1. Giving HR the InnovationAdvantagePrepared for:Human Resources Leadership ForumJanuary 19, 2012the clarion group © The Clarion Group, Ltd., January 2012REAL. CLEAR. INSIGHT.
2. QuestionWhat is innovation?Why is it important?the clarion groupREAL. CLEAR. INSIGHT.
3. “Innovation”“Innovation” is: A The Foundational IntroductionA Creative An Change in or of Something Causing Process Outcome Adaption to New or What is Done Different Todaythe clarion groupREAL. CLEAR. INSIGHT.
4. Primary Environmental Drivers for Innovation The new market place is requiring companies to rethink the basics of their business − The “theory of the business” may have changed (e.g., healthcare, investment management) − The market place dynamics have changed, including, for example, consumer trust − The economic model may have shifted where the end buyer now may weigh their purchases differently − The internet and social networking have permanently altered the ways in which people engage in commerce The “maturity” of many industries and the companies within them − “Maturity” shows up as single-digit growth primarily realized by stealing market share from competitors − The staying power of mature industries and companies is limited “If you are not growing, you are dying.” − Growth must be discovered by totally rethinking the current business to “squeeze” growth out of it and by investing in new avenues of growth The rebalancing of our global economics is creating new opportunities, e.g., jewelry manufacturing coming back to the US; the EU losing its financial might and corporations in other zones gaining strength − Slow growth and no one sure where growth will emerge The deepening of customer intimate core value propositions moving beyond: greater market research, segmentation and extensions to distribution capabilities. From: Firm decides and customers receive To: Firm and customer participate in value creation resulting in a new experience for customersthe clarion groupREAL. CLEAR. INSIGHT.
5. The Call to Action… These and other environmental factors call many to systemic innovation that goes beyond just product, service and process innovation TO Business model innovation TO Innovation in the customer/balance of power equationthe clarion groupREAL. CLEAR. INSIGHT.
6. Whole Systems View – The Operating Model Strategy Leadership Culture Organizing Structures the clarion group REAL. CLEAR. INSIGHT.the clarion groupREAL. CLEAR. INSIGHT.
7. Operating Model – Outcomes Strategy  Mission, vision, values  Customer value proposition  Growth strategies  Strategic goals and objectives  Scenario thinking and planning  Scorecard and measurement system Culture Organizing Structures Leadership  Competency  Organizational design requirements  Team alignment  Macro work process  Organization, team  Decision-making and and individual accountability behaviors processes and structures  Change navigation  Talent planning and performance  Organizational culture management systems alignment  Physical space concept design the clarion group REAL. CLEAR. INSIGHT.the clarion groupREAL. CLEAR. INSIGHT.
8. The 3 Levels of Innovation Innovation 3 Customer/Balance of Power (Value Co-creation) “Urban Planner” Innovation 2 Business Model (Transformation) “Architect” Innovation 1 Operational Performance (Process Improvement) “Engineer” Increasing degree of:  Complexity  Change  Openness to new ideas and possibilitiesthe clarion groupREAL. CLEAR. INSIGHT.
9. Innovation 1 – Process Improvement Intact work process: one in which all major steps occur within the same organization: Step Step Step Step 1 2 3 4 Interactive work process: one in which the work, at some point during the process, is handed off to another organization for one or more steps, then returned to the original organization to complete: Step 3 Step Step Step Step 1 2 4 5 Input work process: one in which major input is received from another organization during the work process: Step 2b Step Step Step Step 1 2a 3 4 There can be many variations and combinations of these simple processes.the clarion groupREAL. CLEAR. INSIGHT.
10. Innovation 1 – Value Chain InnovationProcess Improvement Product Product Sales & CustomerExample: Design Development Marketing Service – Hold customer focus – Xxx – Xxx – XxxMajor groups – Xxx – Xxx – Xxx – Develop product designsActivities – Competitor analysis – Xxx – Xxx – Xxx – Customer input reports – Xxx – Xxx – XxxKey – Product blueprints – Xxx – Xxx – Xxx – Competitor productDeliverables information – Xxx – Xxx – Xxx – Engineering – Xxx – Xxx – XxxParticipants – Marketing – Xxx – Xxx – Xxx – VP Product Group A – Xxx – Xxx – Xxx – Product groups B & C – Xxx – Xxx – XxxKey Dependencies/ – Customer service reps – Xxx – Xxx – XxxInterfaces – Sales reps – Xxx – Xxx – XxxKey – Xxx – XxxDecisions – Xxx Key Interfaces and Handoffs Key Customer Touch Points the clarion group REAL. CLEAR. INSIGHT. the clarion group REAL. CLEAR. INSIGHT.
