• Share
  • Email
  • Embed
  • Like
  • Save
  • Private Content
Innovating for growth: Innovation 2.0 - A spiral approach to business model innovation
 

Innovating for growth: Innovation 2.0 - A spiral approach to business model innovation

on

  • 717 views

There is no question that innovation is one of the most powerful ways to drive business growth in today is challenging economic environment. But innovation is changing, allowing companies of all sizes ...

There is no question that innovation is one of the most powerful ways to drive business growth in today is challenging economic environment. But innovation is changing, allowing companies of all sizes and from all geographies to compete with traditional multinationals, thus disrupting markets.
http://www.ey.com/GL/en/Issues/Driving-growth/Growth-through-innovation---The-innovation-spiral
Our Growing Beyond program explores opportunities across expanding into new markets, finding new ways to innovate & implementing new approaches to talent.
www.ey.com/growingbeyond

Statistics

Views

Total Views
717
Views on SlideShare
697
Embed Views
20

Actions

Likes
1
Downloads
23
Comments
0

4 Embeds 20

http://pinterest.com 9
http://www.pinterest.com 9
http://www.slashdocs.com 1
http://gb.pinterest.com 1

Accessibility

Categories

Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

    Innovating for growth: Innovation 2.0 - A spiral approach to business model innovation Innovating for growth: Innovation 2.0 - A spiral approach to business model innovation Presentation Transcript

