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The four pillars_of_innovation


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Description of:
1) business model innovation
2) process innovation
3) product/service innovation
4) innovation culture
and the tools and models needed to understand , create and implement.

Published in: Business, Technology
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The four pillars_of_innovation

  1. 1. The Four Pillars ofInnovationJoel M. VardyVardy & Associates, LLCJan 27, 2012
  2. 2. THE FOUR PILLARS of INNOVATION Business Model Innovation: “When the game gets tough, change the game” Radical vs. Incremental (semi-radical) Innovations The Role of Business Transformation Business Model Diagnostics (Value Assessment/Creation) Process Innovation: “the method & language of doing things differently…making innovation work” New & Exciting Developments Product/Service Innovation: “The artifacts of Innovation – the ultimate output” Technology & Design New Channels, Customer Service Concepts Innovation Culture: “the art of collaboration...changing organizational DNA to achieve sustained innovation” How to Ensure Success How to Maintain ItConfidential/Proprietary Vardy & Associates LLC
  3. 3. Innovation: Famous Quotes “Innovation is the specific instrument ofentrepreneurship. The act that endows resources with a new capacity to create wealth” Peter Drucker“Innovation distinguishes between a leader and a follower” Steve Jobs“Without tradition, art is a flock of sheep without a shepherd. Without innovation, it is a corpse” Winston ChurchillConfidential/Proprietary Vardy & Associates LLC
  4. 4. Why do previously strong Corporations face Higher Risks Today? Periods of High Volatility can Destroy Business Value in Some Sectors allowing New Value Creation in Others… Demand Supply Stronger Demand Supply Stronger Volatility Volatility New Players Volatility Volatility New Players Corporate Corporate Strategy Strategy Direction Direction Business Business Unit Unit Direction Alignment Corporate Tactical Countermeasures Shifting Closing Global Global Markets Skills Differences Shifting Closing Global Global Markets Skills DifferencesConfidential/Proprietary Vardy & Associates LLC
  5. 5. Key Concept #1 Radical vs. Semi-Radical Innovations Business Transformation • Reforming - Strategic new Vision • Restructuring - Work Flow redesign • Revitalization - Linking Technology • Renewal - Changing Behavior Innovation RADICAL Improvements (FMEA can be applied here) 2 Continuous Improvement • Total Quality Management 1 • SPC/SQC 0 Semi-Radical Improvements Existing Work Processes • As-Is Process • First order changes are not enough • Bus. Trans. required to create dramatic (radical/breakthrough) improvementsConfidential/Proprietary Vardy & Associates LLC
  6. 6. Balancing Creativity and Commercialism – Managing the Paradox Imagination Innovation Concept to Reality CREATIVITY PROCESSES VALUE CREATION PROCESSES Blue - Out-of-Box thinking Portfolio - In-the-box thinking Ocean - Raw and refined ideas - Experimentation Mgt. - Engineering/Manufacturing Ecosystems - Precision - Ambiguity/Uncertainty - Well-calculated trade-offs Disruptive - Research Scenario - Intuition Foresighting - Buying/Selling of ideasInnovations - Surprise - Do things right - Answer question and Planning - Courage verify solutions - Find the right things Innovation - Avoid major risks - Ask questions and explore the unknown innovation Mgt - Find the right things - Get the product into - Seize opportunities the marketplace - Visualize the future and - Bias for incremental consider all options Program - Include incremental and radical innovations Mgt Source: “Making Innovation Work” Davila, Epstein, Shelton Confidential/Proprietary Vardy & Associates LLC
  7. 7. Business Model Innovation First Pillar of Innovation “When the game gets tough, change the game”Confidential/Proprietary Vardy & Associates LLC
  8. 8. The Human Brain & Innovation – Making the ‘Connections’ in a land of Complexity and Uncertainty “The brain appears to be naturally configured for innovation to work and to have new ideas because its job is to use information about the world and innovate by modeling new ways in which the state of the world out there might be put together” James Burke Science historian, author and television writer/producerConfidential/Proprietary Vardy & Associates LLC
  9. 9. Business Models: Molding the Process -- Another Key Innovation Concept 1. Visualize to Understand It 2. Model to Simulate It 3. Measure to Improve It Visualize Understand Improve Measure Model SimulateConfidential/Proprietary Vardy & Associates LLC
  10. 10. Business Models: Striking the appropriate Balance between 4 Key Ideas/Metrics Innovation Excellence Front Office Key High (external) Level Metric: Time-to-Market Service Excellence Business Key High Model Level Metric: Commercialization Order to Excellence Deliver Time Key High Manufacturing Level Metric: (Operations) Time to Scale Operational Key High Excellence Level Metric: Source-to-Make Time Back Office (internal)Confidential/Proprietary Vardy & Associates LLC
  11. 11. Business Models: Sample Innovation Value Prop. Tree (/) KPI TREE Return On Inno. Other Working Net Oper. Fixed Inv. Capital Inno. Profit Costs Holding (-) Production Process Process Net Oper. (x) Innovation Innovation Margins Improvement 1 Improvement 2. Primary Influences Measured KPI’s Revenue (-) Variable for analysis Costs Product Lost Manufacturing Expedite Innovation Orders Inno. Improvement Overtime Logistics Inno. Bus. Forecast Other Accuracy Drivers Rework/ Supply Wide Spec On Time Customer Inno. Imp. Delivery Service LevelsConfidential/Proprietary Vardy & Associates LLC
