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World Innovation Forum Survey Full Details Final

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World Innovation Forum Survey Full Details Final

  1. 1. Leader or Laggard:<br />Innovation as a Competitive Success Factor During Recession<br />Capgemini World Innovation Forum Survey<br />Spring, 2009<br />
  2. 2. “Every organization needs one core competence: INNOVATION” <br /> ~ Peter Drucker<br />
  3. 3. Contents<br />Introduction<br />Drivers of Innovation<br />Barriers to Innovation<br />The People Principles of Innovation<br />Importance of Inspiring Leadership<br />Profiting from Partnerships<br />Tools and Techniques<br />Business Model Innovation<br />Implications and Opportunities<br />
  4. 4. 0<br />We assessed companies in multiple industries and asked respondents to self-identify based on innovation success rates<br />Innovation Survey Respondents Representation by Industry<br />What percentage of your firm's innovation has a positive material impact on business results?<br />More than 75%<br />14.1%<br />Professional Services<br />Life Sciences, Pharma, Med Devices<br />10.9%<br />Financial Services<br />10.6%<br />Less than 25%<br />51-75%<br />34%<br />Consumer Products<br />26%<br />Telecommunications & Media<br />Other<br />Public Sector<br />High Tech<br />Marketing / Creative Services<br />34%<br />Education<br />25-50%<br />Transportation & Logistics<br />Healthcare<br />Not for Profit<br />Innovation Leadership Assessment<br />Aerospace & Defense<br />Retail<br /><ul><li>Innovation Leaders: Over 75% success
  5. 5. Highly successful innovators: 51-75%
  6. 6. Moderately successful innovators: 25-50%
  7. 7. Innovation laggards: Less than 25%</li></ul>Construction<br />OEM<br />Energy<br />Automotive<br />Utilities<br />
  8. 8. 0<br />Most respondents have continued to innovate during the recession and leaders are using it as an opportunity to transform<br />Impact of recession on innovation efforts<br />“Our management team is using the current recession as an opportunity to fundamentally transform our business”<br />We have had to cut back on our efforts at innovation<br />13.7%<br />We are continuing our efforts, but have changed focus / direction<br />24.6%<br />We have no plans to change our innovation strategy or approach<br />28.1%<br />We are using the slowdown as a catalyst to increase our efforts<br />33.6%<br />Innovation Leaders<br />Highly Successful Innovators<br />Moderately Successful innovators<br />Innovation Laggards<br />
  9. 9. Respondents were consistent in their definition of successful innovation – “newness” is a necessary but not sufficient condition<br />Shareholder Value Creation<br />Innovation Success<br />Customer Intimacy<br />Intentionality<br />Successful Innovation is<br />Customer Focused<br />“Redesigning new ways of thinking, processing and delivering that achieves greater results and resonates with our customers”<br />“Co-creation of new experience, product / services, market, network and sustainable development with clients and customers.”<br />“The most important measure of success for innovation is user adoption”<br />Intentional and Future-oriented<br />“Successful innovation is not only about introducing the idea; it’s a process”<br />“Building discipline in the team to make time for the future in order to lead the industry ...”<br />“Just having new technology is not innovation; it’s about what we do with the technology to change human behavior and create a new future”<br />“There has to be a reason for what we’re doing; we believe in purpose-driven innovation, rather than innovation for innovation’s sake”<br />Value Creating<br />“Successful commercialization of game changing products (and / or business practices) that deliver in a significant way to the bottom line”<br />“Successful innovation creates wealth, market share and the confidence to compete against new competitors”<br />“… increases the likelihood of the long-term growth and sustainability of the company.”<br />TheCornerstones of Successful Innovation<br />
  10. 10. 8<br />Companies recognized as leading innovators significantly outpace the financial performance of the market as a whole<br />Five Year Earnings Growth Rates<br />Five Year Net Income Growth Rate<br />S&P 500<br />S&P 500<br />Apple<br />Apple<br />Research in Motion<br />Research in Motion<br />Google<br />Google<br />Hewlett-Packard<br />Amazon<br />Amazon<br />Hewlett-Packard<br />Nokia<br />Procter & Gamble<br />Microsoft<br />Microsoft<br />Procter & Gamble<br />Novartis<br />Novartis<br />Nokia<br />60%<br />80%<br />40%<br />0%<br />20%<br />-20%<br />100%<br />Source: MSN Money, June 2009; Business Week 25 Most Innovative Companies, 2009<br />
  11. 11. The survey highlighted the key characteristics and behaviors of the most successful innovators<br />Transform Business Processes with Partner Collaboration<br /><ul><li>Refashion internal processes to increase speed to market, customer service, or lower COGS
  12. 12. Open the process to new, non-traditional partners
  13. 13. Form alliances / partnerships to draw on outside ideas or access new customer bases
  14. 14. Consider smart competitive collaborations
  15. 15. Work with suppliers and distributors to improve upstream / downstream performance</li></ul>Create Unique Customer Experiences<br /><ul><li>Engage customers early in the development cycle
  16. 16. Use ethnography and anthropology to understand how customers behave and what problem they are trying to solve
  17. 17. Adapt existing products / services to serve new markets; consider non-traditional options
  18. 18. Explore multiple definitions of value as macroeconomic conditions shift</li></ul>The Disciplineof Innovation<br />Apply New Technologies<br /><ul><li>Find practical uses for today’s technological advances in a way that increases speed, efficiency, or convenience
  19. 19. Take advantage of options like virtualization to support prototyping and experimentation
  20. 20. Collaborate with the multiple partners by using social networking and cloud technology
  21. 21. Explore options for open innovation with technology enabled idea marketplaces</li></ul>Utilize New Governance and Management Methods<br /><ul><li>Make innovation a leadership imperative
  22. 22. Develop an environment that cultivates curiosity, creativity, tolerance for risk
  23. 23. Restructure hierarchy to encourage idea flows (top-down, bottom-up, outside-in)
  24. 24. Increase collaboration across functional groups
  25. 25. Recruit and train with an eye to innovation, regardless of business function
  26. 26. Build the discipline of portfolio management</li></li></ul><li>Contents <br />Introduction<br />Drivers of Innovation<br />Barriers to Innovation<br />The People Principles of Innovation<br />Importance of Inspiring Leadership<br />Profiting from Partnerships<br />Tools and Techniques<br />Business Model Innovation<br />Implications and Opportunities<br />
  27. 27. Innovation is driven primarily by customer and technological changes<br />What are the primary drivers of your firm’s innovation efforts?1<br />Executive direction / internal demands<br />Macroeconomic / external factors<br />Changing supplier capabilities<br />Globalization<br />Technological advances and changes<br />Evolving customer needs<br />Key Insights<br /><ul><li>Since customer changes are the primary driver for innovation, innovation is a survival imperative, not just a “nice to have”, for successful businesses
  28. 28. The role that technological advances play in innovation supports Capgemini’s Technovision 2012 approach, which identifies many of the key technology enablers for innovation, e.g. social networking, cloud computing, collaborative tools
  29. 29. Firms continue to innovate in response to the evolving macroeconomic environment and its impact on internal business conditions</li></ul> 1 Does not sum to 100% – respondents could select more than one response<br />
  30. 30. 0<br />The most successful innovators are more likely to view globalization as a catalyst and enabler of innovation<br />What We Find<br />What are the drivers for your innovation efforts?<br />Catalysts with greatest variance between innovation leaders and laggards<br /><ul><li>Innovation leaders are much more likely to cite executive direction and globalization as catalysts for innovation than less successful innovators
  31. 31. Globalization is a catalyst for innovation in three major areas
  32. 32. New customers and markets
  33. 33. New partners and sources of insight
  34. 34. New talent and labor with diversity of ideas and capabilities
  35. 35. The extended ecosystem expands the context within which to innovate new business models
  36. 36. Greater engagement with the developing world is spurring increased “bottom of the pyramid” innovation to the developed world
  37. 37. Even companies which are confined to a local market (e.g. utilities) are taking advantage of the exchange of talent and technology across borders to innovate in response to local customer needs</li></ul>Executive Direction<br />Macroeconomic Factors<br />Globalization<br />Innovation Laggards<br />Innovation Leaders<br />What We Heard<br /><ul><li>“We cannot only listen to ourselves; we have to bombard our brains with new ideas.”
  38. 38. “We search the globe for new technologies, and to evaluate demos and pilots that we can use in our home market.”
  39. 39. “We actively seek out cross border collaborations – finding people everywhere who want to learn together.”
