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Executive Innovation Management Seminar March 12, 2013 “..because the execution of an idea is always more important than the brilliance of the thought..” (Harvard Business Publishing – Morgan, Levitt & Maleck – INVEST model) This document is solely for the use of the receiver. No part of it may be circulated, quoted, or reproduced fordistribution outside the receivers organisation without prior written approval from Bearing Consulting Ltd.
Presenting todayFöreläsare Jörgen Eriksson, Founding Partner in Bearing and adjunct Professor of Innovation Management, resides in France and works with consulting internationally. Has since 1995 led a large number of projects related to innovation systems, business development, restructuring and R&D across four continents. 3
About Bearing ConsultingBearing Consulting is a management consultancy incorporated in UnitedKingdom with offices in London, Stockholm, Barcelona, andJohannesburg Bearing develops years, we have been Over the past 12 methodology and We work with clients in three focus areas; also engaged in projects across four publish books continents Places & Regions Finance Innovation 4
Agenda1. Globalisation and Hyper Competition2. Business in Hyper Competitive Markets3. What do we mean with Innovation?4. How can we work with Innovation?5. Innovation in Cities6. Corporate Innovation and common gaps7. How to make Corporate Innovation work 6
Globalisation and Hyper CompetitionThis document is solely for the use of the receiver. No part of it may be circulated, quoted, orreproduced fordistribution outside the receivers organisation without prior written approval from Bearing ConsultingLtd.
The European Perspective Sub heading“Europe is facing a moment of transformation. The crises haswiped out years of economic and social progress and exposedstructural weaknesses in Europe s economy.In the meantime, the world is moving fast and long-term challengessuch as globalisation, pressure on resources, population ageing,are intensifying.”- Quote from Europe 2020 Strategy 8
The European PerspectiveThe European Union has set out its vision for Europe s economy in Sub headingthe Europe 2020 Strategy, which aims at confronting structuralweaknesses through progress in three mutually reinforcingpriorities:1. Smart Growth, based on knowledge and innovation2. Sustainable growth, promoting a more resource efficient, greener and competitive economy3. Inclusive growth, fostering a high employment economy delivering economic, social and territorial cohesion 9
The European PerspectiveSub headingInvesting more in research, innovation and entrepreneurship isat the heart of Europe 2020 and a crucial part of Europe s responseto the economic crises.So is having a strategic and integrated approach to innovationthat maximizes European, national and regional research andinnovation potential.It is about enhancing Europe s capacity todeliver smart, sustainable and inclusivegrowth, through the concept of smartspecialization. 10
Business in hyper competitive markets This document is solely for the use of the receiver. No part of it may be circulated, quoted, or reproduced for distribution outside the receivers organisation without prior written approval from Bearing Consulting Ltd.
Corporate world dominanceIn the year 1994, Motorola was world leader in (analogue)mobiles,seven years later Nokia was world leader in (digital) mobiles60%50% Motorola40%30%20%10% Nokia0% Market shares 1994 Market Shares 2001 14
From #1 to crises in less than three years…Why ?Nokia share price 15
Hyper competition“Either you innovate or you’re in commodity hell. If youdo what everyone else does, you have a low-marginbusiness. That’s not where you want to be.” Sam Palmisano, former CEO IBM 17
Hyper competition“Managing innovation better may be the only way out ofthe abyss called commodity hell” Jeffrey R. Immelt, CEO General Electric 18
Some drivers of hyper competitionWhy hyper competition? Globalisation – less trade barriers and efficient transport (e.g. containers) Speed of hyper connected communication and the pace of modern business Disruptive Technologies A new technology that has a serious impact on the status quo and changes the way people have been dealing with something, perhaps for decades 19
What do we mean with innovation? This document is solely for the use of the receiver. No part of it may be circulated, quoted, or reproduced for distribution outside the receivers organisation without prior written approval from Bearing Consulting Ltd.
What is Innovation?The literatureis not givingus aconsistentdefinition 22
The definitionInnovation is creative destruction, whereentrepreneurs combine existing elements innew ways… After Joseph Schumpeter (1883 – 1950) 23
What is Innovation? Innovation ?Innovation can be incremental or disruptive / radical Train Car Airplane”Invention” => Innovation => Effect (Globally) 24
What successful development requiresSuccess with innovation does not require comparative resources.The Ghaff tree grows in the desert virtually without water.The key factors for success with innovation are knowledge and creativity 26
How can we work with innovation? This document is solely for the use of the receiver. No part of it may be circulated, quoted, or reproduced fordistribution outside the receivers organisation without prior written approval from Bearing Consulting Ltd.
