Innovation and Strategic Growth

Customer Experience Innovation Summit 2006 Customer Experience Innovation and Strategic Growth Idris Mootee SVP Strategy and Innovation Blast Radius Inc. Les Vegas All Rights Reserved 2006 Idris Mootee

What Do They Have In Common? What you are deeply passionate about? What you can What drives be the best in your economic the world at? engine? Jim Collins, Good to Great All Rights Reserved 2006 Idris Mootee

In general, only 1/3 companies managed to grow their revenues at a rate faster that the growth of GDP from 1995- 2005 while at the same time delivering shareholder returns above those of the S&P 500 index. All Rights Reserved 2006 Idris Mootee

Warren Buffett on Growth: “Growth benefits investors only when a business can invest when each dollar used to finance the growth creates over a dollar of long term market value. In the case of a low-return business requiring incremental funds, growth hurts the investor.” All Rights Reserved 2006 Idris Mootee

Constraints on Growth Competitive environment 77% 73% Cost / availability of talent Increasingly sophisticated customers 64% Innovation by competitors 60% Excess regulations 52% Less of access to capital 37% Inadequate legal protection 33% Rising health care costs 32% Rising natural resource costs 31% McKinsey & Co. All Rights Reserved 2006 Idris Mootee

What Capabilities Will Be Most Important for Growth Ability to innovate 43% Ability to allocate best talent 25% Ability to manage globally 17% Ability to allocate capital 10% Ability to manage costs 4% McKinsey & Co. All Rights Reserved 2006 Idris Mootee

How Large Companies Innovate? According to IBM’s “Global CEO Study 2006,” 76% of the 750 of CEOs and business leaders interviewed for the study ranked business partner and customer collaboration as top sources for new ideas. This greatly contrasts with internal R&D, which ranked eighth as a source for new ideas — cited by only 14% of CEOs. However, only 51% say their organizations currently collaborate extensively. All Rights Reserved 2006 Idris Mootee

Innovation Performance 100% Y=0.0112x+0.0852 R=0.0073 Apple 75% 25% Topline Growth % 0% 0 1 2 3 4 5 6 Xerox -25% -50% -75% Indexed R&D/Sales Ratio Apple’s R&D 5.9% vs. Industry Average 7.6% All Rights Reserved 2006 Idris Mootee

“This ‘telephone’ has too many shortcomings to be seriously considered as a means of communications. The device is inherently of no value to us.” - Western Union, 1876 All Rights Reserved 2006 Idris Mootee

Be Careful About Consultants There’s always desires to imitate the strategies that makes the most successful companies successful. The nonintegrated business model of Dell is held up as a model for all to emulate. If it’s good for Dell, it must be good for everyone. All Rights Reserved 2006 Idris Mootee

Where is Dell going next? It’s competitive advantage is eroding and soon they will struggle with growth. By 2007 they will need some serious rethinking about their business strategy All Rights Reserved 2006 Idris Mootee

Strategy Is Not A Product Many did not think about under what conditions cause certain factor to be a competitive advantage How and why do competitive actions erode the underpinnings of those advantages? So everyone wanted to be Dell, Amazon and most recently Apple. All Rights Reserved 2006 Idris Mootee

In the last 30 years the concepts of competitive advantage were based upon steep scale economics (high fixed costs vs. variable costs) Then technology allows us to flatten the scale economics. All Rights Reserved 2006 Idris Mootee

The other source of competitive advantage is economies of scope (large enough to absorb the complexity-driven overhead costs of developing, manufacturing or distributing of full product line) The power of data networks changes this economics. The emergence of social networks changes the bargaining power of customers. All Rights Reserved 2006 Idris Mootee

In The Past…. By bringing scale, scope, control and discipline to what had been fragmented and chaotic industries, Du Pont, GM, Shell and a handful of others invented the modern corporation. All Rights Reserved 2006 Idris Mootee

The Sigmoid Curve Those who lead the first curve is not the one who lead the second curve A B Keep the first curve going long enough to support to the second curve All Rights Reserved 2006 Idris Mootee

DEFENDERS: Think Kodak. Think Polaroid. Think Xerox. Think Sony. Think Disney. Think Lego. Think Siebel. Think HP. Think Microsoft. Think Blockbuster. Think ToyRUs. etc… All Rights Reserved 2006 Idris Mootee

Convergence of Socialtech IMAGINE: MSN preserves, for the first time, everything we’ve ever typed. Gmailers are all bloggers who don’t know it. Next, some of us will store everything we’ve ever said. Then everything we’ve ever seen. This storage (and processing, and bandwidth) will continue to make us all networkable in ways and at a level we never imagined. Lifeblog, SenseCam are early examples of “LifeLogs” or “LifeStories” Systems for auto-archiving and auto-indexing all life experience. What will this turn into? All Rights Reserved 2006 Idris Mootee

Red Ocean Strategy Blue Ocean Strategy Compete in existing market Create uncontested market space space Beat the competition Make the competition irrelevant Exploit existing demand Create n capture new demand Make the value-cost trade-off Break the value-cost trade-off Chan Kim and Renée Maub, Blue Ocean Strategy All Rights Reserved 2006 Idris Mootee

Red Ocean Strategy Blue Ocean Strategy Compete in existing market Create uncontested market space space The Paradox: To invite an energizing, disparate, invigorating, unpredictable force into you organization so that you can use its chaotic energy to direct continuous renewal. All Rights Reserved 2006 Idris Mootee

Advancement Activities Survival Activities Manage volume growth, Explore new opportunities, repetitive operational tasks develop new and maximum efficiencies competencies and in a deeply conservatory challenge industry rules and tightly controlled while relentlessly pushing fashion. for adoption. Between the two extremes lies the art of strategy. Here one is simultaneously conservative and radical. Idris Mootee, Escape Velocity All Rights Reserved 2006 Idris Mootee

CX Innovation Impact Scoring (Illustrative) 5 Disruptive Opportunities to improve New Business brand relevance 4 Models Brand Impact Score 3 2 Opportunities to Opportunities for improve business service enhancement 1 economics 0 0 1 2 3 4 5 Business Impact Score Bubble indicates relative size of customer experience innovation opportunity All Rights Reserved 2006 Idris Mootee

Customer Experience Innovation occurs not only as a top-down process shaped by corporate decision makers ….. It is also a bottom-up process shaped by consumer participations. All Rights Reserved 2006 Idris Mootee

Customer Experience Innovation are made, not born. It is the art and science of making luck. Every once in a while you walk down that path and it opens up into huge huge avenue. That makes it all worthwhile. All Rights Reserved 2006 Idris Mootee

Innovation and Strategic Growth

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