  40. 40. “Our goal is to serve clients brilliantly. The only way for us to do that is to move people around. For it to be done right, we need people who have different backgrounds and understand different cultures.”</li></li></ul><li>Companies like GE and Procter & Gamble are taking advantage of “trickle-up” innovation to unlock new markets at home<br />
  41. 41. Contents<br />Introduction<br />Drivers of Innovation<br />Barriers to Innovation<br />The People Principles of Innovation<br />Importance of Inspiring Leadership<br />Profiting from Partnerships<br />Tools and Techniques<br />Business Model Innovation<br />Implications and Opportunities<br />
  42. 42. O<br />Day-to-day business operations are the greatest barrier to achieving breakthrough innovation<br />What most constrains your company’s ability to achieve breakthrough innovation?<br />Failure to gain buy-in at lower levels of the organization<br />Inadequate leadership commitment<br />Lack of formal processes<br />Lack of skills within the organization<br />Financial constraints<br />Urgency of pressing day-to-day business demands<br />Inadequate technological capability<br />Other<br />Key Insights<br /><ul><li>Additional constraints include: company culture and partners’ / customers’ lack of acceptance; inadequate supply chain support; risk aversion and fear of failure
  43. 43. Most companies point to day to day business pressures as a key constraint; therefore, additional on-demand support (new labor models) can help to strengthen innovation efforts
  44. 44. But equally important, innovation efforts should be built into the corporate DNA as a regular part of the business, rather than being treated as an extra or “add-on” separate from the organization’s core activities</li></ul>Note: Does not sum to 100% – respondents could select more than one response<br />
  45. 45. Contents<br />Introduction<br />Drivers of Innovation<br />Barriers to Innovation<br />The People Principles of Innovation<br />Importance of Inspiring Leadership<br />Profiting from Partnerships<br />Tools and Techniques<br />Business Model Innovation<br />Implications and Opportunities<br />
  46. 46. e<br />There was little difference between laggards and leaders in citing barriers to innovation except with regard to people factors<br />What most constrains your company’s ability to achieve breakthrough innovation?<br />Lack of skills within the organization<br />Inadequate leadership commitment<br />Innovation Laggards<br />Innovation Leaders<br />Key Insights<br /><ul><li>Leadership alignment / commitment is one of the most important correlating factors for successful innovation
  47. 47. Many innovation leaders speak about the importance of hiring the right mindset (risk-taking, open to the art of the possible, resilient ) and building skills as part of the organization’s overall mandate
  48. 48. “Creating creativity” is a learned skill; innovation leaders teach formal innovation development and management skills to people across the organization, regardless of function and title
  49. 49. Tools like the Accelerated Solutions Environment can be used to build leadership alignment across functions, which is critical for ongoing innovation success</li></li></ul><li>v<br />Even when companies do make a commitment to innovation they are constrained by the lack of people with the right skills<br />What are the greatest challenges your business faces in delivering successful innovation?1<br />Difficulty in finding the right people to drive the effort<br />Failure to get budget approval for up front<br />Inability to commercialize the best ideas<br />Failure to achieve breakthrough results<br />Failure to deliver in a timely manner<br />Going over budget<br />Key Insights<br /><ul><li>This again shows the value of contracting specialized assistance to support internal innovation efforts
  50. 50. However, specialized support is not enough; the organization must also build internal capabilities with appropriate training, performance management and incentives
  51. 51. Additional challenges include: inability to articulate the value proposition, regulatory concerns and lack of leadership commitment</li></ul> 1 Does not sum to 100% – respondents could select more than one response<br />
  52. 52. r<br />Broader engagement with employees at all levels is positively correlated with successful innovation<br />Employees at all levels and functions throughout the organization are actively involved in our innovation efforts<br />26%<br />15%<br />8%<br />42%<br />35%<br />28%<br />20%<br />Innovation Laggards<br />Moderately Successful Innovators<br />Highly Successful Innovators<br />Innovation Leaders<br />Strongly agree<br />Agree<br />Key Insights<br /><ul><li>Innovation leaders engage employees at all levels by deliberately designing forums which allow employees to work across levels
  53. 53. Developing an innovation ethos means providing employees with the skills needed to be successful; creativity can be a learned skill, but it requires practice and reinforcement
  54. 54. Collaborative tools provide new opportunities for employees to interact and engage across functions, divisions & locations
  55. 55. However, organizations should not underestimate the importance of in-person engagement; forums like the ASE provide a focused, high context environment with a bias for action</li></li></ul><li>Creating innovation energy is a conscious act of leadership that impacts and drives people throughout the organization<br />Articulate, encourage and reward innovation behavior:<br /><ul><li>Freshness: Be willing to explore the new and challenge what has always been done
  56. 56. Greenhousing: Protect ideas when they are most vulnerable
  57. 57. Signaling: Tell others how you want them to react to ideas – challenge? Build?
  58. 58. Realness: Share, be open and embrace learning opportunities and teachable moments
  59. 59. Momentum: Momentum is contagious; but so is inertia
  60. 60. Courage: Provide a safe space for people to stretch their comfort one regularly and deliberately</li></ul>Create the right conditions in the organization:<br /><ul><li>Be smart in selection and allocation of initiatives
  61. 61. Promote transparency
  62. 62. Put structures in place to reward innovation
  63. 63. Leaders must walk the walk
  64. 64. Find and celebrate success – be big in celebration</li></ul>Behavior<br />Organization<br />Innovation Energy<br />Attitude<br />Nurture people with the right attitude:<br /><ul><li>Be deliberate about feedback
  65. 65. Foster confidence and an appetite to do things differently
  66. 66. Recruit for attitude – curiosity, courage, resilience, risk appetite
  67. 67. Instill a sense of passion – give people something to care about</li></ul>Note: Adapted from: ?WhatIf! Consulting, World Innovation Forum 2009<br />
  68. 68. Contents<br />Introduction<br />Drivers of Innovation<br />Barriers to Innovation<br />The People Principles of Innovation<br />Importance of Inspiring Leadership<br />Profiting from Partnerships<br />Tools and Techniques<br />Business Model Innovation<br />Implications and Opportunities<br />
  69. 69. 47%<br />Innovation leaders are more likely to have a dedicated innovation group, although this is uncommon among all businesses<br />As separate innovation division is involved in our innovation efforts<br />We have someone at the executive level who is formally accountable for innovation <br />Innovation Leaders<br />Highly Successful Innovators<br />Moderately Successful Innovators<br />Innovation Laggards<br />Innovation Laggards<br />Highly Successful Innovators<br />Moderately Successful Innovators<br />Innovation Leaders<br />Key Insights<br /><ul><li>Most firms do not have a dedicated innovation division, or someone at the executive level who is formally accountable for innovation; however, innovation leaders are more likely to do so than other firms
  70. 70. The formal role responsible for innovation is not necessarily defined as innovation-specific (though some are, such as the Innovation Chief, Director of Foresight); in many cases the innovation lead is the CEO or a high-level line executive in the organization
  71. 71. Although embedding innovation in the organization may be more effective than trying to create a separate division, having a formal innovation organization increases focus and resource commitment
  72. 72. Companies must balance the benefits of a dedicated division, vs. silo’ing innovation as something for which only one group is responsible</li></li></ul><li>6<br />While having a dedicated executive responsible for innovation does not guarantee success, it certainly improves the odds <br />Innovation Success Rate<br />Innovation Type<br />24%<br />45%<br />76%<br />55%<br />Some big hits and many incremental improvements<br />Ongoing incremental improvements<br />Regular breakthrough innovation<br />Limited innovation success<br />Dedicated Innovation Executive<br />No Dedicated Innovation Executive<br />Has a dedicated innovation executive<br />Less than 50%<br />Greater than 50%<br />Does NOT have a dedicated innovation executive<br />Close to 40% of respondents at firms without a dedicated executive self-identify as laggards (bottom quartile success rate).<br />
  73. 73. 0<br />Even where there is no formal innovation role, executive commitment is a key differentiator for innovation leaders … <br />We have a high degree of executive level commitment to innovation<br />100%<br />82%<br />68%<br />46%<br />Innovation Leaders<br />Very Successful Innovators<br />Moderately Successful Innovators<br />Innovation Laggards<br />Strongly agree<br />Agree<br />Key Insights<br /><ul><li>The chief executive and leadership must make a public and visible commitment to innovation as a business imperative
  74. 74. To ingrain a commitment to innovation, KPIs must be designed to measure and reward the desired behaviors, e.g. creativity, risk-taking, creating a learning culture
  75. 75. The most successful innovators cascade commitment to innovation to the middle and lower levels of the organization, creating a culture of leadership among equals</li></li></ul><li>0<br />… And successful innovators are more likely to align their innovation activities with the company’s overall strategic vision<br />“Our innovation efforts are clearly defined in line with our overall corporate vision”<br />17.3%<br />42.1%<br />10.0%<br />52.7%<br />4.5%<br />49.4%<br />36.8%<br />23.6%<br />Moderately Successful Innovators<br />Highly Successful Innovators<br />Innovation Leaders<br />Innovation Laggards<br />Agree<br />Strongly agree<br />
