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Strategic Innovation - SDG - Stanford University
 

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    Strategic Innovation - SDG - Stanford University Strategic Innovation - SDG - Stanford University Presentation Transcript

    • Strategic Innovation Creativity for Profit
    • Meet Today’s Speakers Carl Spetzler Bill Burnett Hannah Winter Carissa Little CEO, Strategic Executive Director, Partner, SDG; Associate Associate Director, Decisions Group Product Design Program Program Director, Stanford Center for Program Director Department of Mechanical Stanford Center for ProfessionalStanford Center for Engineering, Stanford Professional Development Professional University Development Development ® 2 © 2007 Strategic Decisions Group www.sdg.com
    • Strategic Innovation1. The Innovation Imperative2. Design Thinking as a Business Tool3. A New Model: Innovation and Value Discipline4. Learning More ® 3 © 2007 Strategic Decisions Group www.sdg.com
    • The global economic boom of the 1980s and early 1990s fueled a long period of steady growth. FormulaicTechnology-Based Geopolitical Global Access Low Cost + + + = Growth Productivity Harmony to Markets of Capital Strategy Source: Bigcharts.com ® 4 © 2007 Strategic Decisions Group www.sdg.com
    • The 1990s accelerated into the bubble years. Strategy as Internet-Based “Irrational + Y2K + = Speed and Innovation Exuberance” Flexibility Source: Bigcharts.com ® 5 © 2007 Strategic Decisions Group www.sdg.com
    • Then we had four years of real turmoil. Technology Geopolitical Financial Globalization Survival + + + =Disillusionment Events Scandals of Capabilities Strategy Source: Bigcharts.com ® 6 © 2007 Strategic Decisions Group www.sdg.com
    • … and, the new era is not for the timid. GrowthFinancially Geopolitical Natural Flat World from + + + = Innovation Strong Conflicts Disasters with Hyper- competition with Smart Risk-Taking ? Source: Bigcharts.com ® 7 © 2007 Strategic Decisions Group www.sdg.com
    • Business leaders rank innovation as a top priority…but remain largely dissatisfied with current efforts. Where does innovation rank among your Are you satisfied with the financial return on company’s strategic priorities? your investments in innovation? 100% 100% Not a Priority 7% 7% 27% 21% Top 10 Priority No 48% 44% 49% 56% 32% Top 3 priority 47% Yes 52% 56% 51% 40% 44% Top priority 19% 2005 2006 All Financial Healthcare Industrial Industries Services Goods Source: “Innovation 2006,” BCG Senior Management Survey ® 8 © 2007 Strategic Decisions Group www.sdg.com
    • Strategic Innovation1. The Innovation Imperative2. Design Thinking as a Business Tool3. A New Model: Innovation and Value Discipline4. Learning More ® 10 © 2007 Strategic Decisions Group www.sdg.com
    • Is design thinking the next big thing? Bruce Nussbaum of BusinessWeek is a leading media advocate for design and innovation. “THE CREATIVITY ECONOMY may sound like another over hyped catch-phrase, but companies that have embraced the concept are gaining a bottom-line edge over those who havent.” Business Week, June, 2006 TIME, March, 2006 MIT Technology Review, Fast Company, WIRED, June, 2006 April, 2005 March, 2006 ® 11 © 2007 Strategic Decisions Group www.sdg.com
    • The focus on design thinking is being led byuniversities and design firms. the d.school at Stanford University of Toronto Business schools are teaching design thinking. – Stanford d.school – One-year d.school fellowships, five-day boot-camp on design thinking – IIT Institute of Design – A nine-month masters program in design methods for executives Design firms are becoming strategy firms – IDEO, point>Forward, Doblin, and others ® 12 © 2007 Strategic Decisions Group www.sdg.com
    • d.school –a multi-disciplinaryapproachwith DesignThinking“glue” ® 13 © 2007 Strategic Decisions Group www.sdg.com
    • What do we mean by “design thinking” in thiscontext?• In our experience, design thinking requires the following to be “active”:• It has a Context in the firm • Multidisciplinary teams • Fluency trained • Longevity• It has a Process • Experience-based, user-centered research • Prototyping • IterationSee: The Role of Design Thinking in Firms and Management Education – Bruce A. Heiman, San Francisco State University, USA – William R. Burnett, Stanford University, USA ® 14 © 2007 Strategic Decisions Group www.sdg.com
