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  • Setting Expectation:
  • Setting Expectation:
  • Setting Expectation:
  • Setting Expectation:
  • O know that I don’t know. But I will
  • The environment is an amoeba uncertain shape – unpredictable CK Prahlad – interpreting the above in the Indian context
  • Draw from C K Prahald’s quote Easiest to replicate by competition Develop a mindset to squeeze value at each step of the value chain Principal tool for unfixing the fixed costs is out-sourcing Outsourcing enables Scalability Flexibility - Quick In and Out of opportunity However Pay the price for it Loyalty
  • The Art of Co-creation of Value – See Saturn story below The traditional company-centric view says: (1) the consumer is outside the domain of the value chain; (2) the enterprise controls where, when, and how value is added in the value chain; (3) there is a single point of exchange where value is extracted from the customer for the enterprise. The consumer-centric view says: (1) the consumer is an integral part of the system for value creation; (2) the consumer can influence where, when, and how value is generated; (3) there are multiple points of exchange where the consumer and the company can co-create value. Create WoW at each possible touch point More importantly as product differentiation diminishes The Maruti Luxury car experience The ‘Titan/ Tanishq’ story – Developing new experience in delivery SATURN STORY In the customer-centric mass production and marketing of automobiles, for example, suppliers provide raw materials, components, subcomponents, and systems to manufacturers, who create value by assembling these inputs into vehicles. Consumers actively decide what vehicle to buy, but companies decide what their choices will be. Cars are sold by dealers acting as inter-mediaries for the automakers. The Saturn Corporation, billing itself as “a different kind of car company,” has spurned the industry’s traditional ways. In 1985, when the General Motors Corporation launched Saturn, it didn’t just start a new car company, it created a “community.” Saturn works with its customers in the design, manufacturing, and sales processes, and it engages Saturn owners to help continuously innovate and improve its cars. Consumers think about the place of a car in their life — how it fits their budget, their desire for comfort, their need for peace of mind, their aesthetics. Companies think about their competitive strategy and their operations — engineering, differentiation, logis-tics,pricing, and, above all, revenue and profit. Although these views of value do clash, they’re not irrec-oncilable. Saturn is a company trying to merge these two ways of looking at value. Shopper’s stop, Nike, Barista, Pizza Hut, TGI Fridays, Nokia, Sony, Arrow
  • T he classic approach to corporate strategy starts with a presumption: that with sufficient analytical rigor and an adequate assessment of the probabilities, businesses can pave a predictable path to the future from the matter of the past. In this world, we make reasonable assumptions about the evolution of product markets, capital markets, technology, and government regulation and, in effect, "assume away" most risk – A grave and possibly a fatal error in a market like India. Template changes not as rapid as environmental changes Mindsets do not change as fast as the environmental changes – of suppliers/ employees / internal and external customers Pace of change in India (and other developing countries) is even more rapid - Toffler’s time compaction Loss of opportunity when you manage with old templates in the changing environment – Certain level of conservatism Major Environmental changes Technology (May not be consumer led, For e.g. SMS where you need to work on consumer mindsets) Regulations (Usually no clear path forward, 2 steps forward, one step back)
  • HLL Ice-cream softies, Amul Pizzas
  • I know that I don’t know. But I will.
  • I know that I don’t know. But I will.
  • I know that I don’t know. But I will.
  • Resources People Equipment Technologies Cash Product designs Information Brands relationships Processes : Patterns of interaction, coordination, communication and decision making that employees use to transform resources into products and services of greater worth Values: Standards by which employees set priorities that enable them to judge whether an order is attractive or unattractive, whether a customer is more important or less important, whether an idea for a product is attractive or marginal and so on.
