IBM iForum 2007 - Joint Innovation With Clients by Tony Morgan

Joint Innovation with Clients November 2007 Tony Morgan - IBM Senior IT Architect Tuesday, December 4, 2007 1

Agenda  Innovation and Collaboration  IBM’s Approach to Innovation  Joint Innovation Partnership/Value Creation Centre  Factors for Success 2 Tuesday, December 4, 2007 2

Innovation – One Definition is…  The use of new ideas or current thinking applied in fundamentally different ways that result in significant change  Covering a broad scope including: – Products, Services, and Markets – Business Models – Operations 3 Tuesday, December 4, 2007 3

The Global CEO Study 2006: Innovation Interviewed 765 CEO’s - across the globe, 5 sectors, 21 industries, large and SMB enterprises 4 Tuesday, December 4, 2007 4

The Global CEO Study 2006: Innovation Interviewed 765 CEO’s - across the globe, 5 sectors, 21 industries, large and SMB enterprises CEOs: Extent of fundamental change needed over next two years Moderate 22% A lot Little or no 65% 13% 4 Tuesday, December 4, 2007 4

The Global CEO Study 2006: Innovation Interviewed 765 CEO’s - across the globe, 5 sectors, 21 industries, large and SMB enterprises CEOs are looking to use Innovation to  CEOs: Extent of fundamental drive fundamental change to enable change needed over next two years sustainable growth Moderate 22% A lot Little or no 65% 13% 4 Tuesday, December 4, 2007 4

The Global CEO Study 2006: Innovation Interviewed 765 CEO’s - across the globe, 5 sectors, 21 industries, large and SMB enterprises CEOs are looking to use Innovation to  CEOs: Extent of fundamental drive fundamental change to enable change needed over next two years sustainable growth Business model innovation is now  nearly as important as more traditional innovation around products/services Moderate 22% A lot Little or no 65% 13% 4 Tuesday, December 4, 2007 4

The Global CEO Study 2006: Innovation Interviewed 765 CEO’s - across the globe, 5 sectors, 21 industries, large and SMB enterprises CEOs are looking to use Innovation to  CEOs: Extent of fundamental drive fundamental change to enable change needed over next two years sustainable growth Business model innovation is now  nearly as important as more traditional innovation around products/services CEOs believe that integrating business  Moderate insight and technology capabilities 22% enables the organization to “stay ahead of the curve” A lot Little or no 65% 13% 4 Tuesday, December 4, 2007 4

The Global CEO Study 2006: Innovation Interviewed 765 CEO’s - across the globe, 5 sectors, 21 industries, large and SMB enterprises CEOs are looking to use Innovation to  CEOs: Extent of fundamental drive fundamental change to enable change needed over next two years sustainable growth Business model innovation is now  nearly as important as more traditional innovation around products/services CEOs believe that integrating business  Moderate insight and technology capabilities 22% enables the organization to “stay ahead of the curve” A lot CEOs agree that internal and external  Little or no 65% collaboration is key to innovation, but 13% many are slow to actually practice it 4 Tuesday, December 4, 2007 4

Sources of New Ideas and Innovation Employees Business partners Customers directly Consultants Competitors Associations Internal Sales & Service Units Internal R&D Academia Think-tanks Labs and/or other institutions 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% IBM Institute for Business Value, CEO Study 2006 5 Tuesday, December 4, 2007 5 Interestingly…What we found was more and more CEOs looking outside the organization for fresh ideas and innovation Look at this…external sources mentioned twice as often as internal sources Look at this…R&D mentioned by just over 15% …. a few years ago this would not have been the case There’s a real shift underway to collaborative innovation…

Sources of New Ideas and Innovation Employees Business partners Customers directly Consultants Competitors Associations Internal Sales & Service Units Internal R&D Academia Think-tanks Labs and/or other institutions 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% IBM Institute for Business Value, CEO Study 2006 McKinsey Innovation Survey October 2007 5 Tuesday, December 4, 2007 5 Interestingly…What we found was more and more CEOs looking outside the organization for fresh ideas and innovation Look at this…external sources mentioned twice as often as internal sources Look at this…R&D mentioned by just over 15% …. a few years ago this would not have been the case There’s a real shift underway to collaborative innovation…

Mechanisms for Innovation IBM CEO Study 2006 6 Tuesday, December 4, 2007 6

Mechanisms for Innovation McKinsey Innovation Survey October 2007 IBM CEO Study 2006 6 Tuesday, December 4, 2007 6

Delivering on Innovation Opportunities McKinsey Innovation Survey October 2007 7 Tuesday, December 4, 2007 7

IBM’s Approach to Innovation Challenge / Value realized Incubation Idea Generation Validation Opportunity Alpha Works –LOB with developer community 9 Tuesday, December 4, 2007 9

IBM’s Approach to Innovation Strong governance is crucial Challenge / Value realized Incubation Idea Generation Validation Opportunity Alpha Works –LOB with developer community 9 Tuesday, December 4, 2007 9