    • P&G — a case in point:AG Lafley of P&G is known for his appreciation forthe role of design in business. “We want to become the number one “We want to become the number one consumer design company in the world, consumer design company in the world, so we need to be able to make it part of so we need to be able to make it part of our strategy. We need to make it part of our strategy. We need to make it part of our innovation process.” our innovation process.” – AG Lafley – AG Lafley Chairman, President, and CEO Chairman, President, and CEO P&G P&GSource: AG Lafley, as interviewed by Fast Company in May 2005. ® 15 © 2007 Strategic Decisions Group www.sdg.com
    • At P&G, embracing innovation and design has been a deep and broad effort … and has produced outstanding results. 2005: P&G’s design 2005: P&G’s design staff has quadrupled; staff has quadrupled; NEW: Seek out NEW: Seek out unarticulated unarticulated 12% sales CAGR 12% sales CAGR NEW: Pair R&D staff consumer desires that consumer desires that since 2002. since 2002. NEW: Pair R&D staff with in-house can be transformed can be transformed with in-house NEW: Hire designers to drive into products. into products. NEW: Hire designers to drive experienced experienced innovation innovation designers and work designers and work throughout product throughout product with outside firms life cycles. life cycles. P&G 5-year Stock Price Growth with outside firms like IDEO. like IDEO. P&G S&P 500 S&P 5002000: Stagnant2000: Stagnantsales growth.sales growth.A.G. Lafley becomesA.G. Lafley becomesCEO.CEO. ® 16 © 2007 Strategic Decisions Group www.sdg.com
    • Apple — another example:Apple uses design strategically and is considered bysome to be the most innovative company in theworld.* “ While Jobs may not consider himself a “ While Jobs may not consider himself a designer, II don’t think he can talk about Apple for designer, don’t think he can talk about Apple for more than five minutes without mentioning more than five minutes without mentioning design. His passion gets operationalized within design. His passion gets operationalized within the company in a number of ways…and it is a the company in a number of ways…and it is a self-reinforcing cycle.” self-reinforcing cycle.” – John Zapolski – John Zapolski Design as a Core Strategy Design as a Core Strategy Perspectives on Design + Strategy Perspectives on Design + Strategy IIT Institute of Design Strategy Conference IIT Institute of Design Strategy Conference May 18–19, 2005 May 18–19, 2005Source: Top 20 Innovative Companies in the World. Poll of 940 senior executives in 68 countries by Boston Consulting Group asreported in BusinessWeek August 1, 2005. ® 17 © 2007 Strategic Decisions Group www.sdg.com
    • Leading design firms are finding that design thinkingpractices support business transformation as well. “IDEO is becoming much more than a design company. “IDEO is becoming much more than a design company. Indeed, it is now a rival to the traditional purveyors of Indeed, it is now a rival to the traditional purveyors of corporate advice. corporate advice. IDEO advises clients by teaching them about the IDEO advises clients by teaching them about the consumer world through the eyes of anthropologists, consumer world through the eyes of anthropologists, graphic designers, engineers, and psychologists.” graphic designers, engineers, and psychologists.” – BusinessWeek, May 17, 2004, “The Power of Design” – BusinessWeek, May 17, 2004, “The Power of Design” “Doblin is an innovation strategy firm. We craft “Doblin is an innovation strategy firm. We craft comprehensive, reliable, and repeatable approaches to comprehensive, reliable, and repeatable approaches to innovation” … across the range of strategy elements of innovation” … across the range of strategy elements of DOBLIN a business. a business. – Doblin’s Website – Doblin’s Website ® 18 © 2007 Strategic Decisions Group www.sdg.com
    • Strategic Innovation1. The Innovation Imperative2. Design Thinking as a Business Tool3. A New Model: Innovation and Value Discipline4. Learning More ® 20 © 2007 Strategic Decisions Group www.sdg.com
    • Not all companies recognized for their innovation*are equally outstanding in providing shareholderreturns. Why? 5 Year Return Relative to S&P 500 200% 150% 100% 50% 0% -50% Apple Dell GE Google IBM Microsoft Nokia P&G Sony 3M (1 year only)*Top 10 Innovative Companies in the World: 2005 poll of 940 senior executive in 68 countries by Boston Consulting Group. ® 21 © 2007 Strategic Decisions Group www.sdg.com