Innovation across the business systemBusiness Product & Sales & Delivery & Operation Model Services Marketing Supply Chain 28
The Innovation RadarWolcott, Lippitz, ―Grow from Within‖ 29
Does Harley-Davidson sell motorcycles?―…what we sell is the abilityfor a 43-year-old accountantto dress in blackleather, ride through smalltowns and have people beafraid of him― – an HD executive 33
The Lego StoryY2000 "Toy of the Y2004-03, the Century" by owner & CEOFortune magazine Kjeld Kirk and the British Kristiansen decideAssociation of Toy to go back to Retailers basic! Y2003 – 2004 Y2004-10, Jørgen Huge losses, close Vig Knudstorp to bankruptcy appointed as new CEO 34
The Lego Story The situation 2004 Demand decreasing, competition from games, movies, merchandising Poor quality Poor logistics Slow in adoption Simplistic leadership and laid-back cultureSources: HBR, DN, Guardian, BBC, Handouts European Offshoring Summit, (2009, Copenhagen) 35
The Lego Story Innovate Execute Stabilize Deliver what operations we promise Improve the Value Creating business Partnership Define Rigid Execution Raison dêtre Platform Organic growth Differentiated Value Chain Offshoring Consumer Driven Restore the Value Chain balance sheet 2200Operational Profit 1200 MDK 200 -800 2003 2004 2005 2006 2007 2008 -1800 36 Year
Lego – key achievementsClear Raison dêtre: ―we help children learn systematic and creative problem solving—a crucial twenty-first-century skill‖Gained consumer insights through ―direct sales to consumers‖ through BuiltByMe without competing with existing distribution channelCo-Branding with strong and selected partners such as Star wars and Harry Potter 37
Lego – key achievementsReduced lead time, 45 to 3 days to storeCost saving through offshoring non- core competenciesA new supplier interfaceQA system in placeOpen Innovation, 120,000 people involved in external innovation work – DesignByMe, DreamtByMe, BuildByM eCommunity driven approach; the open platform Mindstorm encouraging customers to design and develop their 38
Lego total innovation makeover Customer External Innovation Engagement Internal Innovation Brand Services Supply Chain Business Model Partner Model Product Marketing...and LEGO continues to deliver exceptional profitable growth onan oligopolistic/niche and international toy market... 39
Innovation in cities and other places This document is solely for the use of the receiver. No part of it may be circulated, quoted, or reproduced fordistribution outside the receivers organisation without prior written approval from Bearing Consulting Ltd.
The City Competition ChallengeThe global competition ofcities is estimated to host 2,7million towns, 3 thousand largecities and 455 largemetropolitan areas with apopulation over one million.All of them compete in thestruggle for attention and thisis not limited to the contestbetween countries and cities.Even within cities there is a fierce competition between city centers versusneighbourhoods, shopping malls vs. traditional down towns, and so on.The competition between places used to be about comparativeadvantages, but in the age of globalisation it is about competitive 42advantage.
The Place Competition ChallengeDriven by globalisation, we now live in hypercompetitive global markets.This competitive environment makes itimportant for places, no matter their size orcomposition, to clearly differentiate and toconvey why they are relevant and valuedoptions.Places have always competed with eachother, but today the competitiveenvironment is increasingly fierce, becauseof economic and cultural globalization andthe increasing mobility of talents and capital.In positioning a place, there is always arisk of simplification. All too often placebrand development results in slogans, butsuch results are failures. 43
Seattle in the 1970s – a place in declineIn the 1970s Seattle became synonymous with urban decline 46
Seattle – example of successWorld classinstitutions andcompanies based inSeattle:- Microsoft (Redmond)- Amazon.com- Starbucks- NordstromsToday, Seattle is one of the wealthier and most productivemetropolitan areas in the United States - Per-capita income is 25 percent above the average - Per-capita productivity is 37 percent above the averageSeattle has succeed by attracting talented institutions and peoplethrough smart place management and smart place branding 47
Differentiation with or without Direction…. 48
What City Branding meansA city brand strategy is a plan for definingthe most realistic, most competitive andmost compelling strategic vision for thecity.This vision then has to be fulfilled andcommunicated.It is fundamental to ensure that the vision ofthe place is supported, reinforced andenriched by every act of communicationwith the rest of the world. 49
