Building Effective Business Innovation

“Some Hints for Building an Effective Business Innovation System” - Miguel Sáenz de Viguera Aizpurua
Some Hints for Building an
Effective Business Innovation System
Miguel Sáenz de Viguera Aizpurua
2007 PMI Distinguished Contribution Award
msaenzdeviguera@hotmail.com
November 2010

On August 6, 1991, Tim
Berners-Lee (CERN) posted
a summary of the World
Wide Web project on the
alt.hypertext newsgroup.
This date marked the debut
of the Web as a publicly
available service on the
Internet.
He wrote:
“The WorldWideWeb
(WWW) project aims to
allow all links to be made to
any information anywhere.
[...] The WWW project was
started to allow high energy
physicists to share data,
news, and documentation.
We are very interested in
spreading the web to other
areas, and having gateway
servers for other data.
Collaborators welcome!"
On August 6, 1991, TimOn August 6, 1991, Tim
BernersBerners--Lee (CERN) postedLee (CERN) posted
a summary of the Worlda summary of the World
Wide Web project on theWide Web project on the
alt.hypertext newsgroup.alt.hypertext newsgroup.
This date marked the debutThis date marked the debut
of the Web as a publiclyof the Web as a publicly
available service on theavailable service on the
Internet.Internet.
He wrote:He wrote:
““The WorldWideWebThe WorldWideWeb
(WWW) project aims to(WWW) project aims to
allow all links to be made toallow all links to be made to
any information anywhere.any information anywhere.
[...] The WWW project was[...] The WWW project was
started to allow high energystarted to allow high energy
physicists to share data,physicists to share data,
news, and documentation.news, and documentation.
We are very interested inWe are very interested in
spreading the web to otherspreading the web to other
areas, and having gatewayareas, and having gateway
servers for other data.servers for other data.
Collaborators welcome!"Collaborators welcome!"
The “New Economy”
• On 1991 the humanity entered in a new era of
instantaneous, global diffusion of information
and knowledge at practically no cost, the era of
Internet
• The “WWW” is the main responsible of the
dramatically fast globalization of the economy
and of the appearance of an increasingly wild
competition at any industry during the last years.
The main responsible too of the economical
growth of the emergent countries that ten years
ago, practically, didn’t count in the economic
arena and now are in the way of becoming the
winners
• In the New Economy, for the Companies of the
EU and USA, from now and for the future, it is
not possible competing by cost. Competing by
quality becomes more and more difficult each
day for them. Business Innovation is, the only
way that they have to get a sustainable
competitiveness
1/30
Introduction: The Shift of the Economic ParadigmIntroduction: The Shift of the Economic Paradigm

When Speaking about Business Innovation, we
refer ourselves to Product Innovation, Innovation
of Processes and Innovation of the Business
Model, all together
The Innovation of the Business Model, many
times the most critical Innovation, also called
Business Transformation, demands transforming
the Key Processes of the Organization and/or its
Primary Infrastructure
Most of these Transformations are Enabled by
the Efficient Use of the New Technologies
When Speaking about Business Innovation, weWhen Speaking about Business Innovation, we
refer ourselves to Product Innovation, Innovationrefer ourselves to Product Innovation, Innovation
of Processes and Innovation of the Businessof Processes and Innovation of the Business
Model, all togetherModel, all together
The Innovation of the Business Model, manyThe Innovation of the Business Model, many
times the most critical Innovation, also calledtimes the most critical Innovation, also called
Business Transformation, demands transformingBusiness Transformation, demands transforming
the Key Processes of the Organization and/or itsthe Key Processes of the Organization and/or its
Primary InfrastructurePrimary Infrastructure
Most of these Transformations are Enabled byMost of these Transformations are Enabled by
the Efficient Use of the New Technologiesthe Efficient Use of the New Technologies
2/30
What are we speaking about when we mention Business Innovation?What are we speaking about when we mention Business Innovation?

“Some Hints for Building an Effective Business Innovation System” - Miguel Sáenz de Viguera Aizpurua 3/30
“I define creativity as the entire process by which ideas
are generated, developed, and transformed into value.
Since it is a process, it can be planned and managed”
“Moreover, when we add information technology to the
mix of creativity and knowledge, we get a particularly
potent combination: capabilities to represent, deploy and
track knowledge coupled with technologies to promote
collaboration across divergent disciplines and
perspectives. When properly managed, the combination
results in creative combustion”
“Innovation is about implementation. Being creative and
maybe even radical does not necessarily mean success”
“The ambiguity, complexity and improvisation of creative
organizations require specially tailored managerial
systems and processes, to transform creative ideas into
value and discipline for its implementation”
Professor John Kao
““I define creativity as the entire process by which ideasI define creativity as the entire process by which ideas
are generated, developed, and transformed into value.are generated, developed, and transformed into value.
Since it is a process, it can be planned and managedSince it is a process, it can be planned and managed””
““Moreover, when we add information technology to theMoreover, when we add information technology to the
mix of creativity and knowledge, we get a particularlymix of creativity and knowledge, we get a particularly
potent combination: capabilities to represent, deploy andpotent combination: capabilities to represent, deploy and
track knowledge coupled with technologies to promotetrack knowledge coupled with technologies to promote
collaboration across divergent disciplines andcollaboration across divergent disciplines and
perspectives. When properly managed, the combinationperspectives. When properly managed, the combination
results in creative combustionresults in creative combustion””
““Innovation is about implementationInnovation is about implementation.. Being creative andBeing creative and
maybe even radical does not necessarily mean successmaybe even radical does not necessarily mean success””
““The ambiguity, complexity and improvisation of creativeThe ambiguity, complexity and improvisation of creative
organizations require specially tailored managerialorganizations require specially tailored managerial
systems and processes, to transform creative ideas intosystems and processes, to transform creative ideas into
value and discipline for its implementationvalue and discipline for its implementation””
Professor John KaoProfessor John Kao
Harvard Business SchoolHarvard Business School
MIT Media Lab.MIT Media Lab.
Harvard Business SchoolHarvard Business School
MIT Media Lab.MIT Media Lab.
Why Companies Need Innovation Management Systems?Why Companies Need Innovation Management Systems?
Managing the Paradox between Creative Improvisation and DiscipliManaging the Paradox between Creative Improvisation and Disciplinene