    • Innovating for growthInnovation 2.0: a spiral approach to businessmodel innovationNovember 2012
    • Contents► Introduction► Explanation of framework► Key findings► Beyond Innovation 2.0 — Recommendations for successful business innovationPage 2 Innovating for growth
    • Innovating for growth — Innovation 2.0: a spiralapproach to business model innovation Innovation is the successful development of an idea that generates business value for sustainable growth. Innovation is not a strategy; it’s a way of being.Page 3 Innovating for growth
    • IntroductionPage 4 Innovating for growth
    • Setting the scene► Innovation 2.0 ► What approach are leading innovators taking. ► Launched in September 2012. ► Based on interviews with 45 participants, which included Ernst & Young professionals and academic and business leaders representing a range of industries in Europe, the US, Africa, Brazil, China, India and Russia.► Since launching Innovation 2.0, we have continued our Innovating for growth journey: ► Quantitative survey of 516 senior executives from multinational companies in both mature and rapid growth markets. ► A two-month social media conversation on LinkedIn and Twitter.► Beyond Innovation 2.0 ► Offers recommendations for guiding your company through the framework to achieve successful business innovation. ► Launched in December 2012. ► Based on 2.0, quantitative research and insights from social media conversation.Page 5 Innovating for growth
    • Can your company pass the 90-day test? ► SAP Labs India slashed the time to get SAP products to customers from 6 to 12 months to 90 days. ► The initiative was led by VR Ferose and allowed the company to gain competitive advantage. ► To achieve this, SAP:VR Ferose ► Used much smaller teamsManaging Director and ► Used “champions” to promote the new approachSenior Vice PresidentSAP Labs India throughout the companyPage 6 Innovating for growth
    • The innovation spiral► Innovation has evolved from a linear step-by-step process to a much more spiral, iterative approach.► Companies dont need an organized innovation plan to succeed.► By adopting this approach, the most innovative companies are able to: ► Take advantage of changes in the external environment ► Continually revamp their business models to achieve competitive advantage ► Innovate to obtain specific business outcomes, such as increased agility or stakeholder confidence► The framework that we have developed as part of this research shows how the process works.Page 7 Innovating for growth
    • The frameworkPage 8 Innovating for growth
    • A new approach to innovation Innovation spiral External environment Business outcomes Capitalize Achieve ► Technological advance ► Profitable growth ► Regulatory uncertainty ► Customer engagement ► Macroeconomic trends ► Business sustainability ► Ecological concerns ► Productivity ► Demographic shifts ► Business agility Areas of innovation Innovation process External collaboration Innovation enablersPage 9 Innovating for growth
    • A The external environment Capitalize on the opportunities ► Identifies the major market and economic circumstances that External environment affect business. ► Technological advance ► These elements increase global exposure to risk, but they also ► Regulatory uncertainty offer major opportunities that can transform whole industries. ► Macroeconomic trends ► Ecological concerns ► Innovative companies know how to capitalize on the external ► Demographic shifts environment to turn even adverse conditions to their advantage.Page 10 Innovating for growth
    • B The innovation spiral Achieve competitive advantage by innovating Innovation spiral 1. Areas of innovation ► Organizations typically innovate in three areas: products and services, processes, and business model. ► Business model innovation tends to confer more lasting benefits. 2. Innovation process ► This is the shift from a linear, step-by-step process to a spiral, iterative approach enriched by intuition and socialization. ► Intuition is the process of obtaining ideas, from anywhere and everywhere. ► Socialization happens when the idea is discussed and debated with other people, formally and informally. 3. External collaboration ► The most innovative organizations realize that they cannot produce everything on their own. To be truly competitive they need to access different skill sets and expertise by collaborating with others. 4. Innovation enablers ► These are the internal factors necessary for the innovation spiral to work.Page 11 Innovating for growth
    • C Business outcomes ► The business outcomes show that companies innovate to Business outcomes achieve five key business outcomes. ► Profitable growth ► The challenge is to focus on all of these outcomes together, ► Customer engagement rather than favoring one over another, which compromises ► Business sustainability the ability to anticipate change and drive growth. ► Productivity ► Business agilityPage 12 Innovating for growth
    • Key findingsPage 13 Innovating for growth
    • What companies should be doing to achievesustainable competitive advantagesA. Take advantage of changes in the external environmentB. Continually revamp their business models to achieve competitive advantageC. Innovate to obtain specific business outcomes, such as increased agility or productivityPage 14 Innovating for growth
    • A Are you taking advantage of changes in the external environment? Innovation spiral External environment Business outcomes Capitalize Achieve ► Technological advance ► Profitable growth ► Regulatory uncertainty ► Customer engagement ► Macroeconomic trends ► Business sustainability ► Ecological concerns ► Productivity ► Demographic shifts ► Business agilityPage 15 Innovating for growth