  • The process is based on the fact that many important commercially important are initially thought of and even prototyped by “lead users” – companied, organisations, or individuals that are well ahead of market trends. Their needs are so far beyond those of the average user that lead users create innovations that on their own may later contribute to commercially attractive breakthroughs. Phase-1 : Laying the foundation : The team identifies the markets it wants to target and the type and level of innovations desired by key stake holders in within the company. Phase-2 : Determining the Trends : The team talks to experts in the fields that they are exploring-people who have a broad view of emerging technologies and leading-edge applications in the area being studied. Phase-3 : Identifying Lead Users: The team identifies and learns from users at the leading edge of the target market and related market and gather innovations and ideas that that might contribute to the development of a break through products. Phase-4 : Developing the breakthrough: To move preliminary products towards completion. A workshop is hosted with lead users, in-house technical and marketing team. The idea is to design final concepts that fir the company’s needs. After the workshop the project team hones the concepts, determines the fit to the targeted users and present recommendations to seniors managers. Some of these may finally be marketed
  • Capturing good ideas “ To invent, you need good imagination and a pile of junk” – Thomas Edison Keep your eyes and ears open for new ideas. They can come from any where. Keeping the ideas alive – plying with them, discussing them, and using them. Keep the ideas visible in tangible objects on white boards etc. otherwise they die very quickly. Also ideas need to be shared across – spread information about who knows what. Imagining new uses for old ideas – the steam boat. Putting promising concepts to the test “ The real measure of success is the number of experiments that can be crowded into 24 hours” – Thomas Edison Testing shows whether an innovation has commercial potential and also teaches valuable lessons (for future) even when an ideas is a complete flop. For more details read: Building and innovation Factory by Andrew Hargadon and Robert I. Sutton, Harvard Business review on Innovation.
  • Organize for rapid experimentation – Examine and, if necessary, revamp entrenched routines, organisational boundaries and incentives to encourage rapid experimentation. Use small development groups with all the knowledge required to iterate rapidly. Determine experiments that cam be performed parallel instead of sequentially. (eg. Virtual simulation of crash tests for automobiles) Fail early and often, but avoid mistakes: Embrace failures that occur early in the development process and advance knowledge significantly. Well designed test must have clear objectives and hypothesis. When variables cannot be controlled, allow for multiple, repeated trials. Anticipate and exploit early information: Identify problems upstream where they are easier and cheaper to solve (front loading). Acknowledge the trade off between cost and fidelity Experiments of lower fidelity are best suited in the early stages and high fidelity in the later staged to verify the products. Combine new and traditional technologies: Do not assume that new technologies will replace an established one. Usually new and old technologies are best used in concert. Remember that new and old technologies emerge and evolve continually.
  • How to distinguish a wining idea (CNN) from a bad one (Motorola’s Iridium) The buyer utility map – creating exceptional utility The price corridor of the mass The business model guide
  • Three possibilities: Using a new utility lever in the same stage – Starbucks and Barista: Injected fun and experience Using the same utility lever in a new stage: Dell delivers computers tailored to the user needs faster than any other manufacture Using a new utility lever in a new stageAlso to see if the space is occupied by someone else. Had motorola used this test probably iridium would never have been launched.
  • Looking across substitute industries – Home Depot, Quicken, FedEx, United Parcel Service, Southwest Airlines Looking across strategic groups within industries – Polo Ralph Lauren, Toyota Lexus, Champion Enterprises Looking across chain of buyers: Bloomberg, Philips – North America Looking across complementary Product and service offerings – Borders Books & Music, Barnes & Nobles, Zeneca’s Zalicks cancer centres Looking across functional and emotional appeal to buyers – Swatch, Starbucks, The Body Shop Looking across Time – Cisco,
  • Two steps Identifying the price corridor of the mass Specifying a level within the price corridor
  • Which price model should we use? – video cassette rentals and time share holidays

Innovation factory Innovation factory Presentation Transcript

  • First the Revolutionaries (Innovators) will take your markets and your customers.
  • Next they will take your best employees.
  • Finally, they will take your assets!!!
  • First the Revolutionaries (Innovators) will take your markets and your customers. Next they will take your best employees. Finally, they will take your assets!!!
  • Dream, create, explore, invent, pioneer, imagine! Do these words describe what you do?
  • Innovation Assembly Line Why? What? How?
  • Presentation Structure
    • CEO’s Tasks
    • Value Opportunity
    • Innovation Assembly line
    • Constituents of the assembly lines
    • Institutionalising the innovation process
    • Idea Filtering
    • Hurdles to innovation
    • The innovation Agenda
  • CEO’s Tasks
    • Create Shareholders wealth
    Manage Operations (efficiency) Deliver Experience (doing new things) Companies spent the 20th century managing efficiencies. They must spend the 21st century managing experiences. C K Prahlad Venkatram Ramaswamy Uncertain Environment
  • Manage Operations Ceased to be a differentiator
    • Create Efficient operations
      • Just to survive; table stakes
    • Squeeze value in each element of the value chain
      • Managing cost structures
      • Unfixing the fixed cost
    • “ In the final analysis, you can’t continue to reduce costs and grow” – Paul Cook, founder, Raychem
    • “ No business can (cost) cut its way to success” – Bill Gates
  • Hence, business success is now derived out of…
  • Delivering Experience De-commoditizing the product
    • Creating and delivering experiences in the entire lifecycle of the consumer
      • The Art of Co-Creation
      • Pre-sales to Post-sales experiences
    • Capturing Mindshare
      • The good old way
    • Continuously Redefining the ‘Wow factor’
    Managing Experiences in an environment where the customer is intensely value-seeking & transactional is a critical challenges for all businesses
  • Therefore, today’s greatest challenge is…
  • Uncertain Environment… Managing at Inflection points
    • Template changes not as rapid as environmental changes
      • Mindsets of suppliers
      • Mindsets of internal customers
    • Disruptive technological changes
      • Grabbing Opportunities
    • Managing Regulations - Jerky changes
      • Drunken man’s walk
    Strategy today has to align itself to the fluid nature of this environment. It must be flexible enough to change constantly and to adapt to outside and internal conditions even as the aspiration to deliver favorable outcomes for shareholders remains constant.
