volume of Public Interest

The Duality of Intelligence Both Decisive & Incisive Sensing Incisive Scanning for Trends, there is no “Decision” to be made Recognizing “Pattern Vectors” Framework for Interpretation Implications for the Reader Bottom-Up Driven by Trends Outcome is Observation Hypothetical Decisive Frame of Reference is the Decision, Less Trend-Dependent Framework for Analysis Compares Options & Outcomes Recommendations and Trust Top-Down Driven by Issues Decision & Action vs. ‘Nariyuki’ Factual

The Insight Method Take Nothing at Face Value Get to the Facts at the Heart of an Issue Explain Difficult Concepts, Don’t Write Around It Speak to As Many Relevant People as Possible Use Simple, Obvious Questions to Open Subjects Don’t Echo Main Source, Find Other Views Every Company, Person & Issue Has a History that Drives Behavior Today Sunday Times

Take Nothing at Face Value

Get to the Facts at the Heart of an Issue

Explain Difficult Concepts, Don’t Write Around It

Speak to As Many Relevant People as Possible

Use Simple, Obvious Questions to Open Subjects

Don’t Echo Main Source, Find Other Views

Every Company, Person & Issue Has a History that Drives Behavior Today

Sunday Times

The CI Think Tank Model Tasking the Research & Analysis Bureau using by KITs & Scenarios to Deliver a Portfolio of End-User Applications

Porter’s Five Forces Model

Impacts on Planning & Execution Your Company’s Plans and Execution Vision and Grand Strategy Strategic Plans Market Success Operational Projects and Programs Tactical Execution Other (More-or-Less) “Uncontrollables” Competitors’ Plans and Actions New Forms of Competition X Y Z P Q R A B C Indirect Competitors Direct Competitors Government and Regulatory The Economy Technology Market Trends Industry Rationalization Other Unknowns

Success Breeds Complacency “ It is a classic conundrum for business titans: How much money and attention should be focused on a new, but growing, operation that is far less profitable than the core business?” - Prof. Clayton Christensen, The Innovator's Dilemma

“ It is a classic conundrum for business titans: How much money and attention should be focused on a new, but growing, operation that is far less profitable than the core business?”

- Prof. Clayton Christensen, The Innovator's Dilemma

Process of Predicting Industry Change Customer Needs Operational Approach & Posture Technology & Innovation

“ Strategic Intelligence” Principles of Defensive Warfare Only the market leader should consider playing defense. The best defensive strategy is the courage to attack yourself. Strong competitive moves should always be blocked. Principles of Offensive Warfare The main consideration is the strength of the leader's position. Find a weakness in the leader's strength and attack at that point. Launch the attack on as narrow a front as possible. Principles of Flanking Warfare A good flanking move must be made into an uncontested area. Tactical surprise ought to be an important element of the plan. The pursuit is just as critical as the attack itself. Principles of Guerilla Warfare Find a segment of the market small enough to defend. No matter how successful you become, never act like the leader. Be prepared to bug out at a moment's notice. -- Jack Trout Guerilla Small Players Finding market small enough to defend Prepared to bug out at moment’s notice Flanking New Players Moving into uncontested area Element of surprise Offensive No 2 or No 3 Avoiding leader’s strengths Attacking leader’s weaknesses Defensive Market Leaders Attacking themselves with new ideas Blocking competitive moves The Strategy Square

Principles of Defensive Warfare

Only the market leader should consider playing defense.

The best defensive strategy is the courage to attack yourself.

Strong competitive moves should always be blocked.

Principles of Offensive Warfare

The main consideration is the strength of the leader's position.

Find a weakness in the leader's strength and attack at that point.

Launch the attack on as narrow a front as possible.

Principles of Flanking Warfare

A good flanking move must be made into an uncontested area.

Tactical surprise ought to be an important element of the plan.

The pursuit is just as critical as the attack itself.

Principles of Guerilla Warfare

Find a segment of the market small enough to defend.

No matter how successful you become, never act like the leader.

Be prepared to bug out at a moment's notice.

