Innovation Moves Strategy V2. No Slide Photos

Innovation moves strategy

Module 11 Innovation Moves Strategy Page ©2008 Balanced Scorecard Collaborative, a Palladium company • thepalladiumgroup.com Innovation vs Strategy 0.1 Define the opportunity 0.2 Build through co-creation 0.3 Execute innovation 0.4 Create the movement 0.5

Discussion Questions

Does your strategy consider innovation?

Or

Is your strategy innovative?

Innovation vs Strategy

Within five years if you're in the same business you are in now, you are going to be out of business (Philip Kotler)

Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value. (Michael Porter)

A business has two-and only two-basic functions: marketing and innovation. Marketing and innovation produce results. All the rest are costs (Peter Drucker)

Once you have defined your strategy, you should start thinking in the next generation strategy (Norton)

Triggers of strategy change at Marriot Vacation Club International Innovation should be a continual and progressive process in every organization Transformative strategy (high innovation) Incremental strategy (execution) Degree of Change Encompassed by Strategy Ideal transformative strategy curve Transformative strategy (high innovation) Innovation vs Strategy

AS IS SITUATION

The key success factor is being able to create new market spaces where there is no existing competence. Companies that find blue ocean are 2-3 times more profitable than the ones that are in red oceans

TO BE Innovation should progressively drive companies towards Blue Oceans Innovation vs Strategy COMPETITION New Attributes

Strategy Plan;

Many hypothesis (answers) to questions

Questions that have no answer yet

Source; Jose Luis Larrea Innovation vs Strategy Cycle of innovation Questions Answers

Innovation vs Strategy Water, from the Greek means new life, emotion, intuition, rebirth and force VIDEO BE WATER MY FRIEND

STEP ONE; do you have an enough broad mission? Whose mission? Improve quality of life All information at one click We want to be your energy

Execution Premium Process DEFINE + EXECUTE + INNOVATE Innovation vs Strategy

Build through Co-Creation Start to ripple Create Movement Keep the wave rolling Execute Innovation Break the rules Define the Opportunity- Don't blow with the wind 40% of managers do not determine where to focus innovation efforts. Three quarters of the executives consider customers, employees and affiliates as an important source of new ideas, but in most organizations there is no central governance to manage innovation. Only 4% of the R&D projects obtain the expected results (BusinessWeek). The problem is R&D in normally constrained under a conservative strategy 64% of the executives say that they have enough of the right kind of people to innovate, however almost 70% of them considers this talent is not being used due to lack of processes or of an adequate culture Innovation vs Strategy

40% of managers do not determine where to focus innovation efforts. Don't just blow with the wind Define the opportunity

COSTUMER JOURNEY ANALYSIS Get to know the customer's experience and all the processes that relate to the service VALUE CHAIN ANALYSIS Understand the current situation and the processes in the company. LOOK BEYOND PRODUCT AND SERVICE OFFERINGS Define the opportunity XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX

MARKET TRENDS Review market trends and the industry COMPANY CUSTOMER Define the opportunity XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX

The role of the leader Establish a sense of urgency; The first thing our leader did was to remark the importance of change STRATEGIC COMPLEXITY 2008 2005 2000 TIME To be competitive To be effective To be efficient Integration - intermodal Geographic dispersion Extension Liberalization

CHALLENGES

Manage growth

Customer orientation

Win concessions

External business

Cultural evolution

Greater customer demand Environmental concerns Define the opportunity; case study. Metro de Madrid

Define the opportunity; case study. Metro de Madrid

Strategy Map

Projects

10 strategic projects

9 with many questions,…,but also many answers

1 just with questions,...., ACTIVA

Typically, roughly 80% of an Organization should be focus on executing strategy, 20% need to be focus in evolving it

Define the opportunity; case study. Metro de Madrid Public Transport 1. Advertisement & Public Relations 2. Subscription Administration / Consortium 4.Entrance Hall & In-Station Stores & Turn-tickets 6. Navigation & Information Support 7. Providing Information & Support 8. Navigation & Other information Support 1. Choosing a daily transport 2. Applying for a card for season ticket 3. Buying Season Ticket 4.Getting Inside Public Transport Space 5. Public Transport Train 6. Train Change 7. Problems / Breakdown 8. Getting Outside of Public Transport Space Customer of Public Transport 5. Vehicles (Conductor) 3.Selling Points

