The thin line between success and failure within innovation Koen Klokgieters Business Innovation Officer Capgemini CS TU Delft, 19 November 2007

What Capgemini means by innovation … Business Innovation : the development and implementation of a unique added value that is adopted by customers, by means of an integrated change of internal and external factors. First of al, there is no checklist you can walk through and leave you with a successful innovation. There are however different factors you have to consider which can help or harm your innovation process. “ There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things. Because the innovator has for enemies all those who have done well under old conditions, and lukewarm defenders in those who may do well under the new’ ( Niccollo Machiavelli)

Business Innovation : the development and implementation of a unique added value that is adopted by customers, by means of an integrated change of internal and external factors.

First of al, there is no checklist you can walk through and leave you with a successful innovation. There are however different factors you have to consider which can help or harm your innovation process.

There are a countless number of articles which handle all sorts of success and failure factors Bron: HBR, Innovation the classic traps, R. Moss Kanter (2006) Executives say innovation is a top priority for driving growth but getting it right is hard as ever . They flaw in how their companies manage and govern innovation. (2007 McKinsey survey on innovation ) A lack of methodologies, a systematic approach and a low innovation presence might be what are keeping corporations from fully capitalizing on their innovative capabilities (Capgemini, 2006) A risk-averse corporate culture, lengthy product-development times, and a lack of internal coordination are the three biggest stumbling blocks facing companies seeking to improve their return on innovation (BCG, 2007)

A successful approach starts with choosing the Ambition level for Business Innovation Success is determined by awareness of the right ambition level in combination with self-knowledge and your innovation capability. The value proposition for the customer increases in the order of product-, channel- and market level. The impact will increase exponentially if innovation takes place in multiple levels at a time: a “Blue Ocean” development. The ambition level is steered by the outcome of the impact analysis on the different trends and the strategic decisions of the company on how to handle this impact. The total overview of scenario’s and strategic choices determine the ambition level. Figure 1. The Business Innovation Ambition level

Success is determined by awareness of the right ambition level in combination with self-knowledge and your innovation capability.

The value proposition for the customer increases in the order of product-, channel- and market level.

The impact will increase exponentially if innovation takes place in multiple levels at a time: a “Blue Ocean” development.

The ambition level is steered by the outcome of the impact analysis on the different trends and the strategic decisions of the company on how to handle this impact.

The total overview of scenario’s and strategic choices determine the ambition level.

The Innovation Growth Model provides insight into the various stages of the Innovation Management growth process We can distinguish 5 growth phases in Innovation Management, every phase with its own characteristics (ambition level and innovation capability) and challenges to grow to the next phase: Adhoc Innovation: Company in the 1 st phase of the growth model initiates innovation projects on an adhoc basis. Challenge: Connect and integrate the separate initiatives. Program Innovation: In the 2 nd phase the company is able to manage innovation project integrally. Challenge: Attract parties from outside the company to deploy initiatives collectively. Co-creation: In the 3 rd phase initiatives are actively taken to participate with possible external parties. Challenge: Set up and maintain eco-systems. Eco-innovation: In the 4 th phase a structural network of partners, suppliers, and customers (Eco-system) is in place for systematically innovation. Challenge: Maximally utilize specific roles in the various ecosystems and create new value chains. Value Chain Innovation: In the 5 th phase new value chains will be discovered. So called Mash-ups will be introduced. Challenge: How to combine different business models at the same time. Figure 2. The Innovation Growth model The management of innovation is above all a learning- and growth process High Low Low High Ambition level of Business Innovation Innovation capability of the organization Adhoc Innovation Program Innovation Co - Creation Eco - Innovation Framework for Idea generation Framework for Idea implementation High Low Low High Ambition level of Business Innovation Innovation capability of the organization Adhoc Innovation Program Innovation Co - Creation Eco - Innovation Framework for Idea generation Framework for Idea implementation Value Chain Innovation

We can distinguish 5 growth phases in Innovation Management, every phase with its own characteristics (ambition level and innovation capability) and challenges to grow to the next phase:

Adhoc Innovation:

Company in the 1 st phase of the growth model initiates innovation projects on an adhoc basis.

Challenge: Connect and integrate the separate initiatives.

Program Innovation:

In the 2 nd phase the company is able to manage innovation project integrally.

Challenge: Attract parties from outside the company to deploy initiatives collectively.

Co-creation:

In the 3 rd phase initiatives are actively taken to participate with possible external parties.

Challenge: Set up and maintain eco-systems.

Eco-innovation:

In the 4 th phase a structural network of partners, suppliers, and customers (Eco-system) is in place for systematically innovation.

Challenge: Maximally utilize specific roles in the various ecosystems and create new value chains.

Value Chain Innovation:

In the 5 th phase new value chains will be discovered. So called Mash-ups will be introduced.

Challenge: How to combine different business models at the same time.

Behind every step in the Innovation management growth process, there lies some crucial success factors … The three most important success factors of innovation are exactly the same as Jim Collins points out in his book ‘Good to Great’ on the question why some companies become great and others don’t: People, people and people From one bright mind … towards social and business networks … http://www.wethinking.com

The three most important success factors of innovation are exactly the same as Jim Collins points out in his book ‘Good to Great’ on the question why some companies become great and others don’t:

People, people and people

When looking at success and failure factors of innovations, it is important to differentiate between incremental and radical/disruptive innovations … Incremental innovations builds on existing products, processes or services. Radical innovations on the other hand represent a completely new concept never been seen. An often heard argument is listening to and including your customers (Co-creation) in the innovation process. As much as this is true for incremental innovations, it is killing for a disruptive potential blockbusting innovation. There is no fit on the current mindset and yet no specific function for this innovation, so your current customers wont see the advantage of this radical innovation. This differentiation is important because a different mindset is needed when working on either kind of innovation.