Strategy Innovation is about
challenging existing industry methods
of creating customer value, in order to
meet newly emerging customer needs,
add additional value, and create new
markets and new customer groups for
the organization
Strategy Innovation is aboutStrategy Innovation is about
challenging existing industry methodschallenging existing industry methods
of creating customer value, in order toof creating customer value, in order to
meet newly emerging customer needs,meet newly emerging customer needs,
add additional value, and create newadd additional value, and create new
markets and new customer groups formarkets and new customer groups for
the organizationthe organization
4/30
First Hint:First Hint: ““Innovate your Business StrategyInnovate your Business Strategy””

• All countries and industries are now suffering the “New
Economy” of wild, global competition
• Changes of the business environment and the competition are
dramatically deeper and faster each day
• In the New Economy, the new paradigm, the old models for
business strategic analysis and planning are not more valid
• But… Business Strategy should drive the Business Innovation
Effort
5/30
Why Innovating the Business Strategy?Why Innovating the Business Strategy?
In the new economy, business strategy should be defined,
evaluated and refined frequently, through the application of the
last best proven models, tools and techniques for business
strategic analysis and planning
In the new economy, business strategy should be defined,In the new economy, business strategy should be defined,
evaluated and refined frequently, through the application of theevaluated and refined frequently, through the application of the
last best proven models, tools and techniques for businesslast best proven models, tools and techniques for business
strategic analysis and planningstrategic analysis and planning

Arnoldo C. Hax Dean L. Wilde II
MIT Sloan School of Management
“The Delta Project”
The “New Economy”
Three Distinct Strategic Options
Best Product
Total Customer Solutions
System Lock-in
TheThe ““New EconomyNew Economy””
Three Distinct Strategic OptionsThree Distinct Strategic Options
Best ProductBest Product
Total Customer SolutionsTotal Customer Solutions
System LockSystem Lock--inin
Michael Porter
Harvard Business School
“Competitive Strategy”
Traditional Economy
Two Generic Competitive Strategies
Cost Leadership
Product Differentiation
Traditional EconomyTraditional Economy
Two Generic Competitive StrategiesTwo Generic Competitive Strategies
Cost LeadershipCost Leadership
Product DifferentiationProduct Differentiation
Generic Strategies
The NewThe New
StrategicStrategic
OptionsOptions
The “Delta Model”
System
Lock-In
Best
Product
Total
Customer
Solutions
DistinctDistinct
StrategicStrategic
PositionsPositions
System
Lock-In
Best
Product
Total
Customer
Solutions
DistinctDistinct
StrategicStrategic
PositionsPositions
1980 2001
6/30
Focus your innovation strategy on the new strategic options forFocus your innovation strategy on the new strategic options for your businessyour business

The Delta Model: The Three New Distinct Strategic PositionsThe Delta Model: The Three New Distinct Strategic Positions
(Arnoldo C. Hax & Dean L. Wilde II, MIT Sloan School of Manageme(Arnoldo C. Hax & Dean L. Wilde II, MIT Sloan School of Management)nt)
System Lock-In
Based on: System Economics
Strategy: Market Dominance
Objective: Achieving Complementors Share
Best Product
Based on: Product Economics
Strategy: Best than Competitors
Objective: Achieving Product Share
Total Customer Solutions
Based on: Customer Economics
Strategy: Cooperation
Objective: Achieving Customer Share
Mostly EnabledMostly Enabled
through Effectivethrough Effective
Use of TechnologyUse of Technology

SystemSystem
LockLock--InIn
BestBest
ProductProduct
TotalTotal
CustomerCustomer
SolutionsSolutions
Emphasize Product Orientation
Key Driving Forces
• Supply Chain Efficiency (Cost & Quality)
• New Product Development Capability
• Securing of Distribution Channels
Threat
Commodization
Its Aim is a Unique Value Proposition to
Individualized Customers by means of a
Customized Portfolio of Products and Services
Key Driving Forces
• Careful Segmentation of the Customers’ Base
• Joint Development Efforts with Customers and Key
Suppliers guided by the Individual Customer
Expectations
Focus on the “Full System”
as the Relevant Scope to get Power
(The Business, Customers, Suppliers and
Complementors)
Key Strategic Driving Force
Gaining Complementors Shared as the
main objective because they are the
Basis for the Consolidation of the PowerIncreased
Sustainability
The Three New Distinct Strategic Positions,The Three New Distinct Strategic Positions,
Main Features and Compared SustainabilityMain Features and Compared Sustainability