Define the opportunity; case study. Metro de Madrid 4 MAIN QUESTIONS What next when no tickets and no conductors are needed?, will Metro have employees? Should Metro care for better use of citizen time? Should Metro provide further information from the surface? 1. Advertisement & Public Relations 2. Subscription Administration / Consortium 4.Entrance Hall & In-Station Stores & Turn-tickets 6. Navigation & Information Support 7. Providing Information & Support 8. Navigation & Other information Support 1. Choosing a daily transport 2. Applying for a card for season ticket 3. Buying Season Ticket 4.Getting Inside Public Transport Space 5. Public Transport Train 6. Train Change 7. Problems / Breakdown 8. Getting Outside of Public Transport Space 5. Vehicles (Conductor) 3.Selling Points

Build Through Co-Creation Three quarters of the executives consider customers, employees and affiliates as an important source of new ideas, but in most organizations there is no central governance to manage innovation. Start to ripple

Discussion Questions

Does your executive committee have many innovate ideas?

Guess why?

Norton; There is a bottom-up innovation process, which involves employees and customers participating in the collective building of the next generation strategy.

4 COMBINING and DEVELOPMENT OF IDEAS 2 GROUPS EMPLOYEES AND NON - EMPLOYEES GENERATION OF IDEAS STORAGE OF IDEAS PORTFOLIO OF INITIATIVES 5 CUSTOMERS, AND NON-CUSTOMERS AFFILIATES, UNIVERSITIES,ETC.. 3 CO-CREATION 1 2 3 4 5 Key success factors Leadership and commitment around opportunity areas Common language and philosophy 1 6 Co-create. Interaction generates creativity Combine and develop ideas using imagination Right resources to the right initiatives Coordination and communication Build Through Co-Creation

Build Through Co-Creation Tools; Ideation ECC Lateral thinking Anthropology Ask about how they use the product, their problems, their dreams, encourage or challenge your customers to change or improve. (i.e; restaurant) OTHER COMPANY CUSTOMER SUPPLIER REGULATOR CONSULTANT

Number of Red Dots >=3 Pilot Station potential Areas Attention/Information Initiative potential Areas Entertainment Initiatives potential Areas Build Through Co-Creation Case Study: Metro de Madrid

GROUP IDEAS; 4 NEW POSSIBLE BUSSINES

Media channel = 1.000.000 clients for 1 hour.

School / Library

Retail; Metro-shop

Social & cultural Activity, Entertainment

NEW ATENTION / INFORMATION MODEL

152 4 26 25 12 19 26 32 8 Total 9 0 1 1 1 1 1 4 0 SPEED 7 0 1 2 0 0 1 3 0 SECURITY 10 0 0 2 2 2 2 2 0 COMFORT 27 0 5 5 3 4 5 5 0 ENVIRONMENT/CONSERVATION 41 1 7 6 3 6 6 9 3 INFORMATION 30 2 5 4 2 2 6 5 4 ATTENTION 12 0 4 2 0 1 2 3 0 ENTERTAINMENT 16 1 3 3 1 3 3 1 1 OTHER SERVICES Total EXIT to DESTINY PLATFORM to EXIT TRANSFER TRAIN PLATFORM TURNSTILE to PLATFORM ACCESS To TURNSTILE ORIGIN to ACCESS

Build Through Co-Creation Case Study: Metro de Madrid. Some ideas

Build Through Co-Creation; COMBINE AND DEVELOP THE IDEAS USING IMAGINATION 1. iPod “music access and listening” experience 2. iTunes “music management and download” experience 3. iTunes “music browsing” experience 4. iMix sharing playlists experience Go beyond product and services, Create new experiences What is it with the i-pod?

Key success factors for the Business Plan;

IMAGINATION; visualize the ideas

HOMOGENIZATION; The Strategy Map defines the KPI´s that will be estimated in every business plan.

STRATEX; Expenditure for strategic and innovative initiatives Build Through Co-Creation; RIGHT RESOURCES FOR THE RIGHT INITIATIVES Strategic impact on FUTURE STRATEGY!!!...TO BE value proposition - Time to results + - Strategic Impact + QUICK WINS NEEDS TEST AND VALIDATION STOP THESE INITIATIVES OR TRANSFER TO THE CORRESPONDING AREA Effort ( Investment level, human capital, change management, etc.) + START NOW

Execute Innovation Only 4% of the R&D projects obtain the expected results (BusinessWeek) Break the rules

You can have an excellent idea and still be stuck in the same jam

Once the organisation has evaluated the impact of the innovation initiatives on the strategy, it's time to EXECUTE! Impact on the strategy Execute Innovation Initiatives generating a differential costumer experience Initiatives improving processes radically STRATEGY INTEGRATION