IBM’s Approach to Innovation Strong governance is crucial Challenge / Value realized Incubation Idea Generation Validation Opportunity IBM innovation programs Research, Corporate IBM Lines of Alpha Works –LOB with developer Business community GTO / GIO / IBV Client (and IBM) Challenges 9 Tuesday, December 4, 2007 9

IBM’s Approach to Innovation Strong governance is crucial Challenge / Value realized Incubation Idea Generation Validation Opportunity IBM innovation programs Research, ThinkPlace Corporate IBM Lines of Alpha Works –LOB InnovationJam with developer Business community Communities GTO / GIO / of Practice IBV Client (and IBM) Challenges 9 Tuesday, December 4, 2007 9

IBM’s Approach to Innovation Strong governance is crucial Challenge / Value realized Incubation Idea Generation Validation Opportunity IBM innovation programs Research, Extreme ThinkPlace Corporate Blue IBM Lines of Alpha Works –LOB Biz Tech InnovationJam with developer Business community Emerging Communities GTO / GIO / Business of Practice IBV Opportunities Client (and IBM) Challenges 9 Tuesday, December 4, 2007 9

IBM’s Approach to Innovation Strong governance is crucial Challenge / Value realized Incubation Idea Generation Validation Opportunity IBM innovation programs Research, Extreme TAP ThinkPlace Corporate Blue IBM Lines of Alpha Works –LOB Biz Tech InnovationJam with developer Business community Emerging Communities GTO / GIO / First of a Kind Business of Practice IBV Opportunities Client (and IBM) Challenges 9 Tuesday, December 4, 2007 9

IBM’s Approach to Innovation Strong governance is crucial Challenge / Value realized Incubation Idea Generation Validation Opportunity IBM innovation programs Research, Extreme TAP IBM Internal ThinkPlace Corporate Blue IBM Lines of Alpha Works –LOB Biz Tech IBM Oerings InnovationJam with developer Business community Emerging Communities GTO / GIO / Partners First of a Kind Business of Practice IBV Opportunities Client (and Clients IBM) Challenges 9 Tuesday, December 4, 2007 9

IBM’s Approach to Innovation Strong governance is crucial Challenge / Value realized Incubation Idea Generation Validation Opportunity IBM innovation programs Research, Extreme TAP IBM Internal ThinkPlace Corporate Blue IBM Lines of Alpha Works –LOB Biz Tech IBM Oerings InnovationJam with developer Business community Emerging Communities GTO / GIO / Partners First of a Kind Business of Practice IBV Opportunities Client (and Clients IBM) Challenges Client Clients Joint Innovation Partnerships Challenges 9 Tuesday, December 4, 2007 9

Joint Innovation Partnership Client and IBM Value Creation Centre Client Strategy & IBM Research Global / Regional Teams Centres Client Business / CIO Teams A business-led governance process sets Strategic Direction &Priorities IBM Industry and technology Through the VCC, IBM can share the expertise technology vision, knowledge, best practices, and solutions gained from IBM’s research, development and worldwide customer experience Value Creation Centre AB CD Other IBM Innovation VCC works with the Client to conduct Sources IBM Leader: XXXXX research and shape Client Leader: XXXXX propositions 11 Tuesday, December 4, 2007 11 Interestingly…What we found was more and more CEOs looking outside the organization for fresh ideas and innovation Look at this…external sources mentioned twice as often as internal sources Look at this…R&D mentioned by just over 15% …. a few years ago this would not have been the case There’s a real shift underway to collaborative innovation…

Building a Joint Innovation Partnership  Mission  Scope  People  Process  Tools  Support and Governance 12 Tuesday, December 4, 2007 12

Building an Innovation Partnership 1/4  Mission – Create a set of objectives along with measurable success criteria for the innovation partnership – Review these on a regular basis  Scope – Define scope - areas of the business and technology functions that the innovation partnership should focus on – On occasion there may be a reason to go beyond this scope or to handover an identified idea to a function in another part of the business 13 Tuesday, December 4, 2007 13

Building an Innovation Partnership 2/4  People – Dedicate core resource and leadership – with clearly set objectives – Ensure the right skills – not just gadget people! – Assign virtual resources per project – Ensure the right resources – IBM, IT, business units  Process – Use a “process” to identify and evaluate ideas (and collaborate on if possible) – Use a “process” to develop ideas into real initiatives and projects 14 Tuesday, December 4, 2007 14

Building an Innovation Partnership 3/4  Tools – Formal or informal tools – At the minimum a tool for rating ideas against business objectives and priorities and a tool for running, tracking and reporting on the overall Innovation portfolio – Formal tools can be used – alternatively informal tools such as spreadsheets and project management tools may be an option 15 Tuesday, December 4, 2007 15

Building an Innovation Partnership 4/4  Support and Governance – Exec level sponsorship – IBM and client – Strong focussed Steering Committee – IBM and client – Hook the innovation system into the wider organisation – Potential role of Innovation Catalysts – Clear funding model – core budget, process to get project specific funding 16 Tuesday, December 4, 2007 16

