George Coulston - Kennametal's Innovation Journey

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George Coulston - Kennametal's Innovation Journey

  1. 1. Kennametal’s Innovation JourneyGeorge W. Coulston – VP Innovation VenturesNovember 17th, 2011
  2. 2. PDMA Outstanding Corporate Innovator• Why Kennametal? Why Now? – Our commitment to innovation during a down economy – Tools, Processes, and Executive Engagement – The creation of an Innovation Venture Group targeting EBO’s Sally E. Kay Chair, PDMA OCI Selection Committee Strategic Alignment, Disciplined Processes, and Executive Involvement are Key Success Factors for Sustainable Innovation
  3. 3. What We Do… $2.4+ Billion 2011 Revenues 80,000 + Active Customers 11,600 + Employees 1,700 + Patents 42% % Revenues From Products < 5 years 60 + Global Countries <3% Largest Single CustomerProvide Cutting Tools and Wear Components for nearly all the world‟s critical manufacturing processes through Advanced Materials Solutions
  4. 4. How We Went to Market in 2009 Metalworking Solutions Advanced Materials & and Services Group Solutions Group Turning Milling Indexable Cladding Oven Carbide Substrate Custom Wear Solutions Drilling Road Razor Extruder Barrels Solid Carbide Tooling Systems Fixed Cutter Drilling Bit 60% of Revenues 40% of Revenues Consumables Business, Premier Products Two Independent Business Units! © 2009 Kennametal Inc. l All rights reserved. l 4
  5. 5. Becoming a Breakaway Company Early 2000s Recession Results Breakaway 11% Acquired 9% Other 8% Private 1% Bankrupt/ Liquidate Survive 23% 48%Source: R Gulati/HBS Opportunity to Reinvent Ourselves with Innovation Focus
  6. 6. How We Go To Market Today Kennametal Enterprise Organization Earthworks Aerospace & Transportation General Energy Engineering Defense Five Segment Leaders Regional Sales: Deliver Solutions through Customer Intimacy Global Functions: Excellence / Synergy / Efficiency Infrastructure Industrial Business BusinessA Market-Driven Enterprise Approach to Improve our Customer Intimacy
  7. 7. Language and Measures of Innovation Emerging Opportunities Test Business Models, Growth Prove Viability, Capability, Value Business Seed Growth Businesses Proven Business ModelTiming Core Increase Share & Breakthrough Grow to Opportunity • Project-based Milestones Business Extend/Defend, Adjacent Market Growth • Creating Business Design Increase Productivity • In Market Pilots & Profit Contribution • Market Share Gains • New Customer Acquisition Achieve Revenue Profit • Profit • Revenue, Profit , ROIC, Costs, Productivi ty or Efficiency Learning Required Innovation is Delivering Ever-Increasing Value to Customers
  8. 8. Stage Gate Development for the Core Leadership Commitment to Innovation A Linear Process Quick Business New Product Business 2 Assessment Case Development $ Development 4 Field Test 5 Launch LC Product Sales PL Executive Level Gatekeeper Participation at Gate 3 (“Money Gate”) and Post-Launch Review: • Ensures High-Level awareness of pipeline activity • Guarantees strategic alignment of development programs • Controls quality of execution for programs entering and exiting the pipeline • Provides Opportunity for Growth and Development of our People NPD is a Business Process – it is not an R&D Process
  9. 9. NPD Efficiency & Effectiveness Measures Advance with Technology Technology and InnovationIncreasing ournew product % 55% reduction in NPD cycle time Decreasing SKUs Driving New Products at an Accelerated Rate
  10. 10. Learnings About Core If the philosophy is …. • Focusing on how to do better what has previously There Is Statistical Evidence been done That Companies “Built To Last” • Managing a group as good or better than their Regularly And Systematically predecessors Underperform In The Market! • Better optimizing the performance of their teams • Focusing on core capabilities, customers, assets, functionality, etc. and defending the core with incremental opportunities to extend it • Take care of the short term, the long term will take care of itself The end result will deliver …. • Late to new innovations • Breakthroughs never develop • Incapable of addressing market challenges“Great Companies Missed Opportunities To Compete More Efficiently”
  11. 11. Another Rationale for Focus on EBO’s Evolutionary vs. “New to X” Profit Impact 39% 61% When Successful… Revenue Impact 62% 38% 4x Revenue Potential 10x Profit Potential Business Launch 86% 14% 0% 20% 40% 60% 80% 100% Kim & Mauborgne, “Blue Ocean Strategy”, 2005 Breakaway Companies Target Emerging Business Opportunities
  12. 12. Innovation Ventures GroupIVG is not about long range R&D Different Outcome Requires Different ProcessIt is about capturing New Sources of Customer „Core‟ ProcessesValue in ways not done today by KMT EBO • ACE: Execution focused against Core defined SMART Objectives • Standardized deliverables with goal Emerging Core Growth to minimize process variability Business IVG Processes Business Business Opportunities • Governance CouncilTime to Cash Time to Market Time to Pilot • Probe & Learn: Change course based on market feedback IDEATION INCUBATION TRANSITION • Market Mapping: Evaluate market • Market Development: Develop critical dynamics in white space • Systems level approach often with customer base by achieving first sales external technology integration • Open Innovation and Technology • Structure strategic alliances and ensure Mapping: Define technology landscape • Prototype testing in the market qualification of external supply chain and influence technology strategy partners • Determine business model and path to • Collect VOC, translate unarticulated market with sustainable commercial • Validate financial model assumptions needs into requirements opportunity • Lead commercial launch activities • Begin testing to define value • Develop technology/vendor including product promotion and proposition and articulate opportunity partnerships manufacturing scale-up Leading Growth Into New Spaces with Innovative Solutions
  13. 13. IVG Portfolio Overview Probability of Success New to company 40-55% 25-40% 5-25% or beyond Coatings Related New Materials Related Opportunity Opportunities 50-60% Beyond Blast Adjacent Forming Tooling Metal Cutting Business ModelTechnology 60-75% Current New to Current Adjacent company or beyond MarketReference: “Is It Real? Can We Win? Is It Worth Doing?”, George S. Day, HBR, Dec-07 © 2011 Kennametal Inc. l All rights reserved. l Proprietary and Confidential l 13
  14. 14. Summary • Innovation is the Process of Delivering Ever-Increasing Value to Customers – Business Strategies need to be aligned with the market – Innovation strategies must be aligned to the business • Create a common language for Innovation in your company – Different forms need different management processes • Executive Involvement critical – Culture – Resources / out-of-cycle budget needs – Multi-aligned / unaligned opportunities Strategic Alignment, Disciplined Processes, and Executive Involvement are Key Success Factors for Sustainable Innovation

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