20% 80% Execute Innovation FOCUS Strategy Map Visual representation of the strategic objectives and their interactions ACTION Initiatives (Incorporate Innovative Initiatives) Key action programs to reach objectives Economic value added Asset productivity Be the lowest cost producer Pick the winners globally Create new market demand Price performance Partnering Integrate and align resources Sales and customer development Focused technology development Perfect manufacturing People and change management Strategic competencies and skills Individual and team performance Customer sensitive culture Perspectiva Financial Customer Internal Learning & Growth Objetivos Procurement redesign Emerging markets strategy Partner with the winners Res sec and W&L and hurricane Quality needs identification Quality proc for root cause elim Reformulation SV commercialization/facilities Cust complaint tracking process Side lam VP/partnerships IT enhancement in value chain SCOP implementation ABM Develop/cascade BSC Communicate vision Asia reformation facilities IT strategy alignment Scrap rework proc improvement Yield improvement program Facilities upgrade ISO 9002 NA resin mfg cert Expert systems Rewards dev/implementation Global communications Training strategic skills Iniciativas FOLLOW UP Balanced Scorecards / Indicators / Goals Key strategy success factors and definition of the anticipated performance results

After 3 years “create a differential experience” become a strategic theme in the map

Execute Innovation; case study; Metro de Madrid From 1 objective and 1 project, to 1 strategic theme with many projects Customer's service + - Basic Service Extended Service IMAGE CUSTOMER´S ACQUISITION AND LOYALTY SERVICES Journey phases from origin to destiny TECHNOLOGY Metro vuela algo Muy tuyo PERSONAS Customer Care Culture Global Attention Culture Commercial Culture

‘ Suddenly they start running, but no matter how hard Alice runs, they stay in the same place. The queen explains that in this country you have to run at least twice as fast to get somewhere else…’ Alice in Wonderland Execute Innovation; case study; Metro de Madrid Execution Premium BUSINESS RESULTS: Sustained customer satisfaction > 70%. Growth of the public transportation share within Madrid: from 32% to 40%. Employees productivity from 43 agents per million Kms x Car in 2001 to 37 in 2004. Improved safety ratings (even after 11-M terrorist attacks). OTHER BENEFITS: Developed a culture of “measure” Begin to understand customer’s experience Improved cross-unit’s communication

Create Movement 64% of the executives say that they have enough of the right kind of people to innovate, however almost 70% of them considers this talent is not being used due to lack of processes or of an adequate culture Keep the wave rolling

Create Movement. New functions for the OSM

ROLE OF THE CHIEF MARKETING OFFICER (P.Kotler)

Represent the voice of the customer

Gather market insights to help develop new products and services

Be the steward of the corporate brand

Upgrade marketing technology and skills

Bring insight into the corporate portfolio and synergies

Measure and account for marketing financial performance

ROLE OF OSM REGARDING INNOVATION OR DIFERENCIATION

Identify strategic challenges…do the right questions

Innovation Process coordination and training in the methodologies of generating and developing ideas (could be)

Enable strategy driven decision making using the most informative and relevant information

Ensure effective implementation of initiatives through efficient allocation of resources

INTERESTING FOR STRATEGY MANAGEMENT? Idea Management tools facilitate continuous Co-creation; structure and process determine success

City's Observatory Functions Internal Provide local government with the necessary information to plan and manage their services accordingly External Keep citizens informed of the activities of the local government and the perceived level of satisfaction for the services offered by the administration Create Movement. Case study Ayuntamiento de Madrid

Information Systems Governance Management Evaluation In accordance with the City Model In accordance with the citizen's needs INTERNAL PERSPECTIVE EXTERNAL PERSPECTIVE Operation Management System Budget Management System Complaint and Suggestion System Service Form System Citizen's Perception Evaluation System Strategy Management System Budget Management System Create Movement. Case study Ayuntamiento de Madrid

A co-created strategy will deliver new mutual value for a company and its customers NEW ATRIBUTE BEFORE NEW MODEL Planning Number of reports Consistency Reliability Innovation Learning Motivation Execution Participation Customer Orient. Co-creation the strategy is part of the experience for employees and customers, and it improves the EXECUTION PREMIUM NEW MODEL Strategy management value Proposition Create Movement. New model for strategic development

Implementation (Operations) Management Definition SCOPE PARTICIPATION Board of Directors Senior Management All Employees Customers / Affiliates STRATEGY MANAGEMENT 2.0 Management is about having a continuous conversation with the people around you (Gary Hamel) Create Movement. New model for strategic development Strategy Management Evolution