  76. 76. Contents<br />Introduction<br />Drivers of Innovation<br />Barriers to Innovation<br />The People Principles of Innovation<br />Importance of Inspiring Leadership<br />Profiting from Partnerships<br />Tools and Techniques<br />Business Model Innovation<br />Implications and Opportunities<br />
  77. 77. g<br />Innovation leaders take advantage of external sources of innovation more than other firms<br />What are the primary sources of innovation / new ideas for your organization? <br />Source of Ideas – Suppliers<br />Source of Ideas – Third Party Partners<br />Innovation Laggards<br />Moderately Successful Innovators<br />Very Successful Innovators<br />Innovation Leaders<br />Innovation Leaders<br />Moderately Successful Innovators<br />Very Successful Innovators<br />Innovation Laggards<br />Key Insights<br /><ul><li>Involving suppliers and other third party partners in ideation is positively correlated with innovation success
  78. 78. The use of open innovation and collaborative business tools and techniques provides enhanced innovation capability
  79. 79. Experimentation with non-traditional innovation partners, e.g. individual inventors, specialty design firms, opens new opportunities for innovation</li></li></ul><li>7<br />Higher innovation success rates are achieved when customers are more proactively involved in innovation efforts<br />How involved are your end consumers in your innovation efforts? <br />7.4%<br />We do not actively engage customers in our innovation efforts<br />Customers are involved in test marketing following initial design<br />We use market research / focus groups to generate ideas which we develop in-house<br />Customers are proactively involved in design and development<br />We maintain ongoing customer conversations to support multiple elements of our innovation processes<br />10.5%<br />11.7%<br />19.8%<br />5.3%<br />11.1%<br />21.6%<br />26.3%<br />17.3%<br />17.1%<br />17.1%<br />10.8%<br />47.4%<br />45.7%<br />37.8%<br />28.8%<br />Innovation Leaders<br />Innovation Laggards<br />Highly Successful Innovators<br />Moderately Successful Innovators<br />Key Insights<br /><ul><li>Opportunities for more active customer involvement in innovation efforts include: closed-loop marketing, user-based design, customer anthropology surveys
  80. 80. Social networking technology creates new avenues to engage customers as participants in the innovation process
  81. 81. Social anthropology, ethnography, and user experience / user-designed innovation are growing in importance – the key is to understand how customers behave, why they do what they do, what problem they are trying to solve, not what they say they want
  82. 82. More systemic and business model changes are being driven by customer insights, e.g. Tesco
  83. 83. Hot housing, experimentation and real world living labs provide additional opportunities to engage customers throughout the innovation process</li></li></ul><li>Contents<br />Introduction<br />Drivers of Innovation<br />Barriers to Innovation<br />The People Principles of Innovation<br />Importance of Inspiring Leadership<br />Profiting from Partnerships<br />Tools and Techniques<br />Business Model Innovation<br />Implications and Opportunities<br />
  84. 84. 9<br />Innovation leaders have well defined innovation processes built into their business operations<br />We have a well defined process for promoting and harvesting innovation in our company <br />10%<br />35%<br />7%<br />51%<br />1%<br />32%<br />29%<br />22%<br />Innovation Leaders<br />Very Successful Innovators<br />Moderately Successful Innovators<br />Laggards<br />Strongly agree<br />Agree<br />Key Insights<br /><ul><li>Close to two-thirds of innovation leaders have defined innovation processes built into the organization
  85. 85. Innovation processes should be: intentional, clearly defined, action-oriented, easily understood, accessible, repeatable
  86. 86. Many companies need help in designing an effective method for incorporating innovation into day to day operations – Capgemini’s 5E model can provide a framework to institutionalize the innovation process</li></li></ul><li>%<br />Just as important to successful innovation is a defined way to prioritize and measure the success of innovation projects<br />We have a clearly defined way to prioritize ideas and drive innovation<br />We have well understood methods / approaches to evaluate the success of our innovation efforts<br />11%<br />11%<br />14%<br />4%<br />10%<br />4%<br />67%<br />42%<br />1%<br />2%<br />32%<br />30%<br />36%<br />33%<br />27%<br />16%<br />Innovation Leaders<br />Innovation Laggards<br />Innovation Leaders<br />Highly Successful Innovators<br />Moderately Successful Innovators<br />Innovation Laggards<br />Highly Successful Innovators<br />Moderately Successful Innovators<br />Agree<br />Strongly agree<br />Key Insights<br /><ul><li>Portfolio management tools and processes help set direction, improve transparency and build alignment across divisions and functional areas
  87. 87. To be effective the prioritization system must be aligned with overall corporate objectives as well as individual divisional goals
  88. 88. Defining success criteria, key metrics and measures a priori provides a mechanism to “fail fast” while leaving room to continue to explore promising ideas
  89. 89. The most effective processes not only measure innovation success but capture and integrate the learning from “smart failures”</li></li></ul><li>Contents<br />Introduction<br />Drivers of Innovation<br />Barriers to Innovation<br />The People Principles of Innovation<br />Importance of Inspiring Leadership<br />Profiting from Partnerships<br />Tools and Techniques<br />Business Model Innovation<br />Implications and Opportunities<br />
  90. 90. Business model innovation fundamentally redefines the business elements that shape the company’s value proposition<br />Resources<br />Customer<br />Offer<br />Co-creation<br />CustomerRelationship<br />PartnerNetwork<br />BusinessFunctions<br />Distribution Channels<br />Value Proposition<br />CustomerSegment<br />Core Capabilities<br />Financial Performance<br />CostStructure<br />RevenueStreams<br />PROFIT<br />Note: Adapted from Alexander Osterwalder, The Business Model Ontology, a proposition in a design science approach<br />
  91. 91. Govindarajan's “three-box” model1 provides an effective framework for undertaking business model innovation<br /><ul><li>The future should be treated like a marathon. Steps must be taken today to shape the future
  92. 92. Business model innovation is driven by companies’ answers to known unknowns
  93. 93. “What does my customer want that today they cannot get from anyone at any price?”
  94. 94. “If the current governmental or regulatory environment were to change dramatically from today, what would it take for my business to succeed?”
  95. 95. How would my business be different if the margins or cost structure mirrored those of a radically different industry?
  96. 96. Which company that is not currently my competitor has the potential to completely reshape the environment and take my most profitable customers away?”
  97. 97. Globalization is forcing companies to rethink their business models as more innovation emerges from the “bottom up”. i.e., from the developing world</li></ul>Box 1: <br />“Manage the Present”<br />Box 2: <br />“Selectively Forget the Past”<br />Box 3: <br />“Create the Future”<br />Address current business challenges<br />Respond to non-linear changes in the industry and in the macro environment<br /><ul><li>Compete for the present
  98. 98. Benchmark and address performance gaps
  99. 99. Perform corporate restructuring
  100. 100. Dedicate 50-55% of corporate effort
  101. 101. Address the steps to create the future
  102. 102. Create fundamental business model changes
  103. 103. Requires bold strategic intent: direction, passion, challenge
  104. 104. Dedicate 10 -20% of corporate effort
  105. 105. Identify “next practices” not best practices
  106. 106. Expand into areas adjacent to existing business
  107. 107. Dedicate 10-25% of corporate effort</li></ul>Source: 1. Vijay Govindarajan, Tuck School of Business, Dartmouth<br />
  108. 108. Access to global resources, combined with a focus on co-created customer experiences, is driving new business models<br />Two pillars of innovation: Focus on individual customer experiences to create a market of one N(=1) and take advantage of global resources (R=G)<br />R=G<br />N=1<br /><ul><li>First pillar of innovation demonstrates shift in customer preferences
  109. 109. Co-create product / service with each consumer based on individual preferences
  110. 110. Focus on one customer at a time through
  111. 111. Flexibility
  112. 112. Collaborative networks
  113. 113. Simple customer interface
  114. 114. Anticipating evolving customer needs
  115. 115. Second pillar of innovation enables co-creation
  116. 116. Access high quality resources at low cost from multiple sources globally
  117. 117. Shift from owning all necessary resources to ability to access specialized suppliers as needed
  118. 118. Results in
  119. 119. Quick turnaround
  120. 120. Scalability
  121. 121. Innovation arbitrage</li></ul>R=G<br />N=1<br />Source: Prahalad, C.K., Krishnan, M.S. The new age of innovation. 2008<br />
  122. 122. Contents<br />Introduction<br />Drivers of Innovation<br />Barriers to Innovation<br />The People Principles of Innovation<br />Importance of Inspiring Leadership<br />Profiting from Partnerships<br />Tools and Techniques<br />Business Model Innovation<br />Implications and Opportunities<br />
  123. 123. Innovation leaders succeed because their approach to innovation is intentional, consistent and well-defined<br />Engage with Customers<br /><ul><li>Develop a customer-focused, rather than a product or process-focused mindset
  124. 124. Take advantage of web 2.0 (collaboration, social networking) and web 3.0 (open innovation, connectivity, “relationality’ to engage in customer-driven conversations
  125. 125. Use analytics to identify customer behaviors that suggest new opportunities for innovation
  126. 126. Explore ethnography and anthropology as tools for user experience innovation</li></ul>Take Advantage of the Extended Ecosystem<br /><ul><li>Reach beyond traditional partnership to find new avenues of innovation – third party labs, individual members of the inventor community, academic institutions, etc.