    • Turn challenging situations to your advantage► The most innovative firms turn challenging situations to their advantage.► In most rapid-growth markets, innovation tends to be the solution to a fundamental problem.► Consequently, companies can innovate themselves into a completely new industry. Case study: Suzlon Energy, India ► A wind turbine supplier based in India was born out of a textile manufacturer. ► An unreliable and expensive power supply led the chairman toJohn OHalloran experiment with wind power to maintain factory productivity.President of TechnologySuzlon Energy Ltd. ► The resulting wind turbines are helping solve power supply problems across India and are meeting global needs, making Suzlon the world’s fifth-largest supplier of wind turbines.Page 16 Innovating for growth
    • Internet and cloud services altercompetitive landscape► The internet and cloud services have radically changed the notion of size as an indicator of commercial potential: ► Smaller companies can now use cloud computing and compete with multinationals without having to invest in the technological infrastructure. ► The services open up cross-border opportunities and allow companies to access new consumer bases without having a physical presence there.► Companies of all sizes and from different markets can compete with traditional multinationals due to a surge in intangible assets (e.g., IP).Page 17 Innovating for growth
    • Where other companies have taken advantageof the external environment Be adaptable. When Virtual City, a systems integration and mobile solutions company based in Kenya, tried to replicate Amazon and eBay in Africa, it had limited success. But thanks to its experience in containing air-freight costs, the company discovered new supply-chain strengths. “We changed our entire company from being an internet service provider to a supply-chain automation company,” says John Waibochi, CEO of Virtual City. “This is now our business,John WaibochiCEO thanks to a broad perspective, which enabled us to understand where our true strengths lieVirtual City in relation to opportunities in the market.” Seize converging opportunities. US-based Boston-Power, a leader in energy storage, capitalized on ecological concerns, regulatory incentives and customer potential in China to become a major energy supplier to the automotive industry. Whereas gasoline-powered cars could only be bought by lottery and driven half the week in China, electric cars could be purchased and driven freely. “Being an entrepreneur, a nation seeking to be less reliant on oil meant significantDr. ChristinaLampe-Onnerud opportunity for me,” says Christina Lampe-Onnerud, Founder and International ChairmanFounder and of Boston-Power. “Our insight suggested that China’s policymakers had stimulated theInternational Chairman customer base to enable a market in electric cars. In a sense, the government becameBoston-Power, Inc. a procuring body. An electric car is now a status symbol among high officials because it plays to the green agenda and involves state-of-the art technology.”Page 18 Innovating for growth
    • Where other companies have taken advantage ofthe external environment Turn regulation to your advantage. Government policies can help drive cross-border opportunities. “In North America, government incentives helped facilitate fantastic growth in the market for wind turbines,” says John O’Halloran, President of Technology at India-based Suzlon Energy. A US telecom company follows a similar strategy in China. “Government subsidies are aligned to the Five-Year Plan, so we maximize use of the cloud in education because this was a keyJohn OHalloranPresident of Technology element of the technology initiatives in the Plan,” says the company’s managing director forSuzlon Energy Ltd. Greater China. Look for a “universal” customer base. E-commerce has opened up a wide range of online customers who are unrestricted by geography. For Alibaba Group, electronic business brought about a free flow of information that allowed companies and individuals to cooperate with and support one another.Dr. Brian Junling LiVice President, CEO OfficeAlibaba GroupPage 19 Innovating for growth
    • B Can you revamp your business model regularly to achieve competitive advantage? Innovation spiral External environment Business outcomes Capitalize Achieve ► Technological advance ► Profitable growth ► Regulatory uncertainty ► Customer engagement ► Macroeconomic trends ► Business sustainability ► Ecological concerns ► Productivity ► Demographic shifts ► Business agilityPage 20 Innovating for growth
    • Innovations to the business model canlead to more lasting benefits► Companies that alter their business model are more likely to achieve a sustainable competitive advantage.► It is much more difficult for a competitor to copy a business model than it is to replicate products or services.► Today’s most innovative companies have changed their business models from a set focus on geographies, local markets and products to a dynamic focus on customer experiences, value generation and problem-solving.► In a global economy, the major block on progress is protectionism: the disrupter for this is collaboration.► Innovation leaders further economic progress by collaborating with a broader group of peers, including consumers, suppliers and competitors, leading to further innovation in business models.Page 21 Innovating for growth
    • How do these models work in the real world?Zytek AutomotiveSupporting “managed” innovation► The ownership structure favors innovation that achieves a balance between the investment needed for it and profitability.► Zytek is owned by a company that is used to quarterly reporting and monthly performance figures.► This means that they don’t do innovation for innovation’s sake. Innovation has to have a tangible benefit to the firm — often in financial terms.► The revenue achieved through innovation is often used for further investment in R&D.Page 22 Innovating for growth