-- Jack Trout

Guerilla

Small Players

Finding market small enough to defend

Prepared to bug out at moment’s notice

Flanking

New Players

Moving into uncontested area

Element of surprise

Offensive

No 2 or No 3

Avoiding leader’s strengths

Attacking leader’s weaknesses

Defensive

Market Leaders

Attacking themselves with new ideas

Blocking competitive moves

Growth Vector Analysis Growth Vector Analysis (GVA) reviews the different product alternatives available to the firm in relation to its market options, not already being pursued by competitors. Four complimentary characteristics are used for defining common threads of strategy: Product-Market Scope specifies particular industries to which a firm confines its position. Growth Vector indicates the direction a firm is moving relative to current product-market posture (market penetration, market development, product development and diversification). Competitive Advantage defined as particular properties of individual product markets conveying a strong market position. Synergy is the combined effect on the firm’s resources that is greater than the sum of its parts. Present Products Improved Products New Products Existing Market Market Penetration Product Extension Product Development Expanded Market Market Extension Market Segmentation / Product Differentiation Product Development / Market Extension New Market Market Development Product/Service Extension & Market Development Diversification

Growth Vector Analysis (GVA) reviews the different product alternatives available to the firm in relation to its market options, not already being pursued by competitors. Four complimentary characteristics are used for defining common threads of strategy:

Product-Market Scope specifies particular industries to which a firm confines its position.

Growth Vector indicates the direction a firm is moving relative to current product-market posture (market penetration, market development, product development and diversification).

Competitive Advantage defined as particular properties of individual product markets conveying a strong market position.

Synergy is the combined effect on the firm’s resources that is greater than the sum of its parts.

Consumers “Hire” Products to Do “Jobs” for Them Concentrate Less on What Customers “Want” and More on What Customers “Need”

Disruptive Technology

Value Chain Evolution Theory Vertically Integrating to Improve What’s “Not Good Enough” in the company’s products and services Companies must control all those activities and combinations of activities in the value chain that drive the product performance characteristics that matter most to customers Specialists will seek to control performance drivers based on differences in motivation and skills around a modular interface in the VC. (Sword & Shield)

RPV Theory: Building Capabilities Processes Ways to Turn Resources into Products/Services Hiring/Training Product Dev. Manufacturing Budgeting Research Values Prioritization Criteria for Decision-Making Cost Structure Income Statement Customer Demand Opp. Size Ethics Resources Assets the Firm can Buy or Sell, Build or Destroy People Technology Products Equipment Cash/Brand/Distr.

Disruptive Innovation Theory Sustaining Innovations Better Products Brought to Established Markets Low-End Disruptions Target Overshot Customers with a Lower Cost Business Model New-Market Disruption Compete Against Nonconsumption Difference Performance Measure Time Nonconsumers or Nonconsuming Contexts Performance

Consumer Demand & Signals of Change Non-Market Contexts: External Forces (Government, Economics, etc.) Increasing or Decreasing Barriers to Innovation Undershot Consumers: Opportunities for Up-Market Sustaining Innovations Overshot Consumers: Opportunities for Low-End Disruption, Shifting Profits by Specialist Displacements (Modularity) and the Emergence of Rules Non-Consumers: Opportunities for New Market Disruptive Growth Established Companies almost always Lose to Disruptive Innovators

Non-Market Contexts: External Forces (Government, Economics, etc.) Increasing or Decreasing Barriers to Innovation

Undershot Consumers: Opportunities for Up-Market Sustaining Innovations

Overshot Consumers: Opportunities for Low-End Disruption, Shifting Profits by Specialist Displacements (Modularity) and the Emergence of Rules

Non-Consumers: Opportunities for New Market Disruptive Growth

Process of Predicting Industry Change Signals of Change Strategic Choices Influencing Success Likely Outcome of Competitive Battles

Process of Predicting Industry Change Breakout Discussions Customer Needs Operational Approach & Posture Technology & Innovation

Competitor Vignettes A.) Articulate Opposing Worldviews & their Impact on Resulting Competitor Strategy B.) Describe Primary Forces to Consider Driving Competitor Decisions & Industry Change C.) Develop Hypothetical & Factual Frameworks for Research Collection, Impact Analysis and Delivery of Findings and Recommendations

A.) Articulate Opposing Worldviews & their Impact on Resulting Competitor Strategy

B.) Describe Primary Forces to Consider Driving Competitor Decisions & Industry Change

C.) Develop Hypothetical & Factual Frameworks for Research Collection, Impact Analysis and Delivery of Findings and Recommendations

Competitor Vignettes Toyota vs. General Motors Microsoft vs. Google Intel vs. AMD Dell vs. HP Wal-Mart vs. Target

Toyota vs. General Motors

Microsoft vs. Google

Intel vs. AMD

Dell vs. HP

Wal-Mart vs. Target

Questions or Comments? www.AuroraWDC.com Arik R. Johnson CI Best Practices Institute [email_address] +01-715-720-1616 Derek L. Johnson Research & Analysis Bureau [email_address] +01-608-268-3470

www.AuroraWDC.com