Not Every organization has the possibility to reach the
strategic position of “System Lock-In”
Not Every organization has the possibility to reach theNot Every organization has the possibility to reach the
strategic positionstrategic position of “System LockSystem Lock--InIn””
Proprietary
Standard
Microsoft
Intel
SystemSystem
LockLock--InIn
BestBest
ProductProduct
TotalTotal
CustomerCustomer
SolutionsSolutions
Low Cost
Easy Jet, Clickiair
Air Berlin
Differentiation
Bang & Olufsen
Sony Wega
Customer
Integration
Indra, EDS
Accenture
Redefining the
Customer
Relationship
MCI
Dominant
Exchange
Yellow Pages
eBay
Exclusive
Channel
Telefónica
Nespresso
Horizontal
Breadth
Fidelity
IncreasedIncreased
StrategyStrategy
SustainabilitySustainability
Proprietary
Standard
Microsoft
Intel
SystemSystem
LockLock--InIn
BestBest
ProductProduct
TotalTotal
CustomerCustomer
SolutionsSolutions
Low Cost
Easy Jet, Clickiair
Air Berlin
Differentiation
Bang & Olufsen
Sony Wega
Customer
Integration
Indra, EDS
Accenture
Redefining the
Customer
Relationship
MCI
Dominant
Exchange
Yellow Pages
eBay
Exclusive
Channel
Telefónica
Nespresso
Horizontal
Breadth
Fidelity
IncreasedIncreased
StrategyStrategy
Most of the
organizations have
not a dominant
exchange position,
cannot get the
exclusivity of the
channels of
distribution that
customers use to
avail themselves of
their products and
either, not have
the possibility to
develop and get
the ownership of
the standards of
the industry
Most of theMost of the
organizations haveorganizations have
not a dominantnot a dominant
exchange position,exchange position,
cannot get thecannot get the
exclusivity of theexclusivity of the
channels ofchannels of
distribution thatdistribution that
customers use tocustomers use to
avail themselves ofavail themselves of
their products andtheir products and
either, not haveeither, not have
the possibility tothe possibility to
develop and getdevelop and get
the ownership ofthe ownership of
the standards ofthe standards of
the industrythe industry
9/30
Some Strategies towards the New Strategic PositionsSome Strategies towards the New Strategic Positions

““MCIMCI””, an Example of Strategy for Redefining the Customer Relationshi, an Example of Strategy for Redefining the Customer Relationshipp

““FidelityFidelity””, an Example of Strategy for Expanding the, an Example of Strategy for Expanding the
Breadth of Products and Services provided to the CustomerBreadth of Products and Services provided to the Customer

The competencies required to successfully perform in the Best Product
Strategy…
• A Strong Product Base
• A Solid Supply Chain Infrastructure
• Strong Internal Innovation Capabilities…
very often are not enough to create or defend sustainable competitive
advantages in the new economy
“The transformation that any company should undertake to
move away from a Product-Centered Mentality towards a Total
Customer Solutions Position, and towards a System Lock-In
Position, if it has possibilities, is a mandatory challenge for all
executives”
Professor Arnold C. Hax (MIT)
““The transformation that any company should undertake toThe transformation that any company should undertake to
move away from a Productmove away from a Product--Centered Mentality towards a TotalCentered Mentality towards a Total
Customer Solutions Position, and towards a System LockCustomer Solutions Position, and towards a System Lock--InIn
Position, if it has possibilities, is a mandatory challenge forPosition, if it has possibilities, is a mandatory challenge for allall
executivesexecutives””
Professor Arnold C. Hax (MIT)Professor Arnold C. Hax (MIT)
CAF, DANOBAT RAILWAY SYSTEMS and the recent announcement of the
strategic alliance between IKUSI and ORMAZABAL are examples of Basque
Companies, strategically trying to move from a position of "Best Product" towards
another one of "Total Customer Solutions", an intelligent strategic movement
CAF, DANOBAT RAILWAY SYSTEMS and the recent announcement of theCAF, DANOBAT RAILWAY SYSTEMS and the recent announcement of the
strategic alliance between IKUSI and ORMAZABAL are examples of Bstrategic alliance between IKUSI and ORMAZABAL are examples of Basqueasque
Companies, strategically trying to move from a position of "BestCompanies, strategically trying to move from a position of "Best Product" towardsProduct" towards
another one of "Total Customer Solutions", an intelligent stranother one of "Total Customer Solutions", an intelligent strategic movementategic movement
12/30
Business Strategy for the New Economy, ConclusionsBusiness Strategy for the New Economy, Conclusions

Implement an Efficient, Structured Process for:Implement an Efficient, Structured Process forImplement an Efficient, Structured Process for::
I
Encouraging the
Generation, Capture and
Refinement of Ideas for
Innovation from
Customers, Employees
and other Stakeholders of
your Organization
II
Encouraging theEncouraging the
Generation, Capture andGeneration, Capture and
Refinement of Ideas forRefinement of Ideas for
Innovation fromInnovation from
Customers, EmployeesCustomers, Employees
and other Stakeholders ofand other Stakeholders of
your Organizationyour Organization
III
Building an Efficient
Development Process that
Provides Excellence in the
Development and
Implementation of the
Selected Innovations
Proposals
IIIIII
Building an EfficientBuilding an Efficient
Development Process thatDevelopment Process that
Provides Excellence in theProvides Excellence in the
Development andDevelopment and
Implementation of theImplementation of the
Selected InnovationsSelected Innovations
ProposalsProposals
II
Evaluating, Prioritizing
and Selecting the ideas
that have the greatest
potential to add value to
the Business
IIII
Evaluating, PrioritizingEvaluating, Prioritizing
and Selecting the ideasand Selecting the ideas
that have the greatestthat have the greatest
potential to add value topotential to add value to
the Businessthe Business
Second Hint:Second Hint: ““Implement an Efficient, Idea Management ProcessImplement an Efficient, Idea Management Process””

If no one believes
that your firm is
serious about
innovation, few
people will take it
seriously
If no one knows
about your ideas
campaign, no one will
participate
Small rewards for
ideas can be a
remarkably powerful
means of promoting
participation
• Communicate that creativity and innovation have high
priority in the organization. The High Management
demonstrably should boost innovation
• Provide free education and training on creativity and
creative problem solving
• Give to the people free time and other resources
(mentoring, space, tools,...) to refine, test, developing the
concept and presentation for creative ideas
• Reward rather than discourage creative thinking. Show that
failures are tolerated, indeed they are seen as valuable
learning opportunities.
• Set aside some additional budget for refining and testing
the more radical ideas
• Implement and communicate a system to gather and
process the innovation ideas. The goal: not one idea
without answer from management
• Communicate your process, for assessing, filtering ideas
and deciding which ones to invest in
14/30
Second Hint:Second Hint: ““Implement an Efficient Idea Management ProcessImplement an Efficient Idea Management Process””
Keys for Boosting the Generation of Innovation IdeasKeys for Boosting the Generation of Innovation Ideas