    • 1 Sharing risk and reward ► Boston-Power’s business model is based not on traditional contract manufacturing agreements but on business partnerships with shared risk and reward. ► Instead of investing in and building their own factory,Dr. Christina Lampe-Onnerud they accessed spare capacity on manufacturing linesFounder and and paid a contract manufacturing fee per battery.International ChairmanBoston-Power, Inc. ► To ensure they maintained the quality of the batteries, they included some of their management team to co-lead the factory. ► This allowed them to enter the capital-intensive industry through scalable manufacturing.Page 23 Innovating for growth
    • 2 Collaborating with competitors► A growing trend is for companies in the same industry to unite to create a shift in consumer habits or spearhead the development of a common technology platform.► This involves careful management of intangible assets, with companies making rigorous decisions on their IP, collaborating in areas where there are complementary capabilities or offerings, and protecting strategic intellectual property.Page 24 Innovating for growth
    • 3 Creating an independent licensing and royalty model ► ARM Holdings was formed 22 years ago in the UK as a spin-off from two competing technology companies for whom collaboration was not possible. ► ARM was created to exploit the low-power chip design for handheld computers, based on a licensing and royalty modelBill Parsons for the two companies involved. The revenue from this modelExecutive Vice President has supported the further development of ARM’s ownof Human ResourcesARM microprocessors, which now have a 95% market share in mobile phones.Page 25 Innovating for growth
    • 4 Building the right mindset and culture► The right leadership mindset is one of the key enablers of strategic innovation.► It is directly linked to an organizational culture that nurtures, guides and supports innovative thinking and practices.► Essential elements of this kind of culture include: ► Leadership support ► Collaboration through social networks ► Cultural diversity ► Mobility ► Leading-edge key performance indicators (KPIs)Page 26 Innovating for growth
    • C Are you innovating to achieve specific business outcomes? Innovation spiral External environment Business outcomes Capitalize Achieve ► Technological advance ► Profitable growth ► Regulatory uncertainty ► Customer engagement ► Macroeconomic trends ► Business sustainability ► Ecological concerns ► Productivity ► Demographic shifts ► Business agilityPage 27 Innovating for growth
    • Innovative companies focus on fivekey business outcomes► Innovative companies are focusing on competitive advantage to achieve five key business outcomes: 1. Profitable growth 2. Customer engagement 3. Business sustainability 4. Productivity 5. Business agility► The optimal situation is to achieve all of these outcomes together.► While the business outcomes in our framework are closely connected to each other, our participants offered valuable perspectives on each one.Page 28 Innovating for growth
    • 1 Profitable growth► Innovation can help firms to grow profitably by helping to expand the business while maintaining high profit margins.► However, innovation has to pay its own way, or it may have a negative impact on the profitability of the company. This means that the financial viability of innovation must be assessed.► Traditional methods of assessing this are not geared toward innovation and can sometimes be seen as one of the largest barriers to innovation. The amount spent on innovation also needs to be transparent to attract investment.► Organizations need to have different KPIs to track innovation to help them understand the different elements of risk and reward and how they relate to investment levels and financial viability.Page 29 Innovating for growth
    • 2 Customer engagement► Understanding the customer is the top priority in strategic innovation.► Social media is a very useful tool in getting closer to the customer because it enables companies to: ► Open up a dialogue with the consumer and achieve a deeper level of engagement ► Build customer feedback and data into R&D ► Allow customers to drive their expansion► The customer relationship is not just about selling the good or service that they want but is now a much more holistic experience. To achieve competitive advantage, companies need to own the whole customer experience.Page 30 Innovating for growth
    • 3 Business sustainability► Innovation is the key to ensuring relevance now and in the future.► It is not enough to come up with one great idea and then stop innovating; you will quickly become irrelevant. ► E.g., Kodak was very successful with camera film but never made the move to digital and is now irrelevant.► Companies have to continuously go against the status quo, come up with new goods or services, do things in new ways or even totally revamp their business models.► This is more the case now because we live in a connected world, there is continuous volatility, and companies need to keep innovating to achieve sustainable competitive advantage.Page 31 Innovating for growth
    • 4 Productivity► An increase in productivity can relay large competitive advantage.► To achieve competitive advantage, companies need to improve their internal processes to deliver products or services with fewer inputs.► This can happen by using lean manufacturing and smaller teams or by maximizing the benefits of technology. ► Technology can be used to make better use of data, improve communication, and enhance speed and flexibility.► For there to be innovation in productivity, people have to go against the status quo of the company and try to do things in new, more efficient ways.Page 32 Innovating for growth
    • 5 Business agility► Business models are designed to support leaner, more agile companies.► This is so they can quickly seize an opportunity or react to a competitor.► One of the main reasons this can now happen is due to external collaborations. ► They can access skills, talent and IP from their partners, which they couldn’t do before.► This enables organizations to respond more quickly to changing opportunities, with financial capital, talent and operational flexibility built into their business model.Page 33 Innovating for growth