    • In most organizations, creativity opposes evaluation.Currently design-innovation often falls into this trap. Customer Shareholder Experience Value Spreadsheet “Wow” Analysis Factor Applied Value Value Applied Creativity Discipline Discipline Creativity Excitement Number- Crunching Fuzzy “Bean Counters” Evaluation is a Creativity is a sword in the hands “nice-to-have” once of the controllers. we hit our targets. ® 22 © 2007 Strategic Decisions Group www.sdg.com
    • Organizational hurdles to strategic innovation exist inmany places. Learning failuresWeak structural Growth Processes aresupport for Opportunities linear, not cyclicalapplied creativity Applied Value Value Execution Creativity Discipline Discipline Excellence Implementation Value failures Guidance ® 23 © 2007 Strategic Decisions Group www.sdg.com
    • Mindlessapplication offinancial hurdleanalysis to noveland uncertainideas can totallymiss value. ® 24 © 2007 Strategic Decisions Group www.sdg.com
    • A lack of execution discipline results in not deliveringthe value from the ideas. © The New Yorker Collection 1986 Frank Modell from cartoonbank.com. All Rights Reserved. ® 25 © 2007 Strategic Decisions Group www.sdg.com
    • The Innovation Competency Model: Effective Execution Driven by the Innovation Cycle Growth Opportunities Respects & leverages the practical nature of business analysis 1 Respects &nurtures the Applied Applied Cycle builds Value Value learnings and Significanceopen-ended Creativity Creativity buy-in Significance nature of 2 creativity 3 Value Guidance ® 26 © 2007 Strategic Decisions Group www.sdg.com
    • Analytic tools such as SDG’s tornado chart can informand direct innovation and design. Understanding of the range Understanding of the range of impact can be valuable of impact can be valuable to the design team to the design team Change in NPV: High-End TV Strategy ($ millions) Product and Product and –900 –600 –300 0 300 600 900 market market characteristics characteristics can be defined Appeal to Market Size 0.5x Base 2x Base Estimate can be defined and valued and valued Next-Gen Cost None 1.5x Initial Design Display Resolution Low High TV Cost High Low New Broadcast Standard None Rapid Changes Screen Size 40” 50” Development Costs 2x Estimates Base Case TV Replacement Cycle Slow Rapid Distribution Markup Low High Base Case value = ~ $2 Billion ® 27 © 2007 Strategic Decisions Group www.sdg.com
    • The Innovation Competency Model: Effective Execution Driven by the Innovation Cycle Growth Opportunities Respects & leverages the practical nature of business analysis 1 Respects &nurtures the Applied Applied Cycle builds Value Value learnings and Significanceopen-ended Creativity Creativity buy-in Significance nature of 2 creativity 3 Execution Excellence Value Guidance 4 Flexibility adapts to various situations ® 28 © 2007 Strategic Decisions Group www.sdg.com
    • SDG Case: Ford needed to make a platform decisionin 1996 for its next-generation Mustang. Traditional “Design Business Case Lead” CaseWide audience, broad appeal Design Approach Retro themed, high-performance nicheHigh volumes, low price Volume and Price Point Low volume, high priceExisting platform, $$ Capital Investment Required New platform, $$$$High volume; heavy discounts Limited production; maintain Product Demand Cycleover lifecycle to fill capacity price premium through lifecycle Net Present Value Comparison Expected Base Value Case NewTraditional Higher Value 10%-ile 90%-ile Design“Design Lead” Base case forecast reflected optimistic bias; risk assessment revealed downside of an older platform ® 29 © 2007 Strategic Decisions Group www.sdg.com
    • GE under Jeff Immelt has the four elements workingtogether.1. Growth is driven with 2. The strategic value 2. The strategic value1. Growth is driven with “imagination discipline has been discipline has been “imagination breakthroughs” and deeply embedded in GE deeply embedded in GE breakthroughs” and “dreaming sessions.” for some time. for some time. “dreaming sessions.” Growth Opportunities 1 3 Value Applied Value Creativity Reinforcing Discipline Discipline Cycle 4 2 Execution Value Excellence Guidance3. It is a cycle in which 4. Execution discipline is intense, 4. Execution discipline is intense,3. It is a cycle in which with adequate funding and the everyone has to with adequate funding and the everyone has to best people being assigned to best people being assigned to participate. participate. deliver on the innovation deliver on the innovation initiatives. initiatives. ® 30 © 2007 Strategic Decisions Group www.sdg.com