  • This translates to …
    • Capacity to drive purposeful change – the fine art of innovation
    • Making growth happen as against participating in the growth process. In other words transforming the word “growth” from a noun to a verb.
    • Define a new value curve/chain
    How do you increase the probability that radical new wealth-creating strategies emerge in your organisation?
  • Because… In an overcrowded and demand-starved economy profitable growth is not sustainable without creating and re-creating markets and market spaces Economies rejuvenate themselves through cycles of innovation only In a non linear world only non linear ideas will create new wealth
  • Value Opportunity YOU Competition Catch-up Don’t Know Competitive advantage Commodity Know Don’t Know Know
  • Value Opportunity Innovation leading to opportunity YOU Competition Catch-up Don’t Know Competitive advantage Commodity Know Don’t Know Know
  • Value Opportunity Innovation leading to opportunity YOU Competition Catch-up Don’t Know Competitive advantage Commodity Know Don’t Know Know
  • That’s all fine…but how do we do it? By creating an organisation that’s an innovation assembly line!
  • I know that I don’t know. But I will.
  • Definitions
  • innovation renew; alter; make new
  • Systematic Innovation Purposeful and organised search for change
  • What does innovation mean?
    • Thought leadership, Thinking differently, - insights
    • Renewal
    • Challenging orthodoxy
    • Breaking the mould
    Value Creation Innovation is mixture of serendipity, genius and sheer bloody mindedness
  • Types of innovation
    • Linear innovation
      • Serves existing customers better
    • Disruptive/non-linear innovation
      • Creates new market spaces
    Only non-linear innovation will drive long-term wealth creation
  • Sources of innovative opportunity
    • Those lying within the enterprise of industry
      • Unexpected success/failure
      • Innovations based on process needs
      • Changes in market/industry structure that catch everyone unawares
    • Those lying beyond industry
      • Demographic changes
      • Changes in perception/mood
      • New Knowledge
  • What is an assembly line? a series of workers and machines in a factory by which a succession of items is progressively assembled from raw materials to finished goods/services that the customers will buy
  • Why an innovation assembly line? The life span of an average business idea is longer than a butterfly’s but shorter than a dog’s. Therefore continuous cycles of innovative ideas are the only tools of long-term survival available to any organisation
  • Constituents
  • Constituents of any assembly line Resources Value Created Processes Organisational Values
  • Managing the constituents
  • Resources
    • Access to abundant, high quality resources increases an organisation’s chances of coping with change.
    Given a limited access to key resources the fundamental question is where to deploy (in “releasing” wealth or in creating wealth )and in what measure.
  • Managing Resources
    • Open market for capital - separate resources for innovation activities
      • Earmark for innovations that are not contributing to the here and the now
    • Open market for talent - brightest managers to head quantum growth challenges
    Of all the constituents resources are actually the easiest to gather and re-allocate
  • Processes
    • Two kinds:
      • Formal – explicitly defined and documented
      • Informal – routines or ways of working that evolve over time
    • They create the capability to execute one task and concurrently define disabilities in executing other tasks (non-planned).
    • Most management process are controlled by the defenders of the past.
    • Most process are implicitly risk-averse and are focused on existing customers and markets
    As a company grows, what it can and cannot do becomes more sharply defined in certain predictable ways
  • Values
    • The single most important determinant of the innovative capability of any organisation.
    • The founder of the organisation is the driver of values in the system.