  127. 127. Explore opportunities for smart competitive partnerships or industry colloquia
  128. 128. Embrace globalization as a source of intellectual capital; challenge assumptions around traditional models of innovation</li></ul>Establish Formal Processes but Don’t Be a Slave to Process<br /><ul><li>Define a portfolio management system that is aligned to your firm’s strategic objectives
  129. 129. Institutionalize involvement form employees at all levels
  130. 130. Develop a simple model to incorporate the key elements of innovation: ideation, selection, experimentation, commercialization
  131. 131. Define schedules to drive accountability and action</li></ul>Build Experimentation into the Process<br /><ul><li>Use an iterative design approach to enhance results: visualize and design, experiment, iterate
  132. 132. Take advantage of purpose-built experimental environments – experience labs, innovation factories, solutioning centers
  133. 133. Experiment with virtual prototyping and non-traditional options offered by new technology</li></ul>Remember the People Principles of Innovation<br /><ul><li>Establish the importance of innovation as a strategic imperative; set the tone at the executive level
  134. 134. Encourage bottom-up innovation – support efforts from employees at all levels and functions
  135. 135. Align performance measures and KPIs to reward smart failures as well as successes
  136. 136. Hire the right mindset – future-focused, curious, open – and teach the skills needed to manage innovation</li></li></ul><li>We encourage clients to evaluate their innovation efforts based on the four P's highlighted by the Leader / Laggard survey …<br /><ul><li>What technology changes are shaping our industry?
  137. 137. What problems do our customers’ behavior suggest they are trying to solve?
  138. 138. What macro changes are shaping what our industry and our customers will look like five years from now? Ten years from now?
  139. 139. How should our business model change to support more effective innovation?
  140. 140. Do we have a balanced portfolio with an appropriate mix of incremental improvements, intermediate opportunities and visionary long-term innovation?
  141. 141. Is there a defined way to identify what projects we should terminate?
  142. 142. Can we define and learn from smart failures?
  143. 143. How do we estimate the value of our innovation portfolio?</li></ul>Innovation Platforms<br />Innovation Portfolio<br />The four P’S of innovation<br /><ul><li>How can we institutionalize the process of innovation?
  144. 144. What are the most effective ways to engage partners and customers in our innovation efforts?
  145. 145. What tools are available to support more effective innovation?
  146. 146. How can we strengthen our approaches to ideation / portfolio management / experimentation?
  147. 147. Do we have a culture that supports innovation?
  148. 148. What are the most effective ways to engage employees at all levels?
  149. 149. How do we build a curious, learning organization?
  150. 150. What metrics and KPI’s can be used to support more effective innovation?</li></ul>Innovation Processes<br />People Principles<br />
  151. 151. … And to assess where their organization fits on the journey towards a mature and sustainable culture of innovation<br />Maturity of Innovation Culture<br />Innovation engrained in corporate DNA<br />Innovation made into a repeatable process<br />Governance structures in place<br /><ul><li>Innovation built into training, recruiting and performance evaluations
  152. 152. Rewards structure implemented that recognizes both innovation success and “smart failures”</li></ul>Organizational alignment achieved<br /><ul><li>Tools widely diffused and accessible across organization
  153. 153. Process creates a large enough pipeline and manages failures effectively
  154. 154. Process routinely evaluates lessons learned and measures successes
  155. 155. Individual(s) made responsible for providing innovation tools and techniques
  156. 156. Oversight and monitoring implemented
  157. 157. Leadership show commitment
  158. 158. Input sought from all employees at all levels</li></ul>Degree of Complexity<br />
  159. 159. Innovation projects can be structured to meet the needs of clients based on their individual business needs and industry dynamics<br />Evaluate Current Innovation Capability<br />Establish Framework for Key Innovation Capabilities<br />Transform for Innovation<br />Text<br />Text<br />Illustrative<br />4-6 weeks<br />6-8 weeks<br />TBD – time boxed<br /><ul><li>Define strategic intent
  160. 160. Conduct environmental scan
  161. 161. Conduct customer experience evaluation
  162. 162. Define strategic platforms
  163. 163. Conduct alignment workshops on strategic intent
  164. 164. Refine strategic innovation platforms
  165. 165. Define business model required to support strategic platforms
  166. 166. Ensure shareholder value management by reviewing and monitoring platforms and strategy
  167. 167. Identify new opportunities based on strategic innovation platforms
  168. 168. Assess portfolio balance (Box 1-2-3)
  169. 169. Review investment and value projections
  170. 170. Evaluate “kill criteria” and “fail fast” approach
  171. 171. Maintain transformation management office for portfolio management
  172. 172. Develop failure feedback loop and incorporate learnings into revised portfolio and updated strategy
  173. 173. Revise portfolio in line with strategic platforms; identify new opportunities
  174. 174. Develop portfolio evaluation and kill criteria
  175. 175. Define smart failure
  176. 176. Perform culture assessment
  177. 177. Conduct employee interviews
  178. 178. Conduct capability assessment
  179. 179. Evaluate innovation org structure and diffusion / .execution models
  180. 180. Identify performance blocks and design interventions
  181. 181. Perform leadership coaching
  182. 182. Conduct organizational change management in support of revised organization design
  183. 183. Facilitate “creating creativity workshops”
  184. 184. Redefine performance metrics and KPIs – reward risk & curiosity
  185. 185. Design recruitment & development plan
  186. 186. Evaluate processes related to ideation, assessment, experimentation and rollout
  187. 187. Assess technology capabilities and strategy
  188. 188. Build influence and diffusion maps
  189. 189. Define technology strategy and processes to support strategic intent
  190. 190. Establish breakthrough operating model
  191. 191. Configure and implement supporting tools
  192. 192. Roll out revised processes
  193. 193. Design and coordinate CLM pilots and living lab experimentation
  194. 194. Revise processes based on strategic objectives and existing gaps
  195. 195. Design experimentation models, e.g. CLM, virtual prototypes
  196. 196. Conduct package selection for appropriate tools
  197. 197. Conduct new partner scan and selection</li></li></ul><li>Capgemini applies its consulting, facilitation, and networking capabilities to assist clients at each step in the innovation process<br />Ideation<br />Prioritization & Portfolio Management<br />Incubation & Experimentation<br />Innovation Realization<br />Innovation Enculturation<br /><ul><li>Put the appropriate measurement mechanisms in place
  198. 198. Pilot, learn, adjust – build experimentation and iteration into the process
  199. 199. Break down functional silos
  200. 200. Use a different perspective
  201. 201. Engage outside help
  202. 202. Customers
  203. 203. Partners
  204. 204. Suppliers
  205. 205. Competitors
  206. 206. Independent third parties
  207. 207. Identify options most aligned with strategic goals
  208. 208. Gain team alignment / management buy-in
  209. 209. Commit the necessary talent and financial resources
  210. 210. Break old habits
  211. 211. Put reward structure in place
  212. 212. Put a repeatable process in place
  213. 213. Build innovation into the firm’s day to day operations</li></ul>Capgemini Tools<br /><ul><li>Accelerated Solutions Environment (ASE)
  214. 214. Consumer Relevancy
  215. 215. Customer Experience Transformation
  216. 216. GrowthWorksTM
  217. 217. TechnoVision 2012
  218. 218. GrowthWorksTM
  219. 219. Customer Experience Transformation
  220. 220. Consumer Relevancy
  221. 221. Mergers and Acquisitions Strategy
  222. 222. Product Lifecycle Management
  223. 223. Accelerated Solutions Environment (ASE)
  224. 224. Business Innovation Center
  225. 225. Closed Loop Marketing
  226. 226. Product Lifecycle Management
  227. 227. Rapid Innovation Centers (RAIN)
  228. 228. Rapid Design and Visualization (RDV)
  229. 229. TechnoVision 2012
  230. 230. Accelerated Solutions Environment (ASE)
  231. 231. Business Transformation
  232. 232. Employee Transformation
  233. 233. Organizational Change Management
  234. 234. Product Lifecycle Management