Incremental innovations builds on existing products, processes or services.

Radical innovations on the other hand represent a completely new concept never been seen.

An often heard argument is listening to and including your customers (Co-creation) in the innovation process. As much as this is true for incremental innovations, it is killing for a disruptive potential blockbusting innovation.

There is no fit on the current mindset and yet no specific function for this innovation, so your current customers wont see the advantage of this radical innovation.

It is not only a matter of people but also about management, processes and tools … Source: Morten T. Hansen and Julian Birkinshaw, HBR, June 2007 DIFFUSION CONVERSION IDEA GENERATION SPREAD D issemination across the organization Do people in our unit create good ideas on their own? Do we create good ideas by working across the company? Do we source enough good ideas from outside the firm? Are we good at screening and funding new ideas? Are we good at diffusing developed ideas across the company? Are we good at turning ideas into viable products, businesses, and best practices? Number of high-quality ideas generated within a unit. Number of high-quality ideas generated across units. Number of high-quality ideas generated from outside the firm. Percentage of all ideas generated that end up being selected and funded. Percentage of penetration in desired markets, channels, cust. groups; number of months to full diffusion. Percentage of funded ideas that lead to revenues; number of months to first sale. KEY PERFORMANCE INDICATORS KEY QUESTIONS SELECTION Screening and initial funding DEVELOPMENT Movement from idea to first result The Innovation Value Chain: An Integrated Flow IN-HOUSE Creation within a unit CROSS- POLLINATION EXTERNAL Collaboration with parties outside the firm Collaboration across units

Success requires a marked departure from traditional principles … Idea generation New Approach The Innovation Value Chain Conversion In-House Cross-Pollination External Selection Spread Development Diffusion Traditional Prime Source of Ideas is the R&D Department Limited, through formal Channels Partner to Create Proprietary IPR Financing Dependant on Organization Priorities Linear process Disjoint Ownership Across Teams Limited to market segments or delivery platforms Ideas can Emerge Anywhere in the Organization Adequate, through Web 2.0 tools Collaborate to Evolve Common Standards Consumer Involvement Financing Based on Merit of the Idea Iterative process End-to-end Ownership with Single Team Rapid diffusion across markets and platforms Source: Capgemini C4 Lab analysis. Harvard Business Review, “The Innovation Value Chain”, 2007

Some established companies give early examples of radical innovation practices Early Adopters of New Approaches to Innovation Players ?? Initiatives Source: Capgemini C4 Lab analysis. Harvard Business Review, “The Innovation Value Chain”, 2007. Company Websites. Idea generation Conversion In-House Cross-Pollination External Selection Spread Development Diffusion Allows Employees to spent 15% time on own projects Internal Explorers, Incubators and Partners work with business engineers Developed Innocentive, an online IPR Trading Forum Launched “Game Changer” for Financing Employee Ideas Over 80% of employee ideas implemented Free Minitel Terminals Revenue share with application providers

How does Capgemini work with innovation: we integrate our sustainable innovation capabilities and offers a full service package … Concept & Solution Creation Program Design Program Execution Innovation Strategy Eco System Innovation Radar Screen Blue Ocean Strategy Workshop New Business Concept creation TechnoVision Innovation Research Program Rapid Innovation (RAIN) Accelerated Business Innovation Innovation Program Management Systematic Innovation (TRIZ) Technology Enabled Innovation (BIS) Customer Centric Innovation Global Industry Trends Innovation Service Chain Capgemini Global Client Business Network

There are four key problems for realizing innovation when your innovation management growth process finds itself at the co-creation stage or up. Motivation Free-riding Efficiency Boundary- crossing How to motivate partners to share Knowledge? How to ensure the right knowledge ends up with the right partner quickly? How to overcome cultural, time, knowledge gaps? How to prevent companies learning but not sharing? Source: A.P. de Man, adapted from Dyer and Nobeoka

The ‘Innovation Platform’, a practical approach to bring the right people together and to improve the innovation capability within an organization and with outside stakeholders … Preparation & mobilisation “ MyInnovation” “ Networking” Event Phase 2 Phase 1 Phase 3 Phase 4 Mobilisation meeting Scan Focus Act Digital portal Innovation room “ Execution power” Event Event innovation day innovation day innovation day

Opening up your innovation process can be a large step, bur there are some key lessons which will help … Some of the most innovative networks combine strong financial incentives with a very informal way of working Long term view is necessary, but by building on existing relations early successes can be made Innovating with external partners raises new questions and problems (where to position, how to manage)… … But the described tools and framework helps co-creation, eco-innovation and value chain innovation to follow the growth path of innovation …

Some of the most innovative networks combine strong financial incentives with a very informal way of working

Long term view is necessary, but by building on existing relations early successes can be made

Innovating with external partners raises new questions and problems (where to position, how to manage)…

… But the described tools and framework helps co-creation, eco-innovation and value chain innovation to follow the growth path of innovation …

www.capgemini.com /consulting Koen Klokgieters/ Capgemini / Utrecht BUSINESS INNOVATION OFFICER Consulting Services http://koenklokgieters-english.blogspot.com/ http://koenklokgieters.blogspot.com/ T: +31 30 689 7312 | M: +31 6 51123259 [email_address] www.capgemini.com Papendorpseweg 100, Postbus 2575, 3500 GN UTRECHT