    Values are the most important constituent of the innovation process and, if entrenched, most difficult to change
  • Managing Processes and Values
      • A CULTURE of Innovation MUST be driven from the TOP
      • It is Top Management’s responsibility to create an organizational culture that encourages innovation & calculated risk-taking, out of the box thinking and occasional mistakes
      • Innovative behavior must be encouraged by aligning performance appraisal systems, recognition, visibility and rewards
  • Institutionalising the innovation process HOW
  • Model - 1 Learning from Lead users – the 3M way
    • Phase-1 : Laying the foundation
    • Phase-2 : Determining the Trends
    • Phase-3 : Identifying Lead Users
    • Phase-4 : Developing the breakthrough
  • Model - 2 The Knowledge Brokering Mantra
    • Capturing good ideas
      • “ To invent, you need good imagination and a pile of junk” – Thomas Edison
    • Keeping the ideas alive
    • Imagining new uses for old ideas
    • Putting promising concepts to the test
      • “ The real measure of success is the number of experiments that can be crowded into 24 hours” – Thomas Edison
  • Model - 3 A system for innovation
    • Organize for rapid experimentation
    • Fail early and often, but avoid mistakes
    • Anticipate and exploit early information
    • Combine new and traditional technologies
  • Idea Filtering The process of selecting, combining, refining the best creative idea(s) to turn into reality The goal is to make sure you have a winner, not to make sure there are no losers
  • Knowing a winning business idea when you see one
    • The buyer utility map – creating exceptional utility
    • The price corridor of the mass
    • The business model guide
  • The Buyer Utility Map Six Stages of the Buyer Experience Cycle Six Utility Levers By locating a new product on one of the 36 spaces one can clearly see how new ideas create a different utility proposition from existing products Maintenance Environmental friendliness Fun & Image Risk Convenience Simplicity Customer Productivity Disposal Supplements Use Delivery Purchase
  • Creating New Market Space
    • Looking across substitute industries
    • Looking across strategic groups within industries
    • Looking across chain of buyers:
    • Looking across complementary Product and service offerings
    • Looking across functional and emotional appeal to buyers
    • Looking across Time
  • Creating New Market Space What factors should be reduced well below the industry standards Reduce Raise What factors should be created that the industry has never offered Eliminate What factors should be raised well beyond the industry standards What factors should be eliminated that the industry has taken for granted Create NEW VALUE CURVE
  • The price corridor of the mass Different form and function, same objective Different form same function Same form Low High Three Product Types Upper level pricing Mid level pricing Upper level pricing Low degree of legal & resource protection Easy to imitate Same degree of legal & resource protection Relatively easy to imitate High degree of legal & resource protection Difficult to imitate PRICE
  • The business model guide
    • What is the cost target?
    • What is the cost target set by the strategic price?
    • Can the product’s raw materials be replaced by unconventional, less expensive ones?
    • Did you significantly eliminate, reduce and outsource high-cost, low value added activities in the value chain?
    • Can you reduce costs be digitising assets or activities?
    • Who can we partner with?
    • What capabilities do you need to achieve the value proposition and which ones do you lack?
    • Which companies have those missing capabilities
    • Based on cost quality and speed, should you acquire those companies or partner with them?
    • Which price model should we use?
    • Is your industry’s pricing model a barrier to your business idea’s success
    • What pricing model would create a greater profit pool
  • Hurdles to innovation adoption
  • Biggest hurdles to innovation
    • Resources
      • Brightest managers not heading quantum growth challenges but simply maintaining existing business
      • Delegating insights
  • Biggest hurdles to innovation
    • Processes
      • Strategic planning reduced to number crunching
      • Projecting own aspirations onto the customer
      • Discussing only tangibles such as budgets and targets rather than abstract underlying concepts
      • Gap between idea and implementation
  • Biggest hurdles to innovation
    • Values
      • Settlers at the top – top management reluctant to push themselves and committing publicly to quantum growth targets. Reluctance to “jump in” the ideating process
      • The Top Sitting in judgment: Writing off ideas as “too risky” or “too impractical” without going through the idea generation process itself – the conformism trap
      • Shooting the people who take risks
      • All new ideas seen in relation to the existing norms of market shares, volume and profitability.
  • Finally…The new Innovation agenda
    • Continuous improvement & Non-linear innovation
    • Product and process innovation & business concept innovation
    • “Releasing” wealth & Creating wealth
    • Serendipity & Capability
    • Visionaries & Activists
  • I am no longer a captive to history. Whatever I can imagine, I can accomplish. I am no longer a vassal in a faceless bureaucracy. I am an activist, not a drone. I am no longer a foot soldier in the march of progress I am a Revolutionary (Innovator).
  • The gap between what can be imagined and what can be accomplished has never been smaller!!! Thank You