  235. 235. Shareholder value Management</li></li></ul><li>Please feel free to contact us for further information<br />Dianne Inniss<br />Managing Consultant – Strategy & Transformation WIF Innovation Survey Lead<br />3500 Lenox Road, Suite G2<br />Atlanta, GA 30324<br />Phone: 404 806 4986E-Mail:<br />
  236. 236. Appendix – Capgemini Capabilities and Tools<br />
  237. 237. The Capgemini ASE can be used at multiple points in the innovation process to facilitate creativity and accelerate realization of value<br />Applications to the innovation<br />What it is?<br />Fostering creativity by …<br /><ul><li>Facilitating clients through exercises that apply different perspectives to problem solving
  238. 238. Getting everyone involved and working against group think</li></ul>Accelerating the innovation process through ...<br /><ul><li>Rapidly building leadership alignment
  239. 239. Building innovation roadmaps within 1-3 ASE timeframe</li></ul>An environment …<br /><ul><li>Enabling small, exclusive teams as well as large groups of people with common or diverse backgrounds to focus on particular issues of mutual interest
  240. 240. Inducing an intensely productive atmosphere designed to foster creative thinking and collaboration
  241. 241. Delivering implementable solutions weeks or months faster than of conventional approaches</li></ul>A radically different way of collaborative work<br />
  242. 242. The ASE promotes the spirit of creativity in innovation by promoting new ways of thinking about problems<br />Use Different LensHow would either someone else view this problem or if so-in-so were here how would they see it<br />Use Analogiesby asking if there is an analogy you change the context of the problem and bring solutions that are different<br />Change Focusby refocusing the problem you generate different thought<br />Take Excursionsby getting away from the problem, you facilitate incubation<br />Force Fit by explicitly combining something random with the problem you generate different thought<br />Change Scale by changing scale (either larger or smaller) you cast the problem in a different light<br />
  243. 243. GrowthWorksSM is Capgemini’s comprehensive assessment to identify the right platforms and business models for innovation<br />GrowthWorksSM<br />Executive BusinessJudgment<br />Analysis of <br /><ul><li>Market Trends
  244. 244. Consumer Needs
  245. 245. Capabilities
  246. 246. Technologies</li></ul>QualitativeFacts<br />QuantitativeFacts<br />Growth Platform Discovery<br />Content<br />Innovations<br />Context<br />Innovations<br />4 Key Criteria<br /><ul><li>Market Attractiveness
  247. 247. Competitive Position
  248. 248. Economic Value
  249. 249. Strategic Fit / Value</li></ul>Med. Risk<br />High Risk<br />Growth Platforms<br />Low Risk<br />Med. Risk<br />Market Offerings<br />New <br />Markets<br />New <br />Channel<br />New <br />Product<br />New <br />Business<br />Evaluate andPrioritize Growth Opportunities <br />Make Intentional Choices to Balance Portfolio<br />Identify Growth Platforms and Fill the Pipeline<br />
  250. 250. Consumer RelevancyTM provides insight into the customer needs and expectations that direct consumer-led innovation …<br />Access<br />Experience<br />Price<br />Product<br />Service<br />The importance of prioritizing and making strategic choices<br />The Consumer RelevancyTM Framework<br /><ul><li>Research within customer behavior shows that a market leader shall dominate on one attribute, differentiate its offering on another and meet the clients expectations on the others
  251. 251. The scale is 1-5, where 1 and 2 is under the customers expectations and this can damage the brand name and customer loyalty</li></ul>Value attributes<br />1. Dominate on one primary attribute<br />Dominate<br />Customers Seek…<br />2. Differentiate on one secondary attribute<br />5 – Dominate<br />5<br />5<br />5<br />5<br />5<br />5<br />3. Meet expectations on the rest<br />Differentiate<br />Customers Prefer…<br />4 – Differentiate<br />4<br />3 – Industry par<br />3<br />3<br />3<br />Industry Par<br />Customers Accept…<br />3<br />4<br />3<br />3<br />5<br />1 & 2 – Does not meet clients expectations<br />Price<br />Product<br />Service<br />Access<br />Experience<br />5.<br />Authority<br />Inspiration<br />Customization<br />Solution<br />Intimacy<br />4.<br />Consistent<br />Reliability<br />Education<br />Convenience<br />Care<br />3.<br />Honest<br />Credibility<br />Accommodation<br />Ease<br />Respect<br /><ul><li>If a company operates at an industry par, trust evolves over time and customers accept the company and consider using them again
  252. 252. If the company differentiates, the customers prefer them and will literally go the “extra mile” to do their business
  253. 253. Dominating on an attribute implies that customers not only prefer the company over another, but will actively seek them out </li></li></ul><li>... And forms the basis for dramatic customer experience transformation using our CET methodology<br />Customer Needs<br />Current status<br />Prioritizes<br /><ul><li>Insight
  254. 254. Behaviors (segmentation)
  255. 255. Journeys (based on needs)
  256. 256. Channels used
  257. 257. Cost to serve (by channel by CJ)
  258. 258. Traffic light the Customer Journeys
  259. 259. Development of Roadmap to achieve the vision</li></ul>External Influences<br />Vision for the future<br /><ul><li>Creation of measurement & governance
  260. 260. Competitors
  261. 261. Industry changes
  262. 262. Legal constraints
  263. 263. Policy principles
  264. 264. Clear company direction
  265. 265. Marketing position
  266. 266. Innovation strategy</li></ul>I want my provider to:<br />Be simple<br />§<br />Be reliable<br />§<br />Know and understand me and <br />§<br />anticipate my needs <br />Be friendly and easy<br />§<br />Keep promises and delight me<br />…<br />§<br />Successful innovators continue to move from a product-oriented focus to a customer-oriented focus; customer experience transformation provides the tools to identify and meet unmet needs.<br />
  267. 267. Closed Loop Marketing (CLM) enables experimentation to unlock the benefits of customer centricity<br />Analytics<br /><ul><li>Sophisticated and holistic deeper analysis of data with powerful tools and dedicated talent
  268. 268. Analysis of channel feedback, sales and demographic data stored in vast central repository
  269. 269. Continuous creation, testing, and refinement of narrow customer segments</li></ul>Marketing Planning<br /><ul><li>Few, long marketing cycles replaced by multiple short iterations
  270. 270. Messages, channel and product mix tailored to narrow segments
  271. 271. Increased accuracy in resource allocation
  272. 272. Greatly improved ability to run multiple prototype campaigns and quickly refine them </li></ul>Analytics<br />MarketingPlanning<br />Closed Loop Marketing Cycle<br />Execution<br /><ul><li>Closer functional alignment between Sales and Marketing, on message generation, delivery, and analysis
  273. 273. Individualized messages and personalized services delivered through only the most response-driving channels</li></ul>Feedback<br /><ul><li>Customer information continuously and automatically collected from all channels
  274. 274. Feedback cycles greatly accelerated
  275. 275. Immediate, high quality feedback is generated, resulting in almost real-time market research from channels; who is using them and how</li></ul>Feedback<br />Execution<br />Customer Centricity<br />With CLM, companies can combine their marketing communications with automatic data-gathering and analysis techniques to develop highly targeted campaigns based on customer behavior.<br />
  276. 276. Our Business TransformationTM framework helps us to address innovation and transformation in a comprehensive framework<br />Envision the future<br /><ul><li>Translate the innovation vision into a transformation plan
  277. 277. Use an evolution process with clear deliverables for each stage
  278. 278. Gain and align key stakeholders to support the innovation vision
  279. 279. Commit to the targets of the transformation</li></ul>E<br />Establish key capabilities<br /><ul><li>Free up and identify your talents
  280. 280. Recruit your vision
  281. 281. Install collaboration at peer level
  282. 282. Push for co-creation
  283. 283. Establish capabilities to coordinate insourcing and outsourcing
  284. 284. Use KPIs to adjust progress</li></ul>Energize people<br /><ul><li>Translate the vision into people benefits
  285. 285. Create networks inside and outside R&D to support change and innovation
  286. 286. Engage the hearts and minds
  287. 287. Accelerate from thoughts to action</li></ul>E<br />E<br />Expedite growth<br /><ul><li>Focus on the big topics to reach targets faster
  288. 288. Permanent market screening for identifying opportunities
  289. 289. Introduce organizational elements to foster innovation (e.g. idea generation process)