Example of Practices for Boosting the Generation of Innovation IExample of Practices for Boosting the Generation of Innovation Ideasdeas
IN-HOUSE ENTREPRENEURSHIP PROGRAMMMESIN-HOUSE ENTREPRENEURSHIP PROGRAMMMES
15/30

The Most Innovative Companies, have a
multifunctional, Innovation Steering Committee (“ISC”)
composed by members of the top management with the
mission of assessing, prioritizing and selecting the
innovation ideas
The ISC meets periodically (monthly in most of the
cases) to select the innovation proposals
The ISC establishes and publishes, within the
organization, the scoring system applied, that takes
into account, at least the following criteria to evaluate
the innovation proposals
• Their Strategic Fit
• The Estimation and Availability of Investment
Funds, Human and other Resources required
for their development and implementation
• A Qualitative and Quantitative (IRR, NPV, Pay
Back,...) Estimation of their Adding Value to
the Business
• Their Risks Evaluation
• The Sustainability Analysis of the Advantage
Acquired by the implementation of the idea
Selected
Initiatives
Rejected
Initiatives
Initiatives
Portfolio
All
Initiative
Ideas
Selected
Initiatives
Rejected
Initiatives
Initiatives
Portfolio
All
Initiative
Ideas
Selected
Initiatives
Rejected
Initiatives
Initiatives
Portfolio
All
Initiative
Ideas
Once one innovation initiative has
been approved by the Innovation
Steering Committee, an initial
budget for its development is
assigned
The rejected ideas are recorded
in an innovation ideas repository
where they can be revisited to be
combined with other ideas or
being applied for different
purposes than the original one
Once one innovation initiative hasOnce one innovation initiative has
been approved by the Innovationbeen approved by the Innovation
Steering Committee, an initialSteering Committee, an initial
budget for its development isbudget for its development is
assignedassigned
The rejected ideas are recordedThe rejected ideas are recorded
in an innovation ideas repositoryin an innovation ideas repository
where they can be revisited to bewhere they can be revisited to be
combined with other ideas orcombined with other ideas or
being applied for differentbeing applied for different
purposes than the original onepurposes than the original one
Development
Funnel
16/30
What are doing the Innovation Champions to Select which ones arWhat are doing the Innovation Champions to Select which ones are thee the
Innovation Proposals to be Developed?Innovation Proposals to be Developed?

The sustainability of the advantage
achieved by an innovation depends on
The Replication Time
• Its assessment requires an analysis of the
innovation project itself and the changes
required in the infrastructure of the business.
Some WEB-based innovations can be replicated in
weeks but the changes in the primary infrastructure
of the business required for its implementation can
take years. Example Compaq against Dell
The Asymmetric Barriers
• Their identification requires analyzing if our
advantage will be cancelled, when a competitor
replicates our innovation.
The cost of suppliers substitution is an example of
asymmetric barrier
The Barriers of Preference
• Their identification requires assessing if our
customers will remain loyal to our organization
unless a competitor offers to them a better
alternative.
Example: Amazon has built up high barriers of
preference
of the Advantage achievedof the Advantage achieved
by an Innovationby an Innovation
ReplicationReplication
TimeTime
Barriers
of
Barriers
of
Preference
Preference
Asym
m
etric
Asym
m
etric
Barriers
Barriers
ProjectProject
AnalysisAnalysis
Custom
ers
Custom
ers
Analysis
Analysis
Com
petitors
Com
petitors
Analysis
Analysis
of the Advantage achievedof the Advantage achieved
by an Innovationby an Innovation
ReplicationReplication
TimeTime
Barriers
of
Barriers
of
Preference
Preference
Barriers
of
Barriers
of
Preference
Preference
Asym
m
etric
Asym
m
etric
Barriers
Barriers
Asym
m
etric
Asym
m
etric
Barriers
Barriers
ProjectProject
AnalysisAnalysis
Custom
ers
Custom
ers
Analysis
Analysis
Com
petitors
Com
petitors
Analysis
Analysis
17/30
A Model for Analyzing the Sustainability of Innovation InitiativA Model for Analyzing the Sustainability of Innovation Initiativeses
A Model for SustainabilityA Model for Sustainability
Assessment of InnovationAssessment of Innovation
InvestmentsInvestments

Management of the Development FunnelManagement of the Development Funnel
Development
Steering
Committee
DevelopmentDevelopment
SteeringSteering
CommitteeCommittee
Innovation
Steering
Committee
InnovationInnovation
SteeringSteering
CommitteeCommittee
Phase I Phase II Phase III Phase IV
Frequent Prototyping
Multifunctional
Project Teams
MultifunctionalMultifunctional
Project TeamsProject Teams
Program and
Project
Managers
Program andProgram and
ProjectProject
ManagersManagers
Management of the Development FunnelManagement of the Development Funnel
Development
Steering
Committee
SteeringSteering
CommitteeCommittee
Innovation
Steering
Committee
SteeringSteering
CommitteeCommittee
Phase I Phase II Phase III Phase IV
Multifunctional
Project Teams
Program and
Project
Managers
ProjectProject
ManagersManagers
The “Development Funnel”
The “Development Funnel” is the graphical
representation of the Development Process
A Development Steering Committee, (“DSC”) that
can be the same or another committee, than the
“ISC”, is responsible for:
• Providing Guidance during the whole
Development Process
• Assigning Program Managers, Project
Managers, Project Teams, budgets and other
resources
• Approving Cycles Life for each Development
Project, the Results to be Achieved at the
End of Each one of their Phases, and the
Project Plans
• Establishing and Leading the Phase
Verification and Validation Meetings (Gates)
• Supervising the Management and
Administration of the Resources and
Program's Budgets
• Making Recommendations to the Top
Management, Including Proposals for
Program and Project Changes or its
Termination
Project Management Professionalism and
Frequent Prototyping are Key Success
Drivers for the Process of Development
Project Management Professionalism andProject Management Professionalism and
Frequent Prototyping are Key SuccessFrequent Prototyping are Key Success
Drivers for the Process of DevelopmentDrivers for the Process of Development
18/30
How is the Development Process of the Innovation Leaders?How is the Development Process of the Innovation Leaders?

