P EER I NSIGHT Rotman Conference Series W Hotel, NYC November 16, 2006 Jeneanne M. Rae Co-founder and President, Peer Insight, LLC Innovation Operating Models Understanding the Migration Path to Organizational Effectiveness

Peer Insight was formed to ask BIG questions about innovation … … and generate pragmatic answers companies can use NOW.

We invited some companies to help us

Our analysis is driven by dialog (not questionnaires) and uses a forensic approach, based on a diverse mix of recent projects different Global 500 companies analyzed 43 Source: Peer Insight analysis of 92 recent service innovation projects failed too-soon-to-tell proven success struggling modest success destined for success 5 12 20 10 14 27 killed before launch 4 600+ interviews with senior service innovators 92 recent projects

research highlights migration path to innovation effectiveness conclusions

distributed specialists generalists hothouse (or incubator) heavyweight team BU team BU labs centralized Structural models of innovation observed for 92 recent service innovation projects at 43 Global 500 companies 25 most successful outcomes All other projects

Senior leadership engagement Systematic innovation framework High-potential innovation protocols exist Close linkage to the brand promise Insight into technology innovation patterns Deep insight into customer needs Robust methods for customer experience design Innovation supply chain to leverage outside parties Techniques for early in-market feedback Effective concurrent service design Strategic use of IT platforms Enroll key stakeholders for launch Foundation disciplines Front-end disciplines Middle- and back-end disciplines 10 20 30 40 50 60 70 80 90 100 0 10 20 30 40 50 60 70 80 90 100 0 83 17 57 35 12 53 49 78 59 57 8 96 leadership cX design Source: Peer Insight analysis of 92 recent service innovation projects Percent difference between most-successful and least-successful projects management change

research highlights migration path to innovation effectiveness conclusions

leading edge early adopters early majority laggards late majority Companies are adopting innovation at different rates Distribution of innovation sophistication, all companies What does it mean to our customers? To our employees? To the world? cultural transformation (cultures) “ Why” M&A + Six Sigma No Man’s Land Innovation 1.0 Innovation 2.0 Innovation 3.0 “ Stay the course” “ If” Is innovation the way to grow profitably in the post-Six Sigma era? search for organic growth (experiments) “ How” How do we find big ideas and get them off the ground? methods and protocols (projects) “ How it scales” How do we make innovation easier, more systematic, so it doesn’t rely on heroic acts? innovation operating model (programs) burning question focus (unit of measure)

M&A + Six Sigma No Man’s Land Innovation 1.0 Innovation 2.0 Innovation 3.0 “ If” “ How” “ How it scales” “ Why” leading edge early adopters early majority laggards late majority How 5 key elements of success typically map to the stages of evolution What does it mean to our customers? To our employees? To the world? cultural transformation (cultures) Is innovation the way to grow profitably in the post-Six Sigma era? search for organic growth (experiments) How do we find big ideas and get them off the ground? methods and protocols (projects) How do we make innovation easier, more systematic, so it doesn’t rely on heroic acts? innovation operating model (programs) Innovation as a new discipline 1 Customer-centricity 2 Senior leadership 3 Operating model 4 Change management 5

What does it mean to our customers? To our employees? To the world? cultural transformation (cultures) leading edge early adopters early majority laggards late majority M&A + Six Sigma Innovation 1.0 Innovation 2.0 Innovation 3.0 Is innovation the way to grow profitably in the post-Six Sigma era? search for organic growth (experiments) How do we find big ideas and get them off the ground? methods and protocols (projects) How do we make innovation easier, more systematic, so it doesn’t rely on heroic acts? innovation operating model (programs) Google and Whole foods are examples from the leading edge Source: Peer Insight analysis No Man’s Land

research highlights migration path to innovation effectiveness conclusions

Innovation science is evolving rapidly Customer-centricity is a key challenge The value is in creating innovation engines We have a lot to learn from each other Thanks!!!!! Some conclusions