  290. 290. Manage risks through a portfolio approach
  291. 291. Anticipate showstoppers in the early stages</li></ul>Enhance competitiveness<br /><ul><li>Connect to become faster and better
  292. 292. Be measurable to beat defined benchmarks
  293. 293. Use capacity restrictions as opportunities</li></ul>E<br />E<br />
  294. 294. Employee Transformation includes solutions to mobilize, enable and optimize talent<br />Renew Capabilities<br /><ul><li>Leadership Development
  295. 295. Vision Engineering</li></ul>Workforce Alignment<br /><ul><li>Learning Solutions
  296. 296. Inspire Leaders
  297. 297. Leadership Alignment</li></ul>Energize People<br /><ul><li>Workforce mobilization
  298. 298. Branding and communications</li></ul> Mobilize <br />Organizational <br />Change Management<br /> Enable <br /> Optimize <br />Enable the Right Talent<br /><ul><li>Recruitment
  299. 299. Retention
  300. 300. Talent Development</li></ul>Workforce Analytics and Strategy<br /><ul><li>Measure current capabilities
  301. 301. Plan for the future
  302. 302. Design the optimal workforce</li></ul>Workforce Analytics <br />and Strategies<br />HR Transformation<br />
  303. 303. Manage creation, approval and deletion on of specification information and documentation <br />Capgemini’s approach to product lifecycle management (PLM) uses multiple ‘modules’ to create a holistic solution <br />Product Data Management<br />Lifecycle Program Management<br />Design and Sourcing Management<br />Integrating design and sourcing functions internally and externally within the supply chain to optimize component selection and cost of procurement<br />Effective project program management within product lifecycle of innovation, growth, maturity and decline <br />Product Lifecycle Management<br />Portfolio Management<br />Collaborative Design and Visualization<br />Rationalization of product and project portfolios to control complexity<br />Sharing of design data for increased innovation success<br />Product Requirements Management<br />Managing consumer aspirations around product for design and lifecycle <br />
  304. 304. Technovision identifies the 17 information technology trends that we believe will be most relevant to business going forward<br />From transaction to interaction<br />Mash-up Applications<br />Mashup applications<br />Real-Time<br />Business<br />Process<br />Control<br />Real-time<br />business<br />process<br />control<br />Youexperience<br />Real-time <br />Integrated <br />Business <br />Intelligence<br />Real-time <br />integrated <br />business <br />intelligence<br />Composite <br />Applications<br />Composite <br />applications<br />Sensing Networks<br />Sensing networks<br />Process-on-the-fly<br />Thriving on data<br />Packaged Sector / <br />Segment Solutions<br />Packaged sector /<br />segment solutions<br />Smart Business Networks<br />Smart business networks<br />Free Agents Nation <br />Free agents nation <br />Role Based User Portals<br />Role-based user portals<br />Social Collaboration Tools /<br />Wikinomics<br />Social collaboration tools /<br />Wikinomics<br />iPodification<br />iPodification<br />Software as a Service<br />Software-as-a-service<br />Google-fication<br />Google-fication<br />Utility <br />Business Infra-structure<br />Utility <br />business infra-structure<br />Mastered <br />Data Management<br />Mastered <br />data management<br />Jericho Style Security<br />Jericho style security<br />Sector-as-a-service<br />Rich Internet Applications<br />Rich Internet applications<br />Invisible infostructure<br />
  305. 305. Appendix – Additional Perspectives from Academia<br />
  306. 306. d<br />Looking at innovation as broadly as possible allows companies to determine the most valuable dimensions on which to focus<br />The innovation radar identifies twelve ways for companies to innovate<br /><ul><li> The “Innovation Radar” presents and relates all of dimensions through which a firm can look for innovation opportunities
  307. 307. Focuses on 4 key business anchors, and embeds 8 other avenues of pursuit
  308. 308. Comparative assessments help determine how firms compare with regards to innovation. With this assessment a company can identify opportunities and prioritize dimensions on which to focus efforts
  309. 309. Allows for the identification of key innovation avenues that have been overlooked by the industry as a whole
  310. 310. When companies identify and pursue neglected dimensions, it can change the basis of competition and leave other firms at a distinct disadvantage
  311. 311. Successful innovation strategies tend to focus on a few key, high-impact dimensions, rather than a multi-dimensional approach</li></ul>Offerings <br />(What)<br />Platform<br />Brand<br />Solution<br />Networking<br />Presence<br />(Where)<br />Customers <br />(Who)<br />Customer Experience<br />Supply Chain<br />Org.<br />Value Capture<br />Processes <br />(How)<br />Source: 12 Different Ways for Companies to Innovate, Sawhney, Wolcott, Arroniz, MIT Sloan Management Review, Spring 2006<br />
  312. 312. Companies which find ways to institutionalize innovation create differentiation and substantial shareholder value<br />Success requires the ability to go beyond isolated wins to develop deep capabilities allowing companies to disarm disruptive threats and seize new growth<br />Develop a balanced portfolio<br />Create a growth Blue print<br />1<br />2<br /><ul><li>The portfolio must become a mix of projects that satisfy the growth objectives
  313. 313. 50% core improvements
  314. 314. 30% logical extensions
  315. 315. 20% new growth initiatives
  316. 316. Articulating what the organization “wants to be” and allocating resources to achieve that vision
  317. 317. Must define strategic goals through concrete scenarios and estimates</li></ul>Institutionalize innovation<br />Construct an innovative engine<br />Support the new growth engine<br />3<br />4<br /><ul><li>Screen for development
  318. 318. New growth initiatives need to go through a more iterative development process, with a focus on identifying and addressing key assumptions and risks
  319. 319. Structure for success
  320. 320. Deep senior management involvement
  321. 321. A common language
  322. 322. Extensive external input
  323. 323. Supportive human resource policies</li></ul>Source: Institutionalizing Innovation. Anthony, Johnson, Sinfield, MIT Sloan Management Review, Winter 2008<br />
  324. 324. The right approach to institutionalizing innovation is determined by the company’s strategic objectives and internal capabilities<br />Support<br />Low<br />Low<br />Create<br />High<br />High<br />Source: Institutionalizing Innovation. Anthony, Johnson, Sinfield, MIT Sloan Management Review, Winter 2008<br />
  325. 325. Innovation in management principles can create sustainable advantages and dramatic shifts in competitive position<br />Why Management Innovation Matters …<br />What Management Innovation is …<br />Competitive advantage:<br />A management breakthrough can deliver a potent advantage to the innovating company and produce a seismic shift in industry leadership<br />Marked departure from traditional management principles, practices, and process<br />Management practices:<br />Management orthodoxies have become so deeply ingrained in executive thinking that they are nearly invisible and are so devoutly followed that they are practically unassailable, breeding complacency<br />Departure from customary organizational forms that significantly alters the way work is performed<br />Changing how managers work to reinvent the process that governs the work they do<br />Commitment to development:<br />For every truly radical idea that delivers a big dozens of competitive advantage, there will be dozens of other ideas that prove to be less valuable. Innovations is a numbers game – the more of it you do, the better your chances of reaping a pay-off<br />Source: The Why, What and How of Management Innovation, Hamel, Harvard Business Review, 2006<br />
  326. 326. The principles of innovative thinking can be applied to designing new management principles just as to other areas of innovation<br />How to Become a Management Innovator …<br /><ul><li>While big problem don’t always produce big breakthroughs, little problems never do
  327. 327. It takes fortitude, perseverance and imagination to solve big problems. These qualities are most abundant when the problem is </li></ul>Commit to a Big Problem<br /><ul><li>Any problem that is pervasive, persistent, or unprecedented is unlikely to be solved with hand-me-down principles
  328. 328. Novel problems deserve novel principles</li></ul>Search for new principles<br /><ul><li>A lot of what passes for management wisdom is unquestioned dogma masquerading as unquestioned truth
  329. 329. Subject each management belief to 2 questions
  330. 330. Is this belief toxic to the ultimate goal?