Innovation Process, What Process? 17 Tuesday, December 4, 2007 17

Innovation Process, What Process?  “Innovation process” – isn’t that an oxymoron?  Example oxymorons – – “new improved” – “numbing sensation” – “partial silence” 17 Tuesday, December 4, 2007 17

Running the Innovation Process  Generating and identifying ideas  Evaluating ideas  Developing innovation initiatives  Reporting the Innovation portfolio 18 Tuesday, December 4, 2007 18

Generating and Identifying Ideas  How are you are going to generate and identify ideas? – Initial ideas set by Steering Committee? – Ideas input formally or informally from internal employees, business partners, customers, R&D department etc? – Both? Employees Business partners Customers directly Consultants Competitors Associations Internal Sales & Service Units Internal R&D Academia Think-tanks Labs and/or other institutions 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% IBM Institute for Business Value, CEO Study 2006 19 Tuesday, December 4, 2007 19

Evaluating Ideas  Once you have an idea how it will be evaluated? – Set criteria and a scoring mechanism – Sometimes temper with a level of pragmatism and experience! 20 Tuesday, December 4, 2007 20

Innovation Initiative Process  Once you have accepted an idea, what process will you follow?  The VCC follows a structured gated innovation process Ideas Discussions Themes Initiatives Delivery 21 Tuesday, December 4, 2007 21

Innovation Initiative Process  Once you have accepted an idea, what process will you follow?  The VCC follows a structured gated innovation process Ideas Discussions Themes Initiatives Delivery Example Project Walkthrough 21 Tuesday, December 4, 2007 21

Innovation Portfolio Reporting – Example View 22 Tuesday, December 4, 2007 22

The Importance of Governance  Strong governance means strong support and commitment for the Innovation partnership and the innovation agenda 23 Tuesday, December 4, 2007 23

Steering Committee  A strong joint executive level Steering Committee is key to delivering a strong innovation partnership  The role of the Steering Committee, like the role of the Innovation Team, should be clearly defined  Example responsibilities include: – Review Innovation Team progress – Review Innovation Team requests and priorities – Confirm selection of current Innovation Team activities – Review Innovation Team Governance – making Exec level decisions where required e.g. on funding priorities – Set strategic directions and focus for coming period 24 Tuesday, December 4, 2007 24

Steering Committee Membership  The Steering Committee membership should include executive management from both organisations covering the main scope areas of the innovation partnership, including an overall chair, plus empowered reps from related organisations, e.g. Strategy and Architecture teams  The Steering Committee should sit quarterly at a minimum and perhaps more often, especially in early days 25 Tuesday, December 4, 2007 25

Factors for Success 27 Tuesday, December 4, 2007 27

Factors for Success Work as a Joint IBM / Client Team  – Effective / Staffed Core Team – Appropriate IBM, IT & Business Unit Involvement for each initiative – Working with the Strategy & Architecture Teams Select the right ideas  – Strategic for client and IBM – Valuable from a client business perspective – Balanced portfolio – quick wins as well as longer term strategic projects 27 Tuesday, December 4, 2007 27

Factors for Success Work as a Joint IBM / Client Team  – Effective / Staffed Core Team – Appropriate IBM, IT & Business Unit Involvement for each initiative – Working with the Strategy & Architecture Teams Select the right ideas  – Strategic for client and IBM – Valuable from a client business perspective – Balanced portfolio – quick wins as well as longer term strategic projects Governance and Sponsorship  – Effective overall joint governance and decision making – Clear business unit sponsorship for the specific initiatives to be progressed – A clear agreed funding model Effective Communication within Client and IBM  27 Tuesday, December 4, 2007 27

Summary 28 Tuesday, December 4, 2007 28

Summary  A Value Creation Centre will provide 28 Tuesday, December 4, 2007 28

Summary  A Value Creation Centre will provide – A proven structured mechanism for driving innovation with an assigned IBM owner who will manage the process 28 Tuesday, December 4, 2007 28

Summary  A Value Creation Centre will provide – A proven structured mechanism for driving innovation with an assigned IBM owner who will manage the process – Ongoing improvement over time - lessons learned and knowledge shared - e.g. 2007 IBM Academy of Technology Study, IBM Global Innovation Community, the iForum event 28 Tuesday, December 4, 2007 28

Summary  A Value Creation Centre will provide – A proven structured mechanism for driving innovation with an assigned IBM owner who will manage the process – Ongoing improvement over time - lessons learned and knowledge shared - e.g. 2007 IBM Academy of Technology Study, IBM Global Innovation Community, the iForum event – Access to a wide range of IBM resources and capabilities 28 Tuesday, December 4, 2007 28

Summary  A Value Creation Centre will provide – A proven structured mechanism for driving innovation with an assigned IBM owner who will manage the process – Ongoing improvement over time - lessons learned and knowledge shared - e.g. 2007 IBM Academy of Technology Study, IBM Global Innovation Community, the iForum event – Access to a wide range of IBM resources and capabilities – IBM focus on a set of jointly agreed innovation initiatives that will add value to the client’s business 28 Tuesday, December 4, 2007 28

IBM iForum 2007 - Joint Innovation With Clients by Tony Morgan

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