11. Examples For each boat: 1. Fertilize the soil 1. Locate the wood 2. Plant the seeds 2. Loft the plans to scale 3. Water and nurture 3. Frame the ribs off the 4. Aerate soil scale 5. Harvest 4. Cut and lay the planks 5. Seal the seams 1. Float seeds in water 1. Build one mold to sponge accommodate infinite 2. Hang in damp air number of boats 3. Harvest 2. Lay fiberglass within it the clarion group REAL. CLEAR. INSIGHT.the clarion groupREAL. CLEAR. INSIGHT.
12. Innovation 2 – Business Model Innovation Leadership Role and PerformanceTheory of the Business  Go-to-Market  Critical Touch Competitive Points Stratecution Strategy  Core  Capabilities  Org Design  Product / Service Chain  Customer Chain  Supply Chain  Knowledge Chain Culture the clarion group REAL. CLEAR. INSIGHT. the clarion group REAL. CLEAR. INSIGHT.
13. ExampleCisco Systems turning its structure on its side to transform its “go-to-market” 1. Business architecture 2. Value Stream 3. Ability to add or shrink product lines cost effectively Functions, e.g., Engineering, Functions, e.g., Engineering, Manufacturing, Sales Manufacturing, Sales Product Lines Functions, e.g., Engineering, Product Lines Product Lines Manufacturing, Sales the clarion group REAL. CLEAR. INSIGHT.
14. Examples Health Plan Enabling Information Theme Parks Company Entertainment Company Hardware Company Services Company TO Running Shoe Company Mindset Company Coffee Company Lifestyle Company “Wax to Glass” Fragrancethe clarion groupREAL. CLEAR. INSIGHT.
15. The 3 Levels of Innovation Much greater complexity Innovation 3 Rapidly emerging Customer/Balance of Power Driven by social (Value Co-creation) networking engines Innovation 2 Business Model (Transformation) Familiar Domain Innovation 1 Operational Performance (Process Improvement)the clarion groupREAL. CLEAR. INSIGHT.
16. Innovation 3 - Customer/Balance of Power Innovation Value Co-creation Vast “And Growing” Research and Shared Innovation Analytics “Value Co-creation” Variables to Consider Business Model Innovation “Transformation” Balance of Many Power Known Unknown Operations Linear Non-Linear Innovation Recipient Participant “Process” Exploit Explore Scenarios Few Low Multiple Alternatives High “And Epic” Degree of Uncertainty the clarion group REAL. CLEAR. INSIGHT.the clarion groupREAL. CLEAR. INSIGHT.
17. Value Co-creation Example – Healthcare Healthcare “Doctor as Expert” To “Family Home Medical Model” What’s different?  Patient and patient’s family are integrally involved in the healthcare plan for an individual The individual takes on responsibility The individual makes choices The family takes on responsibility  Greater access to information for all  Emphasis shifts to home care In aggregate, this results in the patient and the family building a unique path to healthcare for the family member. Hence, the value creation has been altered with the patient dramatically more engaged in the experience.the clarion groupREAL. CLEAR. INSIGHT.
18. Value Co-Creation Example – Big Box Home Improvement Retailer Past Future  Growth by adding new stores  Target creative customer  Competed on pricing/selection  Online access  Individual store-based Personal database execution Dramatic Change Interactive design  Helpful Associates ask, “Which (text, voice, video) product/aisle…?” Integrated with stores  Growth slowed from market  What are you envisioning vs. saturation and the recession what do you need?  Consumer and Associate design together  Mass customized experience the clarion group REAL. CLEAR. INSIGHT.