    • Beyond Innovation 2.0— recommendations forsuccessful business innovation Capitalizing on changes in the external environment and effectively navigating the innovation spiral, increases a companies ability to achieve these five business outcomes from innovation. .Page 34 Innovating for growth
    • Recommendations for capitalizing on changes in theexternal environment The most innovative companies systematically track technological advances, regulatory uncertainty, macroeconomic trends, ecological concerns and demographic shifts for unexploited opportunities. • Seize opportunities in the changing environment by developing a process and strategy for identifying and building opportunities. • Evaluate technological advances which changed the playing field for companies of all sizes, opening up new markets and creating new partnership opportunities as well as new competition. • Turn regulation to your advantage, implement a robust risk management program which allows you to monitor and take advantage of regulatory changes. • Be adaptable - analyze your business model to ensure it is flexible and includes an effective change management program, allowing you to respond and succeed during uncertain times.Page 35 Innovating for growth
    • Recommendations for navigating the innovation spiral Successful innovators innovate the entire business model, as well as goods and services or process to achieve competitive advantage. They understand the innovation process is not linear, are open to less traditional external collaboration opportunities and understand the enablers for the spiral to work. • Build a mindset and culture which encourages new ways of thinking, increased socialization and teaming across functions. • Set the tone from the top, build innovation as a competency across the entire organization. • Promote innovation through a rewards and recognition program, while being careful not to overlook the educational value in any failed ideas. • Support managed innovation, balancing between the investment required and the benefits from it. • Collaborate with a broader set of partners- which may include less traditional groups, enabling fresh thinking and experimenting with new conceptsPage 36 Innovating for growth
    • Key findings from our quantitative research► 78% of our survey respondents agreed that innovation now makes it possible for companies of every size and in any geography to compete.► Only 15% of survey participants feel that business model innovations contribute “very much” to meeting company objectives compared to 19% of new processes and 37% of products and services.► Our survey participants believe that leadership (92%), culture (87%) and people (81%) are most important in enabling innovation.► Only 44% of survey respondents have regular formal innovation meetings with teams outside their function or division, 29% have meetings with teams at other company locations, and 22%, sponsor regular company social events, such as visits to art galleries or sports matches to encourage employees to talk about innovation ideas.► Nearly a quarter (23%) of respondents said their companies offer no particular incentives for innovation. Of those that do, 54% can expect mention in a publication or online, 35% have the promise of a promotion, 34% offer cash, and 28% offer vouchers for food or sport tickets.Page 37 Innovating for growth
    • Summary► Innovation has evolved from a linear step-by-step process to a much more spiral, iterative approach.► By adopting this approach, the most innovative companies are able to: ► Take advantage of changes in the external environment ► Continually revamp their business models to achieve competitive advantage ► Innovate to obtain specific business outcomes, such as increased agility or stakeholder confidence► What companies should be doing to achieve sustainable competitive advantages: ► Take advantage of changes in the external environment ► Continually revamp their business models to achieve competitive advantage ► Innovate to obtain specific business outcomes, such as increased agility or productivity► Innovation is not a strategy; it’s a way of being.Page 38 Innovating for growth
    • Ernst & YoungAssurance | Tax | Transactions | AdvisoryAbout Ernst & Young Growing BeyondErnst & Young is a global leader in assurance, tax,transaction and advisory services. Worldwide, our 167,000 Global growth is the business issue of today.people are united by our shared values and anunwavering commitment to quality. We make a difference In Growing Beyond, we’re exploring howby helping our people, our clients and our wider companies can grow faster — by expandingcommunities achieve their potential. into new markets, finding new ways toErnst & Young refers to the global organization of member innovate and taking new approaches tofirms of Ernst & Young Global Limited, each of which is aseparate legal entity. Ernst & Young Global Limited, a UK talent. It’s an ongoing program to help youcompany limited by guarantee, does not provide services grow beyond your expectations. Join theto clients. For more information about our organization, discussion at www.ey.com/growingbeyond.please visit www.ey.com.© 2012 EYGM Limited.All Rights Reserved.BSC no. 1209-1395301SCORE no. EX0158This publication contains information in summary form and istherefore intended for general guidance only. It is not intended tobe a substitute for detailed research or the exercise of professionaljudgment. Neither EYGM Limited nor any other member of theglobal Ernst & Young organization can accept any responsibility forloss occasioned to any person acting or refraining from action as aresult of any material in this publication. On any specific matter,reference should be made to the appropriate advisor.ED None