  331. 331. Can you imagine an alternative to the reality the belief reflects?</li></ul>Deconstruct your management orthodoxies<br /><ul><li>If your goal is to escape conventional management thinking, it helps to study the practices of organizations that are decidedly unconventional
  332. 332. Your challenge is to hunt down unlikely analogies and suggest new ways of tackling thorny management problems</li></ul>Exploit the power of analogy<br />Source: The Why, What and How of Management Innovation, Hamel, Harvard Business Review, 2006<br />
  333. 333. I<br />Sustaining corporate growth requires both ‘Big I’ and ‘small ‘i’ innovation <br />Long established, incumbent firms may suffer from tunnel vision and miss early signals of market opportunities, creating openings for rivals<br /><ul><li>There is an inherent focus on exploitation (“small i”) activities over “exploration” (“Big I”) activities; however “Big I” innovations disproportionately contribute to revenue and profitability growth
  334. 334. Firms tend to become risk averse and opt for incremental product and service improvements instead of major initiatives
  335. 335. Risk is an inherent aspect of innovation, and is proportional to the pay-off: bigger risk, bigger pay-off
  336. 336. Long-term investments in innovation may decrease when companies use time and resources to react to urgent, short-term requests from customers and salespeople
  337. 337. Companies can avoid lackluster growth by better understanding the risk inherent in different levels of innovation and achieving a balance </li></ul>Big ’I’ Innovation<br />14%<br />86%<br />Small ’i’ Innovation<br />Revenuesgeneratedby small ’i’ innovation<br />39%<br />Revenuesgeneratedby big ’I’innovation<br />61%<br />Source: Sustaining Corporate Growth Requires 'Big I' and 'small i' Innovation, George Day, Knowledge @ Wharton, February 2007<br />
  338. 338. An innovation risk matrix allows companies to evaluate the balance of their portfolio between big and little “i” innovations<br />A portfolio review team evaluates each project to determine where it fits on the matrix<br /><ul><li>Portfolio review board comprises executives with strategic oversight and budgetary authority
  339. 339. Reviews are completed individually and then reviewed as a group – team members explain the rationale for their scores and open for discussion
  340. 340. A series of questions are used to score degree of risk based on
  341. 341. Intended market
  342. 342. Customer behavior
  343. 343. Sales and distribution
  344. 344. Competition
  345. 345. Brand promise
  346. 346. Product and technology
  347. 347. Current capability and technological competency
  348. 348. Intellectual property protection
  349. 349. Manufacturing / service ability
  350. 350. Product and service functionality
  351. 351. Quality standards</li></li></ul><li>Schrello’s R-W-W screen is another valuable tool to assess business potential and risk exposure for innovation projects<br />Is the market real?<br /><ul><li>Is there a need or desire for the product?
  352. 352. Can the customer buy it?
  353. 353. Is the size of the potential market adequate?
  354. 354. Will the customer buy the product?</li></ul>Is it Real?<br />Is the product real?<br /><ul><li>Is there a clear concept?
  355. 355. Can the product be made?
  356. 356. Will the final product satisfy the market?</li></ul>Can the product be competitive?<br /><ul><li>Does it have a competitive advantage?
  357. 357. Can the advantage be sustained?
  358. 358. How will competitors respond?</li></ul>Can we Win?<br />Can the company be competitive?<br /><ul><li>Do we have superior resources?
  359. 359. Do we have appropriate management?
  360. 360. Can we understand and respond to the market?</li></ul>Will the product be profitable at an acceptable risk?<br /><ul><li>Are forecasted returns greater than costs?
  361. 361. Are the risks acceptable?</li></ul>Is it Worth Doing?<br />Does launching the product make strategic sense?<br /><ul><li>Does the product fit our overall strategy?
  362. 362. Will top management support it?</li></ul>Source: Managing Risk and Reward in an Innovation Portfolio, George S. Day, Harvard Business Review<br />
  363. 363. Organizations which use “design thinking” develop ways to embrace risk and increase the odds of innovating successfully<br />Designers embrace risk, and their process of thinking actually mitigates it<br />To incorporate design thinking into the organization<br /><ul><li>Cultivate an obsession with desirability – what do real people need and value?
  364. 364. Become comfortable acting on informed intuition
  365. 365. Prototype; iterate quickly and gather “risk-killing” information
  366. 366. Think big, but start small – use constraints such as schedule, headcount and scope to learn what it will take to execute the big-picture value proposition
  367. 367. Treat money as a positive constraint – limited budgets spur creativity
  368. 368. Make a list of the best things that could happen
  369. 369. Seek challenges – balance clear, achievable goals with just enough task challenge to create a risk of failure</li></ul>Source: “Embracing Risk to Learn, Grow, and Innovate”, Rodriguez, Jacoby, Rotman Magazine, Spring 2007<br />
  370. 370. Appendix – Case Studies<br />
  371. 371. Reversing the Traditional Path of Innovation – GE’s Trickle-Up “Bottom of the Pyramid” Innovation in Healthcare<br />GE turned traditional innovation model on its head by repurposing a product designed for developing nations for successful rollout for the rest of the world <br />The Innovation<br /><ul><li>GE’s portable MAC 800 electrocardiograph was originally designed specifically for rural clinics in India and China
  372. 372. The machine weighs less than 7lbs, compared to traditional ECG machines which weigh over 65lbs
  373. 373. In the past development time for a new ECG machine was as much as 5 years, and development costs were up to eight times higher
  374. 374. Now being made available, with some minor modifications, for use in primary care physician’s offices throughout the U.S</li></ul>The Pay-Off<br /><ul><li>Adapting the Chinese model for the U.S. cost approximately $225,000 and time to market was reduced to only a few months; original development took only 22 months and cost $500,000
  375. 375. The MAC 800 will opens new targets beyond GE’s 34% share of the seemingly tapped out US conventional ECG market (hospitals and large health facilities)
  376. 376. GE projects first-year sales of $2.5 million in the U.S. (retail price – $2,500)</li></ul>What We Find<br /><ul><li>Innovation leaders are more likely to cite globalization as a key driver of their innovation efforts
  377. 377. “Bottom of the pyramid” innovation, as defined by Prahalad, continues to accelerate</li></li></ul><li>Experimentation in a New World – Palomar Pomerado Health Experiments in the Virtual Realm <br />Palomar West, a new healthcare facility that is being built by Palomar Pomerado Health in San Diego has begun life as a completely virtual facility <br />The Innovation<br /><ul><li>Palomar Pomerado Health is in the process of building a new health facility, Palomar Medical Center West
  378. 378. The hospital will be constructed with the concept of sustainable design, with design elements being tested and validated by “champion teams” of physicians and employees
  379. 379. Before beginning physical construction, the company has constructed a virtual facility in
  380. 380. Visitors can create avatars and tour the virtual facility, testing some of the new design concepts and technology (including current technology which has low adoption rates in existing hospitals)</li></ul>The Pay-Off<br /><ul><li>The virtual facility lets the hospital test patient reaction to and acceptance of several healthcare and technology innovations as part of the iterative design and building process</li></ul>What We Find<br /><ul><li>Companies can manage some of the risks and constraints of innovation by using controlled experiments or hot housing. Virtualization offers new opportunities to experiment </li></li></ul><li>Boeing – Crowdsourcing Aircraft Design <br />By utilizing external sources from its extended ecosystem, Boeing successfully collaborated to create the 787 Dreamliner<br />The Innovation<br /><ul><li>Applying the concept of ‘crowdsourcing’ Boeing facilitated engineers from approximately 100 companies to come together and collaborate through face-to-face meetings and systems tests during the early stages of design
  381. 381. In the past Boeing followed an extended development process, with designers creating designs and drawings and sending them to suppliers only when final decisions had been made </li></ul>The Pay-Off<br /><ul><li>The collaboration resulted in a series of impressive innovations: a new wing made from lightweight composite material, which Boeing developed with Mitsubishi and a new maintenance system that beams data about non-critical repairs to ground crews via satellite </li></ul>What We Find<br /><ul><li>Innovation is more likely to emerge when firms reach beyond their corporate and industry boundaries to take advantage of intersections across different fields, cultures, people and industries.