19. Innovation is Not Simply Being More Visionary or Creative… In our experience, successful innovation is…  Recognizing your unique innovation requirements for success. …Innovation is not a one-size-fits-all program  Architecting your operating model for creativity and discipline …Both are required for long-term success  Starting small, testing, iterating, validating and then investing for scale …Build a portfolio of early stage ideas and continue investments based on data  Maintaining a consistent pace with the appropriate guiding metrics …Innovation is not a sprint or a single brilliant idea; it’s hard work  Focusing on the day-to-day, but creating time to step back and observe the market for foundational changes and adjusting your course accordingly …Leadership must create the strategic “container” in which relevant innovation can occur the clarion group REAL. CLEAR. INSIGHT.
20. Leadership Competency Implications Capabilities Developable, yet differentiating skills and knowledge- based elements that leaders acquire through education and experience. Capabilities are what people have learned to do, involving how people think and their knowledge on a variety of topics, including management practices. Characteristics Innate operating and interaction styles. Characteristics, although particularly instinctive, may be strengthened or modified to a degree through awareness, practice and reinforcement. Capacities Differentiating attributes that influence a leader’s intellectual, emotional, and physical strength, endurance and perseverance. Capacities tend to be more “hard-wired” and less malleable. While not totally within a leader’s control, capacity can expand or contract depending on the situation.Core MotivesRecurrent concerns that energize, orient and selectbehavior. They are so deeply rooted that they areoften beyond our consciousness. the clarion group REAL. CLEAR. INSIGHT.
21. Leadership Competency ImplicationsThe “4C’s” Competency Model Characteristics Capabilities Core Motives Capacities Innovation Level Innovation 3 Collaboration Wildly Open to Enablement Customer/Balance of Power Co-Creation the Unknown (Value Co-creation) Capabilities Innovation 2 Open to New Inclusion Enablement Business Model Ideas (Transformation) Focused on Innovation 1 Structuring Authority Known Operational Performance Delegation Control Domain (Process Improvement) the clarion group REAL. CLEAR. INSIGHT.
22. The Implications for HRThe HR Value Pyramid Clarify Strategic and Culture Goals Individual and Executive Team Performance Organization Design, Effectiveness and Change Navigation Employee Engagement Integrated Talent Management HR Performance Compensation Staffing Development Analytics Management Employee Services and Infrastructure the clarion group REAL. CLEAR. INSIGHT.
23. The 3 Levels of Innovation and the Implications for HR Innovation 3 Customer/Balance of Power Clarify Strategic (Value Co-creation) and Culture Goals Individual and Executive Team Performance Organization Design, Effectiveness and Change Navigation Innovation 2 Business Model (Transformation) Employee Engagement Integrated Talent Management HR Performance Innovation 1 Compensation Staffing Development Analytics Management Operational Performance (Process Improvement) Employee Services and Infrastructure the clarion group REAL. CLEAR. INSIGHT.the clarion groupREAL. CLEAR. INSIGHT.
24. Individual Innovation Assessment WorksheetWhat are the external trends/issues driving your organization’s need for innovation?   Of the three levels discussed, which are needed by your organization and why?  Operational –  Business Model –  Value Co-Creation –What are the implications for HR in your organization? What must your HR organizationdo differently or better?    the clarion group REAL. CLEAR. INSIGHT.
25. HRLF Innovation Program Topics Planned for 2012 Strategy Strategy: Using Innovation to Stimulate Business Growth at Prudential Retirement with Helen Frye and Sean McLaughlin (November 13 – AM Meeting) Leadership Organizing Culture Managing Talent in an Structures Age of Uncertainty with Peter Cappelli, The Wharton School Innovate or Perish: (June 5 – PM Meeting) Building a Culture of Talent Acquisition: Innovation with Jay Innovative Solutions to Jamrog, SVP Research Recruiting with i4cp HireVue and a Panel of Experts (March 27 – PM Meeting) (September 20 – AM Meeting) HR Practices: Creating a Mindset of Innovation with Jatin DeSai from the DeSai Group (May 1 – AM Meeting) the clarion group REAL. CLEAR. INSIGHT.the clarion groupREAL. CLEAR. INSIGHT.