Communication • Co-branding with products and servicesWhen to • In promotion for trade, tourism, investment and talentCommunicate attractionthe City Brand? • In representing its culture with other places • How residents behave when abroad and how they treat visitors at home • In the urban and natural environment it presents to the visitor • In the way it features in media • In the bodies and organisations it belongs to • Toward the other cities it associates with 50
The Internet home pageInternet is now theprimary communicationtool.A city may have a verywell thought through placebrand, but the clarity andrelevance of the brandhas to be communicatedon the internet in anefficient and skilful way. 51
4 Who to involve - the triple helix dilemma… For 20 years we have Sub heading used the traditional triple-helix model, describing the crossing of three worlds; academia, business and government In the photo above we can see triple helix spiral stairs from the cathedral in Santiago de Compostela in Spain. They all start on the ground floor and lead to different places. The photograph illustrates the real-world difficulties of making the business sector, the academic sector and government understand each other and cooperate. 52
4 The ‖drain pipes‖… Successful development can never thrive on an organizational Sub heading set up where the traditional institutional borders look like the drain pipes. Instead, an open and innovative cross fertilization is the winning recipe. In summary: ―context management‖ is a prerequisite. 53
4 The Quad Helix model Sub heading The Quad-Helix model recognizes that the drain pipe approach is not competitive It also illustrates the key importance of the central context management The Quad Helix model approach is at the core of our thinking 54
Always start with your Target MarketsCity branding is the process of image communication to a targetmarketAll places compete with other places for people(visitors, residents), resources, and business.Which are the target markets of your place? 55
Perform a sweet spot analysis for differentiation Where your city meets What? target markets needs Where? in a way in which your Why? Competitive Customers’ competitors cannot How? places needs offerings 3 1 Sweet Spot 2 Sweet spot = unique spot How to protect/define boundary 1,2,3 Your own city assets and capabilities 56Inspired by: Collis & Rukstad (2008). Can You Say What Your Strategy Is?, HBR (April 2008)
The Power of VisionsSub heading“Vision without actionis merely a dream. VisionAction without visionmerely passes thetime. StrategyVision with action can Plans andchange the world.” implementation- Joel Barker, Futurist, Author 57
Book published in 2011Place Management – bookon placemanagement, branding anddevelopmentThe book is available onwww.amazon.co.ukorwww.placemanagement.net 59
Corporate Innovation and common gaps This document is solely for the use of the receiver. No part of it may be circulated, quoted, or reproduced fordistribution outside the receivers organisation without prior written approval from Bearing Consulting Ltd.
The S-curve Emergent Growth Mature Performance / Value offering Ongoing business Business of the future (EXPLOITATIVE) (EXPLORATORY) Effort / TimeSource: Tovstiga (2007) 62
Ten steps to corporate innovation managementFöreläsare 1. Adopt a disciplined method for innovation management including project management, focus on customer needs and alignment of research and development to marketing plans. 2. Use advisers and collaborators to obtain resources which are non-core, vital or of superior quality to resources available in-house. 3. Identify customer needs in market segments. 4. Identify the differentiation of your innovative offering (goods, services, systems or a combination of them) to meet those customer needs. 5. Develop the offering for the identified differentiation. 6. Secure intellectual property protection. 7. Use the differentiation as a component of the competitive advantage 8. Refine the positioning of the offering at either the offerings, operations or organisational structure level. 9. Monitor, anticipate and respond to competition against or relevant to the offering. 63 10. Monitor and respond to the market performance and feedback for the offering.
Common gaps En definition...1. Framework of reference, lack of common terminology2. Heads on competition in market. Limited focus on differentiation3. Culture4. Not allow people time and space to be creative5. Focus only on exploitative business, not exploratory6. Creativity killed by process and procedure7. Too long time to market 65
How to make corporate innovation work This document is solely for the use of the receiver. No part of it may be circulated, quoted, or reproduced for distribution outside the receivers organisation without prior written approval from Bearing Consulting Ltd.