In the Model of “Winning
Boost”, Business Strategy is
driving:
• The Management of the
Portfolio of Innovation
Proposals
• The Management of the
Development Process
• The Internal R&D
• The HHRR Development
Programs
• The Acquisition of External
Technology and Know How
There is a unique, Innovation
Steering Committee,
responsible for Managing the
Portfolio of Innovation Ideas
and its Development Process
IIIIII IIIIII IVIV
ImplementedImplemented
InnovationsInnovations
FunnelFunnel
New
Competencies
InIn--Company R&DCompany R&D
and HHRRand HHRR
Development StrategyDevelopment Strategy
TechnologyTechnology
and Knowand Know
HowHow
AcquisitionAcquisitionNew
Technologies
WB Innovation Development Model © 2007 Winning Boost
ProjectProject
ManagementManagement
Programs/ProjectsPrograms/Projects
ProposalsProposals
BusinessBusiness
StrategyStrategy
SteeringSteering
CommitteeCommittee
19/30
Example: The Model of WINNING BOOSTExample: The Model of WINNING BOOST

The application of IT enable prototyping products, processes and
business models, fast and cost efficiently
The application of IT enable prototyping products, processes andThe application of IT enable prototyping products, processes and
business models, fast and cost efficientlybusiness models, fast and cost efficiently
20/30
When Frequent Prototyping of Products and Processes, is
applied, the feedback from the end users results in an iterative
refinement of the model until it finally meets the user's needs
and expectations.
Advantages of Frequent Prototyping of Products and
Processes
• User requirements easier to determine
• The development’s result, more closely meets the needs and
expectations of the end users
• Changes identified earlier in the development process
• Development costs are reduced
• Faster development
• Stopping development on an unworkable product or process
Advantages of Frequent Prototyping of Processes and
Business Models
• Involvement of the personnel working for the process
• Easier for the personnel to learn how to operate in the
process before its implementation
• Employees know what to expect at the implementation of the
new process
• Fewer changes needed after implementation
• Employees’ resistance to change reduced.
Phase I Phase II Phase III Phase IVPhase I Phase II Phase III Phase IV
Fast Prototyping applying CAD/CAM
Fast Prototyping applying CAD/CAMApplying CAD/CAM for Fast Prototyping
Fast Prototyping applying CAD/CAM
Fast Prototyping applying CAD/CAMApplying CAD/CAM for Fast Prototyping
Apply Frequent Prototyping for Faster and Reliable DevelopmentApply Frequent Prototyping for Faster and Reliable Development

Improve the Competency for Project Management of your OrganizatiImprove the Competency for Project Management of your Organizationon
Development, the final Stage for Successful
Implementation of Innovative Ideas is mainly a task of
performing projects
Project Management Professionalism is Key for:
• Ensuring that the deliverables will meet the needs and
expectations of the project’s stakeholders and the
Company’s quality standards
• Identifying early the project's risks and defining and
implementing properly the adequate risk response
• Managing properly the unavoidable project changes while
ensuring the achievement of the goals of the organization
and stakeholders satisfaction
• Tracking and Controlling adequately the project's progress
• Taking advantage of the opportunities to speed up the
schedule, reduce cost and improve the deliverables features
• Completing the projects within the optimal period of time and
the most efficient use of the budget and resources available
Provide to your Employees Education and Training for Project Management
Assign to the Most Competent, Project Managers the Responsibility for Managing
your Key Innovation Projects
Provide to your Employees Education and Training for Project ManProvide to your Employees Education and Training for Project Managementagement
Assign to the Most Competent, Project Managers the ResponsibilitAssign to the Most Competent, Project Managers the Responsibility for Managingy for Managing
your Key Innovation Projectsyour Key Innovation Projects
21/30