    • Repositioning well for growth trends … WINNING IN THE FUTURE Perhaps the clearest view of GE’s growth potential lies in the trends shaping our collective future: the demand for infrastructure globally, growth of emerging markets, the economics of scarcity regarding natural resources, the ever-evolving opportunities of the digital age, the available liquidity in the global capital markets and the unstoppable demographics of healthcare. … is a strong strategic foundation. Source: GE 2006 Annual report ® 31 © 2007 Strategic Decisions Group www.sdg.com
    • The Jim McNerney period instilled GE’s Six Sigma andvalue disciplines into 3M with great results. The prior five years, The prior five years, 3M underperformed 3M underperformed 3M 3M the S&P 500, even the S&P 500, even though it was among though it was among the most innovative the most innovative companies. companies. S&P 500 S&P 500 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Chart from ©BigCharts.com; current as of 10/25/05 ® 32 © 2007 Strategic Decisions Group www.sdg.com
    • Why is it so hard to build the competencies for avirtuous cycle and embed them into an organization? • Three very different competencies working together – It is by nature a cross-functional organizational challenge, and those are always difficult. • Numerous behavioral and organizational barriers – Turf and the split of roles – incentives to succeed within the silos – The requirement for scale to achieve excellence – Risk aversion, realism vs. optimism – Habits of mind and practice • Strong leadership and vision are crucial. ® 33 © 2007 Strategic Decisions Group www.sdg.com
    • It takes time and real commitment from the top. “When II got the job, II knew II wanted the company to be more “When got the job, knew wanted the company to be more innovative, more global, and more focused on the customers. innovative, more global, and more focused on the customers. But it does take a year or two or three to really put ideas into But it does take a year or two or three to really put ideas into initiatives and get the team aligned. initiatives and get the team aligned. The big difference is that the business leaders have no choices The big difference is that the business leaders have no choices here. Nobody is allowed not to play. Nobody can say, ‘Im going here. Nobody is allowed not to play. Nobody can say, ‘Im going to sit this one out.’ Thats the way you drive change.” to sit this one out.’ Thats the way you drive change.” “When we have an idea factory like IDEO talk to us about “When we have an idea factory like IDEO talk to us about innovation, it’s my job to translate what they say into GE. That innovation, it’s my job to translate what they say into GE. That means putting it in terms of process and metrics.” means putting it in terms of process and metrics.” Sources: July 2005 interview of Jeff Immelt by Fast Company. June 2006 interview in HBR ® 34 © 2007 Strategic Decisions Group www.sdg.com
    • Strategic Innovation1. The Innovation Imperative2. Design Thinking as a Business Tool3. A New Model: Innovation and Value Discipline4. Learning More ® 36 © 2007 Strategic Decisions Group www.sdg.com
    • We define strategic innovation using design tools … Strategic Innovation ® 37 © 2007 Strategic Decisions Group www.sdg.com
    • We teach a 2.5-day course that covers the three maincomponents of strategic innovation. Strategic Innovation Creative Significant Real Day 1 Day 2 Day 3 Learn Design Apply Design Identify Tools and Thinking to Organizational Process Business Issues Requirements ® 38 © 2007 Strategic Decisions Group www.sdg.com