Sweetspot analysis Where your firm meets What? customers needs in a Where? way in which your Why? Competitors’ Customers’ competitors cannot How? offerings needs 3 1 Sweet Spot Sweet spot = unique spot 2 How to protect/define boundary 1,2,3 Company’s capabilities Context (technology, industry, regulat ory, etc.) 70llis & Rukstad (2008). Can You Say What Your Strategy Is?, HBR (April 2008)
Your Sweet Spot Defines Your Future Success First DIFFERENTIATE Where your company What? from competitors meets customers needs in a way in Where? Why? Competitors’ Customers’ which your competitors How? offerings needs cannot 3 1 Sweet Spot Sweet spot = unique spot 2 How to protect/define boundary 1,2,3 Company’s capabilities Context (technology, industry, regulat ory, etc.) 71llis & Rukstad (2008). Can You Say What Your Strategy Is?, HBR (April 2008)
Your Sweet Spot Defines Your Future Success THEN expand border 3 north toward customer needs Where your company What? meets customers Where? needs in a way in Why? Competitors’ Customers’ which your competitors How? offerings needs cannot 3 1 Sweet Spot Sweet spot = unique spot 2 How to protect/define boundary 1,2,3 Company’s capabilities Context (technology, industry, regulat ory, etc.) 72llis & Rukstad (2008). Can You Say What Your Strategy Is?, HBR (April 2008)
Innovation framework Strategic question Type of innovation Style Why How What Profit / Market share Product Innovation • Cauldron Company Strategy Process Innovation • Spirale • Incremental/ Organisational Innovation • Fertile Disruptive • PacMan Management Innovation • Need seekers • Explorer Production Innovation • Market readers • Technology drivers Commercial/Marketing People Innovation • 10 Faces of Innovation Service Innovation Capability & Process • Ideation • Project selection • Product development • CommercialisationSource: Penker (2011) 73
Innovation CapabilitiesInnovation Capabilities- Determines how well you will succeed with your innovation efforts The most successful companies are those that focus on a particular, narrow set of common and distinct capabilities that enable them to better execute their chosen strategy.Examples:• Personas• Knowledge• Team structure• Tools• Processes. 74
Why – Strategic Question ? Strategic To keep competitors Question out keeping/gaining To increase the profit ? market shares? Building the capabilities to increaseIncrease barriers to enter or copy the internal efficiencyDifferentiation and neutralization of Cost savings competitorsFocus on competitive advantages Disruptive opportunities 75
How – Style & People ―The Devil´s Advocate may never go away, but on a good day, the ten personas can keep him in place‖ (Kelly & Littman, 2005) Learning Organisational Building personas personas personas Experience Anthropologist Hurdler Architect Set Designer Experimenter Collaborator Storyteller Cross-Pollinator Director CaregiverSource: Kelly & Littman (2005) 76
What – Types of InnovationBusiness model • Creating or reinventing the business in itselfOrganisational • Changing the organisational structure, in its business structure practice, workplace organisation or external relations Processes • Creation of better or more efficient internal processes Production • Improve the production stream and business methods Products • Development of new or improved products Services • Development of new or improved services Management • Development or implementation of more efficient or systems better management systems 77
Innovation style • An entrepreneurial • A style where you are • A style where the style where the constantly innovating organisation tries to business model is the existing business use existing constantly challenging and it over time capabilities and and is frequently changes its nature. resources in a new challenged While it seems to stay way beyond the in the same place. company’s existing operations. The Spiral The Cauldron The Fertile Field Staircase • A style where you • A style where you invest in start ups that explore possibilities have already done and invest time and the strategy money in them development and without demanding R&D short-term profit The PacMan The ExplorerSource: Loewe, Williamson and Wood 78 (2001)
The Innovation Personas The world is changing at an accelerating speed and these personas are needed to Learning help teams from becoming too internally Personas focused. • The Anthropologist • The Experimenter • The Cross-Pollinator Enables the ideas to move forward in the organisation as even the best ideas must The Organising compete got time, attention and Personas resources. • The Hurdler • The Collaborator • The Director The building roles apply insights from the learning roles and channel the The Building empowerment from the organising roles Personas to make innovation happen. • The Experience Architect • The Set Designer • The Storyteller • The CaregiverSource: Kelly and Littman (2005) 79
How – Capabilities & Process Project Product Commercializa Ideation Selection Development tion Supplier and Strategic disruption Diverse user group distributor decision making and Reverse engineering management engagement in transition plan ideation process Independent Technical risk Supplier–partner Production ramp-up competitive insights assessment/manage engagement in from the marketplace ment product development Regulatory/governme nt relationship Open Rigorous decision management innovation/capturing Design for specific making around ideas at any point in goals portfolio trade-offs the process Global, enterprise- Detailed wide product launch Project resource understanding of requirement Product platform emerging forecasting and management Product life-cycle technologies and planning management trends Deep consumer and Engagement with Pilot-user Ongoing assessment customer insights and customers to prove selection/controlled of market potential analytics real-world feasibility rolloutsSource: Jaruzelski & Dehoff (2010) 80
Marissa Mayer s 9 Principles of Innovation En definition...1. Innovation, not instant perfection2. Ideas come from everywhere3. A license to pursue your dreams4. Morph projects don t kill them5. Share as much information as you can6. Users, users, users7. Data is apolitical8. Creativity loves constraints9. You re brilliant? We re hiring 81
IDEO´s method for creativity‖Method to our madness‖ 1. Understand the market, the client, the technology and percieved constraints 2. Observe real people in real life situations 3. Visualize new-to-the-world concepts 4. Evaluate and refine the prototypes 5. Implement the new concept for commercialisation 82
Bearing Innovation Navigator...the navigatorInitiated by the work of Sawhney, M., Wolcott, R. C., & Arroniz, I. (2006). The 12 Differetnt Ways for Companies toInnovate. MIT Sloan Management Review , 75-81. 83