  382. 382. Most firms are not taking full advantage of their extended ecosystems in their innovation efforts</li></li></ul><li>Crayola – Coloring Outside the Lines Leads to Innovation Based on Consumer Insights<br />At Crayola, the goals of more effectively meeting consumer needs has led the company to reorganize in ways that facilitate greater collaboration across functional teams<br />The Innovation<br /><ul><li>The company has been reorganized around consumer platforms which are based on specific consumer insights – one such platform was based on insight that mothers did not like their children to play with paint because of the potential for messiness
  383. 383. The company created the “No Limits” platform as a result
  384. 384. Cross-functional teams are led by members of the marketing team to solve the problems related to an individual consumer platform</li></ul>The Pay-Off<br /><ul><li>Crayola introduced Color Wonder Paper and Paints - Clear drying gels that replicate the tactile sensation and play experience of real paints, but only appear in color on specially treated paper
  385. 385. The innovation has led to the introduction of several other Color Wonder products based on the “No Limits” platform</li></ul>What We Find<br /><ul><li>Innovation leaders make a conscious effort to integrate multifunctional teams
  386. 386. Innovation leaders have a highly customer-centric focus on innovation</li></li></ul><li>Novartis – Radically Remakes its Business Model and Redefines the Drug Development Process <br />Taking a calculated risk, CEO Daniel Vasella, turned Novartis’ R&D model upside down, resolving to push drugs through testing only if they are backed by proven science<br />The Situation<br /><ul><li>Drug companies have exhausted easy targets, and poised to lose an estimated $140 billion in sales in the next 5 years as patent expire
  387. 387. Drug companies have historically dedicated research and development efforts to seeking blockbuster drugs for major illnesses that impact millions</li></ul>The Innovation<br /><ul><li>The focus of Novartis’ research is on illnesses with very small patient groups (“orphan diseases”), using the proven science to develop more targeted and effective therapies for small patient classes
  388. 388. When drug therapies prove successful in one small patient group, the company expands them to other potential therapeutic areas
  389. 389. Novartis has 93 drug candidates in the pipeline, 40% more than 3 years ago, and 80% of Novartis’ drugs in 2008 made it from early testing to late stage development</li></ul>“Well designed drugs just keep on giving.”<br /><ul><li>Mark Fishman, Head of R&D</li></ul>What We Find<br /><ul><li>Companies struggle to balance the tension between having to deliver immediate short-term business results and innovating for long-term sustainability
  390. 390. Business model innovation is becoming more of strategic differentiator in the quest for improved profitability</li></li></ul><li>Procter & Gamble – Capitalizing on the Benefits of Ethnography and an Extended Ecosystem<br />The connect & developTM platform has effectively expanded Procter & Gamble’s R&D organization from 7,500 people inside to 7,500 plus 1.5 million outside <br />The Innovation<br /><ul><li>Executives create consumer needs lists, with input from unit managers, that are developed into science problems to be solved by technology entrepreneurs
  391. 391. Researchers use “Living it” immersion process: researchers live with shoppers for several days to come up with product ideas based directly on consumer needs
  392. 392. The company is a member of four open networks (Nine Sigma; Innocentive; YourEncore; Yet2Com) to solicit solutions for defined science problems
  393. 393. P&G’s proprietary networks shares problem briefs with top it 15 suppliers, who collectively have 50,000 R&D staff, to collaboratively create solutions</li></ul>The Pay-Off<br /><ul><li>R&D productivity increased by nearly 60%
  394. 394. Doubled success rate of P&G research & development efforts to about 85%
  395. 395. More than 100 new products introduced in the last 2 years
  396. 396. 45% of initiatives contain key elements discovered externally
  397. 397. 1100 leads generated by the Entrepreneur Network the first year</li></ul>“Innovation is our lifeblood – new ideas and new products that make consumer lives better” <br />– AG Lafley, CEO<br />What We Find<br /><ul><li>Innovation leaders make more use of extended networks in their innovation efforts
  398. 398. Innovation leaders have a highly customer-centric focus on innovation
  399. 399. Innovation leaders have well defined processes and supporting tools</li></li></ul><li>IDEO – Integrating User Experience, Design Thinking and Experimentation Into the Process of Innovation<br />IDEO includes the user experience as a fundamental principle in support of innovation and does rapid prototyping to evaluate how innovations meet behavioral needs<br />The Innovation<br /><ul><li>Uses “human-centred design” to support the ideation and prototyping process; uses anthropologists to study human behavior and identify what problems people are trying to solve
  400. 400. Methods include observation, prototyping, building, and storytelling, and are used across industries and with multiple functional and skills groups
  401. 401. Brings together people from different disciplines within and outside the client organization to effectively explore new</li></ul>The Pay-Off<br /><ul><li>Successful innovations include
  402. 402. Kidney transporter
  403. 403. New vaccine delivery method
  404. 404. Kraft supply chain improvement which led to 162% increase in sales
  405. 405. First Mac mouse
  406. 406. IDEO has received over 1,000 patents issued since 1978
  407. 407. Winner of over 350 awards since 1991</li></ul>“Fail often in order to succeed sooner”<br /> –David Kelley, IDEO founder<br />What We Find<br /><ul><li>Innovation leaders maintain ongoing customer conversations to determine what problems consumers are trying to solve and identify unmet needs
  408. 408. Successful innovators build frequent experimentation and iteration into the process</li></li></ul><li>Hewlett-Packard revamped R&D and the portfolio management process to surpass Dell as leading PC maker<br />Overview<br />Results<br />Solution<br /><ul><li>HP cut costs dramatically in 2005 to decrease operational spending
  409. 409. Slow-moving HP Labs (R&D group)
  410. 410. Inefficient project process
  411. 411. Project approvals mainly relied on personal relationships between 600 scientists
  412. 412. Few formal milestone reviews
  413. 413. Excessively long projects hinder new project staffing due to lack of available resources
  414. 414. Link HP Lab’s annual $150 million budget to 20-30 major projects with high expected pay-offs
  415. 415. Implement business plan review process
  416. 416. Compile business plans to compete for budget and staff
  417. 417. Instigate central review board to approve ideas and monitor progress of projects
  418. 418. Implement technology transfer office
  419. 419. Speed promising projects into product groups
  420. 420. License projects HP cannot use through “entrepreneur in residence” program with venture capital firm to commercialize technology
  421. 421. Measure productivity across product line by measuring research spending as percentage of gross margin
  422. 422. Flatter hierarchies
  423. 423. Seven global outposts report directly to HP Labs director
  424. 424. Focus on five key strategic areas
  425. 425. Intensive data analysis
  426. 426. Build clusters of machines for complex problems
  427. 427. Transform analog into digital content
  428. 428. Mobile computing
  429. 429. Environmentally friendly machines
  430. 430. Increased accountability
  431. 431. Termination of projects with insufficient progress
  432. 432. Transfer unproductive researchers
  433. 433. Overall company stock price tripled in two years to beat Dell as leading PC maker</li></ul>“We [are] trying to get innovation to the highest level we can” – Mark Hurd, CEO HP<br />Source: Business Week, Apr 2008; Business Week Mar 2009<br />
  434. 434. Dyson developed a new technology and used iterative development to create a new product class<br />Business Description<br /><ul><li>Dyson Ltd. specializes in manufacturing of innovative vacuum cleaners which have patented multi-cyclone technology instead of conventional suction technology</li></ul>Drivers – product enhancement<br /><ul><li>Vacuum cleaner bag often clogs with dust affecting its operation, this was noticed by James Dyson
  435. 435. Dyson went about investing time for developing bagless vacuum cleaners which would enable smoother operation of the vacuum cleaners</li></ul>Major changes undertaken<br /><ul><li>James Dyson designed and built an industrial cyclone tower, which removed the powder particles by exerting centrifugal forces greater than 100,000 times that of gravity and applied the principle to vacuum cleaner
  436. 436. Dyson spent 5 years and developed 5,127 prototypes of his vacuum cleaner till the bagless model finally arrived</li></ul>Success achieved<br /><ul><li>Dyson went on to become the largest selling brand of vacuum cleaners in UK and the Western European region, accounts for 20% of all vacuum cleaner sales in America and has achieved sales of over USD 10 b worldwide</li></ul>Criteria<br />Low High<br />Industry requirements<br />Dyson fulfillments<br />P<br />R<br />I<br />O<br />R<br />I<br />T<br />Y<br />Price<br />Technology Innovation<br />Market Access<br />Customer Convenience<br />Environmental Friendliness<br />Maintenance<br />“Anyone developing new products and new technology needs one characteristic above all else: hope.” – James Dyson.<br />Source: Dyson website, Best vacuum cleaner reviews website; CEA CS.SHOP Analysis<br />
  437. 437. Bayer has successfully implemented the Greenhouse concept of transferring innovative ideas to an independent entity – Lyttron<br />How Bayer Material Sciences overcame organizational hurdles to institutionalize innovation<br />Criteria<br />Low High<br />Business Description<br /><ul><li>Bayer is a global enterprise with core competencies in the fields of health care, nutrition and high-tech materials
  438. 438. Bayer MaterialScience AG is a renowned supplier of high-performance materials and innovative systems </li></ul>Drivers<br /><ul><li>Bayer MaterialScience developed luminescent films which are uniform area light sources characterized by homogeneous light emission
  439. 439. It could foresee the immense potential the innovation possessed but decided to carve it out as it did not form a part of its core business</li></ul>Major changes undertaken<br /><ul><li>Bayer MaterialScience established Lyttron to begin production of luminescent films on industrial scale and developing individual solutions for customers, with an investment of EUR 24.5 m</li></ul>Success achieved<br /><ul><li>Lyttron develops, produces and distributes highly flexibleelectroluminescent films: luminous films that are characterized by their soft, constant light and durable, failsafe and compact nature</li></ul>Industry requirements<br />Fulfillments<br />P<br />R<br />I<br />O<br />R<br />I<br />T<br />Y<br />Technology Innovation<br />Product Features<br />Market Access<br />Business Model<br />Leveraging parent’s brand value<br />Operational Efficiency<br />Source: Bayer website; Bayer MaterialSciences website; Lyttron website; CEA CS.SHOP Analysis<br />

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