    • The Strategic Innovation course emphasizesinteractive discussion and experience-based learning. Discussion and Discussion and Examples of Speakers from Examples of Speakers from Case Exercise: Defining Case Exercise: Defining Lecture Topics Lecture Topics Previous Courses Previous Courses a New Business Model a New Business Model••Defining Strategic Defining Strategic ••““NeedFinding and Customer- Need Finding and Customer- ••Understanding Customer Understanding Customer Innovation Innovation Based Ideas,” Dennis Boyle, Needs Needs Based Ideas,” Dennis Boyle, IDEO IDEO••Creativity Tools Creativity Tools ••Alternative Generation Alternative Generation ••“Weird Ideas that Work,” Prof. “Weird Ideas that Work,” Prof.••Design Thinking Design Thinking Bob Sutton, Stanford ••Iterating for Value Iterating for Value Bob Sutton, Stanford••Applying an Innovation Applying an Innovation ••“Internal and External Cycle “Internal and External Course Instructors Course Instructors Cycle Innovation,” Tom Cripe, P&G Innovation,” Tom Cripe, P&G Connect + Develop Program Connect + Develop Program ••Carl Spetzler, SDG••Organizational Issues Carl Spetzler, SDG Organizational Issues and Realization and Realization ••“Executing and Innovative “Executing and Innovative ••Bill Burnett, Stanford Bill Burnett, Stanford Business Model,” Ralph Business Model,” Ralph Morales, HP, Finance Morales, HP, Finance ••Cynthia Benjamin, IMS Cynthia Benjamin, IMS Health Health ® 39 © 2007 Strategic Decisions Group www.sdg.com
    • Stanford University and SDG have created educationprograms focused on improving decision-making. Stanford Center for Professional Development (SCPD) • Directed by Professor Ron Howard, Management Science and Engineering • Developed in partnership between SCPD and Strategic Decisions Group • Available online, on campus, and on-site • Meets the career-long education needs of professionals, managers, and executives ® 40 © 2007 Strategic Decisions Group www.sdg.com
    • Our program comprises education for strategicdecision-making at two levels. • Certificate program in Strategic Decision and Risk Management – For leaders and senior managers who want to improve decision-making by their teams – For those who support strategic decision-making – On-campus sessions in March, June, and September – What past participants have said: - “A highly engaging intellectual experience with practical applications” - “Very rich in content that is relevant and valuable” - “Excellent materials and presentation with an interactive approach” - “This course was worth the time and monetary investment!” • Two-day senior executive seminar – For senior executives with significant decision responsibility – November 13–14, 2008 ® 41 © 2007 Strategic Decisions Group www.sdg.com
    • The certificate program offers 2.5-day coursesspanning the breadth of decision staff skills.Strategic Decision and Risk Management (SDRM) Program Core course Elective Decision Leadership Proposed course Behavioral Challenges in Strategic Decision-Making Innovation DQ Advanced DA Decision Converting Modeling SDRM Project for Strategic Decision Quality Practicum Strategy into Insight Analysis Action Management Program Advanced Decision Analysis Enterprise Risk Strategic Management Portfolio Management ® 42 © 2007 Strategic Decisions Group www.sdg.com
    • 2007 On-Campus Calendar June September Monday Tuesday Wednesday Thursday Friday Monday Tuesday Wednesday Thursday Friday 11 12 13 14 15 10 11 12 13 14 Decision Quality In Organizations Strategic Innovation Converting Strategy Into Action Decision Analysis 18 19 20 21 22 17 18 19 20 21 Modeling for Strategic Insight Strategic Decision and Risk Converting Strategy Into Action Enterprise Risk Management Advanced Decision Analysis Management Practicum 25 26 27 28 29Decision Quality In Organizations Decision Analysis CORE ELECTIVE Pricing • $2,495 per course • $2,245 per course – early registration (register by 5/11/07 for June) ® 43 © 2007 Strategic Decisions Group www.sdg.com
    • Thank you for Q&Aparticipating intoday’s eBriefing,the winner of theiPod Shuffle is… To contact one of today’s speakers: Carl Spetzler Bill Burnett Hannah Winter Carissa Little cspetzler@sdg.com wburnett@stanford.edu hwinter@sdg.com carissal@stanford.edu +1.650.475.4405 +1.650.280.0098 +1.650.475.4455 +1.650.723.0653 To learn more about the SDRM program: sdrm_reg@scpdinfo.stanford.edu 1-866-234-3380 ® 46 © 2007 Strategic Decisions Group www.sdg.com
    • Upcoming Executive eBriefing April 18, 2007 12:00–1:00 p.m. EDT Enterprise Risk Management: A Value-Driven Approach Register at: http://proed.stanford.edu/redir.asp?M8To visit the SDRM home page: http://proed.stanford.edu/redir.asp?M9 For more information, please contact: Patty Harris, Customer Relationship Manager Toll Free +1 866 234 3380 Outside the US +1 650 475 4490 pharris@sdg.com http://strategicdecisions.stanford.edu ® 47 © 2007 Strategic Decisions Group www.sdg.com