Third Hint:Third Hint: ““Make an Intelligent Use of the Information TechnologiesMake an Intelligent Use of the Information Technologies””
22/30
I-Service – Opportunities Model
Do you need it?
How is it?
Who distributes it?
Who has it?
How much does it cost?
Credit?
When do you want it?
Fully received, satisfied?
Ready to work?
How does it work?
Anything else needed?
Maintenance, repair required?
Sale Finished?
Provided Value ?
Order
Specification
Distribution
Availability
Price
Payment
Delivery
Acceptance
Installation
Performance
Improvement
Maintenance
Return
Assessment
Do you need it?
How is it?
Who distributes it?
Who has it?
Credit?
Ready to work?
How does it work?
Sale Finished?
Provided Value ?
Order
Specification
Distribution
Availability
Price
Payment
Delivery
Acceptance
Installation
Performance
Improvement
Maintenance
Return
Assessment
Do you need it?
How is it?
Who distributes it?
Who has it?
Credit?
Ready to work?
How does it work?
Sale Finished?
Provided Value ?
Order
Specification
Distribution
Availability
Price
Payment
Delivery
Acceptance
Installation
Performance
Improvement
Maintenance
Return
Assessment
Do you need it?
How is it?
Who distributes it?
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Sale Finished?
Provided Value ?
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Specification
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Acceptance
Installation
Performance
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Return
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Do you need it?
How is it?
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Who has it?
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Ready to work?
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Assessment
• The use of new Information technology
enables most innovations of the business
processes. ("I-Innovations")
• Analysis of opportunities of "I-Operations"
"and" I-Marketing " , enable identifying
pragmatic paths to increase sales and
competitiveness of the organization
• New business models and most radical
innovations are most often identified,
looking for opportunities of "I-Service“
At the selection of the technological
platform to support the innovation of
your processes or business model
• Don’t rely totally on advice from
System Suppliers. Many times their
advice is not free of conflicts of
interest
• Ask for references of success,
check and analyze them personally
• Apply, proven decision models, to
facilitate your decision
At the selection of the technologicalAt the selection of the technological
platform to support the innovation ofplatform to support the innovation of
your processes or business modelyour processes or business model
•• DonDon’’t rely totally on advice fromt rely totally on advice from
System Suppliers. Many times theirSystem Suppliers. Many times their
advice is not free of conflicts ofadvice is not free of conflicts of
interestinterest
•• Ask for references of success,Ask for references of success,
check and analyze them personallycheck and analyze them personally
•• Apply, proven decision models, toApply, proven decision models, to
facilitate your decisionfacilitate your decision

...
Intensity of Information
along the Extended
Supply Chain (ESC)High
High
High
Dispersion
of
Inform
ation
along
the
Value
Chain
Low
InformationContent
intheProduct
““EE--OperationsOperations –– Opportunity ModelOpportunity Model””
David Feeny, Oxford UniversityDavid Feeny, Oxford University
Banking, Insurance,
Pharmaceutical,
Publishing Companies...
To improveTo improve
•• Product AvailabilityProduct Availability
and Functionalityand Functionality
•• Development TimeDevelopment Time
•• Cost StructureCost Structure
Reengineering of
the Primary
Infrastructure and
Key Business
Processes
Reengineering of
the Primary
Infrastructure and
Key Business
Processes
Companies with
geographically
dispersed
homogeneous activities.
Example: McDonald's
•• Sharing LearningSharing Learning
and Best Practices.and Best Practices.
•• Economies of ScaleEconomies of Scale
•• Cultural ConsistencyCultural Consistency
Reinforcing the
“Parenting Value”
Reinforcing the
“Parenting Value”
Companies with
products including
hundreds or
thousands of
components
(Automotive,
Aerospace,
Appliances,
Hardware ...) and
companies of "Build
to Order "
•• Product AvailabilityProduct Availability
and Functionalityand Functionality
•• Development TimeDevelopment Time
•• Cost StructureCost Structure
Virtual Integration
of the ESC
Virtual Integration
of the ESC
Process Transformations
Enabled by WEB-Based Technologies
Third Hint:Third Hint: ““Make an Intelligent Use of the Information TechnologiesMake an Intelligent Use of the Information Technologies””
A Model of WebA Model of Web--Based Transformations of Business ProcessesBased Transformations of Business Processes
David Feeny (Oxford University)David Feeny (Oxford University)
23/30

Innovation
Proposals
Development
New
Market
Boundary
of the Firm
Current
Market
Boundary
of the Firm
Innovation
Proposals
Development
The
Market
Closed Innovation Model
Open Innovation Model
Innovation
Proposals
DevelopmentInnovation
Proposals
Development
New
Market
Boundary
of the Firm
Current
Market
Boundary
of the Firm
Innovation
Proposals
Development
The
Market
Boundary
of the Firm
Innovation
Proposals
Development
Innovation
Proposals
Development
The
Market
Closed Innovation Model
Open Innovation Model
The Open Innovation Model
• The Company commercializes both its own
ideas as innovations from other firms
• The Organization seeks ways, to bring its
in-house ideas to the market, by deploying
pathways outside its current business
• The boundary between the Company and its
surrounding environment is porous,
enabling innovations to move between the
two
Henry W. Chesbrough (HBS)
The Closed Innovation Model
• The Company generates, develop and
commercializes its own ideas.
• This philosophy of self-reliance dominated
the innovation processes and R&D
operations of many leading industrial
corporations for most of the 20th century
Fourth Hint:Fourth Hint: ““Adopt the Open InnovationAdopt the Open Innovation””
Open versus Closed InnovationOpen versus Closed Innovation
24/30

Why Adopting Open Innovation?Why Adopting Open Innovation?
25/30
Open innovation represents, in part, a reinvention of the organizational models that we
have come to take for granted.
In the next few years, as connectivity becomes ubiquitous, the shift to more
distributed, more networked and more open organizational models will become
commonplace and those not willing or unable to make the change will be left behind
Open innovation represents, in part, a reinvention of the organiOpen innovation represents, in part, a reinvention of the organizational models that wezational models that we
have come to take for granted.have come to take for granted.
In the next few years, as connectivity becomes ubiquitous, the sIn the next few years, as connectivity becomes ubiquitous, the shift to morehift to more
distributed, more networked and more open organizational modelsdistributed, more networked and more open organizational models will becomewill become
commonplace and those not willing or unable to make the change wcommonplace and those not willing or unable to make the change will be left behindill be left behind
False Beliefs for Closed Innovation
• The talented people in our industry
work for our organization
• To profit from R&D, we must discover,
develop and commercialize it
ourselves
• If we discover it ourselves, we will get
to the market first
• If we are the first to commercialize an
innovation, we will win
• If we create the most and best ideas in
our industry, we will win
• We should control our intellectual
property (IP) so that our competitors
don’t profit from our ideas
Realities to adopt Open Innovation
• Not all of the smart people work for us, so
we must find and tap into the knowledge
and expertise of bright individuals outside
our company
• External R&D can create significant
value. Internal R&D is needed to claim
some portion of that value
• We don’t have to originate the research in
order to profit from it
• Building a better business model is better
than getting to market first
• If we make the best use of internal and
external ideas, we will win
• We should profit from others’ use of our
IP, and we should buy others’ IP if it
advances our own business model
ourselves
to the market first
our company
ourselves
to the market first
our company
ourselves
to the market first
our company
ourselves
to the market first
our company

Two key questions to start the Implementation of Open Innovation
• What are the kind of ideas we need?
• Who are the potential collaborators that we can work with to
greatest effect?
An early, clear answer to these questions could inhibit the creative freedom
needed to create the desired new markets, radical innovations and fresh
business models.
A recommendable path to start Open Innovation
• Start small, with no more than two or three organizations. Some of your suppliers
or clients can be good candidates to start with
• Create a conjoint multifunctional committee with each one of these organizations,
reporting to the top management of both organizations.
• The aim of these committees is to extract investable propositions for the
participant organisations that will share the value chain and benefits of the
developed proposal
• Emphasize more on valuable delivery partnerships than on passive ownership of IP
• Periodically use the lessons learnt to refine the process and extend it to other
collaborating organizations
• The process, matures when both organizations find several opportunities to make
investments or partnership decisions in collaborative business models like joint
ventures or delivery partnerships
• A welcome by-product of these programmes is that the communities stay active
long after the programme has ended, keeping the conversations going, and value
flowing
A recommendable path to start Open InnovationA recommendable path to start Open Innovation
•• Start small, with no more than two or three organizations. SomeStart small, with no more than two or three organizations. Some of your suppliersof your suppliers
or clients can be good candidates to start withor clients can be good candidates to start with
•• Create a conjoint multifunctional committee with each one of theCreate a conjoint multifunctional committee with each one of these organizations,se organizations,
reporting to the top management of both organizations.reporting to the top management of both organizations.
•• The aim of these committees is to extract investable propositionThe aim of these committees is to extract investable propositions for thes for the
participant organisations that will share the value chain and beparticipant organisations that will share the value chain and benefits of thenefits of the
developed proposaldeveloped proposal
•• Emphasize more on valuable delivery partnerships than on passiveEmphasize more on valuable delivery partnerships than on passive ownership of IPownership of IP
•• Periodically use the lessons learnt to refine the process and exPeriodically use the lessons learnt to refine the process and extend it to othertend it to other
collaborating organizationscollaborating organizations
•• The process, matures when both organizations find several opporThe process, matures when both organizations find several opportunities to maketunities to make
investments or partnership decisions in collaborative business minvestments or partnership decisions in collaborative business models like jointodels like joint
ventures or delivery partnershipsventures or delivery partnerships
•• A welcome byA welcome by--product of these programmes is that the communities stay activeproduct of these programmes is that the communities stay active
long after the programme has ended, keeping the conversations golong after the programme has ended, keeping the conversations going, and valueing, and value
flowingflowing
•• Open Innovation isOpen Innovation is
still youngstill young
•• Companies likeCompanies like
Orange, Philips andOrange, Philips and
Hewlett Packard areHewlett Packard are
making of it amaking of it a
strategic prioritystrategic priority
•• Virgin Atlantic, andVirgin Atlantic, and
Procter & GambleProcter & Gamble
reported greatreported great
benefits from theirbenefits from their
Open InnovationOpen Innovation
ProgramsPrograms
•• But still there areBut still there are
not enoughnot enough
experiences toexperiences to
extract commonextract common
good practices forgood practices for
its implementationits implementation
•• The experiences ofThe experiences of
success are notsuccess are not
consistent, becauseconsistent, because
each company haseach company has
started Openstarted Open
Innovation in itsInnovation in its
own wayown way
•• Open Innovation isOpen Innovation is
still youngstill young
•• Companies likeCompanies like
Orange, Philips andOrange, Philips and
Hewlett Packard areHewlett Packard are
making of it amaking of it a
strategic prioritystrategic priority
•• Virgin Atlantic, andVirgin Atlantic, and
Procter & GambleProcter & Gamble
reported greatreported great
benefits from theirbenefits from their
Open InnovationOpen Innovation
ProgramsPrograms
•• But still there areBut still there are
not enoughnot enough
experiences toexperiences to
extract commonextract common
good practices forgood practices for
its implementationits implementation
•• The experiences ofThe experiences of
success are notsuccess are not
consistent, becauseconsistent, because
each company haseach company has
started Openstarted Open
Innovation in itsInnovation in its
own wayown way
How to Start Open Innovation? Some Key IssuesHow to Start Open Innovation? Some Key Issues

“Some Hints for Building an Effective Business Innovation System” - Miguel Sáenz de Viguera Aizpurua1/30
Fifth Hint: "Apply Change Management to get an Innovative OrganiFifth Hint: "Apply Change Management to get an Innovative Organizationzation””
27/30
To succeed on business innovation, especially for effectively implementing new
business models, processes and systems, organizations must quickly get the entire
organization' support to change.
Many change initiatives fail victim to employees' resistance mainly because their
fears for their personal future
To succeed on business innovation, especially for effectively imTo succeed on business innovation, especially for effectively implementing newplementing new
business models, processes and systems, organizations must quickbusiness models, processes and systems, organizations must quickly get the entirely get the entire
organization' support to change.organization' support to change.
Many change initiatives fail victim to employees' resistance maiMany change initiatives fail victim to employees' resistance mainly because theirnly because their
fears for their personal futurefears for their personal future
Key Features on Change Management
Enrolling
• Making the people conscious of the the need for change
• Helping the people to see a future they want to be a part
• Requesting commitment
Enabling
• Challenging people’s self-limiting beliefs
• Providing education and training, for the required
knowledge, skills and behaviors
• Building self-esteem and trust
Energizing, to sustain the change
• Building and sustaining people’s energy
• Celebrating successes
• Giving recognition
Five basic tools to
overcome the employees'
resistance to change
• The commitment and
example of the leaders
• Education and training
• Coaching
• Recognition to effort
and celebration of
successes
•Communication,
Communication,
Communication…!
Five basic tools toFive basic tools to
overcome the employees'overcome the employees'
resistance to changeresistance to change
•• The commitment andThe commitment and
example of the leadersexample of the leaders
•• Education and trainingEducation and training
•• CoachingCoaching
•• Recognition to effortRecognition to effort
and celebration ofand celebration of
successessuccesses
•• Communication,Communication,
Communication,Communication,
CommunicationCommunication……!!

“Some Hints for Building an Effective Business Innovation System” - Miguel Sáenz de Viguera Aizpurua1/30
“The Innovation System at SIEMENS: Taking inputs from technology,
competitors, and market intelligence and driving these into the planning
for new product and new processes development”
Fifth Hint: "Apply Change Management to get an Innovative OrganiFifth Hint: "Apply Change Management to get an Innovative Organizationzation””
Example of a Communication Tool: Map of the Innovation System ofExample of a Communication Tool: Map of the Innovation System of SIEMENSSIEMENS
28/30

Sixth Hint:Sixth Hint: ““Continuously Update your Professional CompetenceContinuously Update your Professional Competence””
A plan with six activities to sustain your
professional competence throughout life
• Read, quarterly, a book recently published about
Innovation Management
• Subscribe and read, at least three prestigious
management magazines ("Harvard Business Review",
"MIT Sloan Management Review" and the online
magazine "www.innovationmanagement.se" are
recommendable)
• Participate, at least a week per year, in continuing
education programs of prestigious academic institutions
• Actively participate in the professional experience
sharing programs of the alumni of the academic
institutions where you studied and the professional
associations where you are member
• Make a public presentation to a professional audience
and/or write, and get published in a professional
magazine, an article about Innovation Management at
least once a year
• Build and sustain a network of prestigious management
professionals and experts on innovation management
from different industries, for sharing knowledge and
experiences
A plan with six activities to sustain yourA plan with six activities to sustain your
professional competence throughout lifeprofessional competence throughout life
•• Read, quarterly, a book recently published aboutRead, quarterly, a book recently published about
Innovation ManagementInnovation Management
•• Subscribe and read, at least three prestigiousSubscribe and read, at least three prestigious
management magazines ("Harvard Business Review",management magazines ("Harvard Business Review",
"MIT Sloan Management Review" and the online"MIT Sloan Management Review" and the online
magazine "www.innovationmanagement.se" aremagazine "www.innovationmanagement.se" are
recommendable)recommendable)
•• Participate, at least a week per year, in continuingParticipate, at least a week per year, in continuing
education programs of prestigious academic institutionseducation programs of prestigious academic institutions
•• Actively participate in the professional experienceActively participate in the professional experience
sharing programs of the alumni of the academicsharing programs of the alumni of the academic
institutions where you studied and the professionalinstitutions where you studied and the professional
associations where you are memberassociations where you are member
•• Make a public presentation to a professional audienceMake a public presentation to a professional audience
and/or write, and get published in a professionaland/or write, and get published in a professional
magazine, an articlemagazine, an article about Innovation Management atabout Innovation Management at
least once a yearleast once a year
•• Build and sustain a network of prestigious managementBuild and sustain a network of prestigious management
professionals and experts on innovation managementprofessionals and experts on innovation management
from different industries, for sharing knowledge andfrom different industries, for sharing knowledge and
experiencesexperiences
The current changes of theThe current changes of the
business environment,business environment,
deeper and faster eachdeeper and faster each
day, are making challengingday, are making challenging
for managers, sustainingfor managers, sustaining
their professionaltheir professional
competence, if they don'tcompetence, if they don't
work every day to updatework every day to update
the knowledge and skillsthe knowledge and skills
required for performingrequired for performing
their professiontheir profession
The current changes of theThe current changes of the
business environment,business environment,
deeper and faster eachdeeper and faster each
day, are making challengingday, are making challenging
for managers, sustainingfor managers, sustaining
their professionaltheir professional
competence, if they don'tcompetence, if they don't
work every day to updatework every day to update
the knowledge and skillsthe knowledge and skills
required for performingrequired for performing
their professiontheir profession

Successfully Managing Innovation requires:
• Implementing collaborative and social networks for
capturing requirements and ideas, from colleagues,
customers and partners, into products and processes
• Establishing consistent, repeatable processes for translating
concepts into products.
• Making role-based data available to all stakeholders during
each stage of the product development process.
• Standardizing the data captured about each project, such as
strategic alignment, financials, and risk levels.
• Managing intellectual property including patent assets and
the protection of specialized proprietary knowledge.
• Managing the project portfolio, tracking execution and
alignment with corporate mission and competitive goals, and
making time-to-market decisions via flexible scheduling.
• Maintaining effective communications across multiple sites
and organizations.
The final stage ofThe final stage of
anyany
effective ideaeffective idea
managementmanagement
approach, isapproach, is
the successfulthe successful
implementation ofimplementation of
innovativeinnovative
ideasideas
What says about these issues a Global Innovation Champion?What says about these issues a Global Innovation Champion?

“Some Hints for Building an
Effective Business Innovation System”
The author authorizes the integral reproduction of this presentation
Miguel Sáenz de Viguera Aizpurua
2007 PMI Distinguished Contribution Award
msaenzdeviguera@hotmail.com
November 2010

Building Effective Business Innovation

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