  12. 12. Process Innovation Second Pillar of Innovation “the method & language of doing things differently…making innovation work”Confidential/Proprietary Vardy & Associates LLC
  13. 13. Process: The Innovation Process Stage Gate Stage Gate Gathering Filtering Supporting Bringing ideas the ideas the ideas ideas to the market Source: MCE Management Centre Europe Putting ideas through the selection Process • any number of ideation processes to gather ideas • market and financial gate criteria required • strong commercialization infrastructure critical to profitable execution as well as talented project managersConfidential/Proprietary Vardy & Associates LLC
  14. 14. Process: Accelerating the Innovation Process $ Time to $ Market Existing 30-50% revenue increase through accelerated and more sustained revenue Existing Time 10-40% less through Development time compression and greater Costs efficiencies Four Key Elements to Achieve these Results: 1. Time-to-Market 2. Internal Integration 3. Collaboration 4. IT enablement Source: IBM Global Business Services analysis. 2006Confidential/Proprietary Vardy & Associates LLC
  15. 15. Process: Key Factors in Driving Innovation -- Complexity, Uncertainty and Change Complexity Maturing market (SKU proliferation starts to address different segments). Needs to be embraced rather than feared. Process complexity can be reduced while embracing product/service complexity. Uncertainty Byproduct of higher levels of complexity Market volatility Needs to be managed and minimized Change Constant It cannot nor should it be eliminated It actually represents new opportunities, frequently exploited by new startups.Confidential/Proprietary Vardy & Associates LLC
  16. 16. Process: Transforming typical Execution-type processes to more Planning-driven ones 20/80 (Planning/Executing) Back-End Loading (‘Churning’) As-Is ? To-Be ? 80/20 (Planning/Executing) Front-End Loading (Collaborative)Confidential/Proprietary Vardy & Associates LLC
  17. 17. Process: Decision Process Workshops get the Critical Organizational Buy-inConfidential/Proprietary Vardy & Associates LLC
  18. 18. Product/Service Innovation Third Pillar of Innovation “The artifacts of Innovation – the ultimate output”Confidential/Proprietary Vardy & Associates LLC
  19. 19. Product/Service: Key Concept for Innovation-Driven Programs: Factoring People, Process & Technology „Formula-Raw Materials‟ „Procedure‟ People Process 50%* 30%* Knowledge of Process how to measure of running a & incent people 20%* superior business Enablement of People & *Audited Project Processes Technology Success Factors Accelerator „Catalyst‟ EnablerTechnology – though accounting for only 20% of project success factors is the most confusing due to rapid changes. Key to either accelerating or enabling possible people & process factors. Confidential/Proprietary Vardy & Associates LLC
  20. 20. Product/Service: Exploiting New and Traditional Innovation Tools & Concepts Innovation Fields/Strategy Project Portfolio Selection 3 1.1 1.2 1.3 4.1 4.2 High 1.5 1.4 IF 1) 1 2.4 Innovation field attractiveness 6.1 6.2 2.1 IF 2 Strategic importance 2.2 7.1 7.2 IF 4 2 2.3 7.3 3.2 3.1 5.1 4.3 6.3 Middle 2.5 5.2 IF 5 IF 3 1 5.3 Low IF 6 0 0 1 2 3 Low Middle High Improvement potential Innovation strength Creating a balanced portfolio of product/service projects that maximizes return on innovation and mitigate risksConfidential/Proprietary Vardy & Associates LLC
  21. 21. Innovation Culture Fourth Pillar of Innovation “the art of collaboration...changing organizational DNA to achieve sustained innovation”Confidential/Proprietary Vardy & Associates LLC
  22. 22. Culture: The Innovation Culture Continuum Foundation Advanced Breakthrough Hierarchical Departmental Silos Self-directed Virtual Management Command & Control Teams Transactional and Integration across Learning & Service Information Aggregated the Enterprise Delivery Architecture Cost and Risk Productivity Collaborative Operations Reduction Improvement Improvement Product Segmented but Customer’s Individual Customers still Product Based Needs and Values Growth Growth and Innovation Strategy Performance “There is no guarantee that an innovation culture leads to innovation but it certainly is a prerequisite.” Source: Ivey Business Journal Jan/Feb 2006Confidential/Proprietary Vardy & Associates LLC
  23. 23. Culture: New Game Changing Strategies -- Managing Uncertainty using Collaboration to Highly Evolved Incorporating both Co-marketing and Co-development Across the ecosystem Integrated Ecosystem High Integrated Internal Collaboration IV Level Of Decision High Systems Integrated Value II III External Collaboration Integration Level Of LowInformation Systems Integration I Low Functional Internal External Collaboration Scope Scope Source: Cayuga Partners Confidential/Proprietary Vardy & Associates LLC
  24. 24. Culture: The Innovators Top 10 - Most Innovative CompaniesTraits of the top 10 2006 2007 2010 2011 Apple Apple Facebook Apple Company Google Google Amazon TwitterLeadership Sony Toyota* Apple Facebook Ideas 3M YouTube* Google Nissan* Strategy Microsoft Microsoft Huawei Groupon* JetBlue Starbucks First Solar Google Personal Starbucks Motorola PG&G Dawning* Strategist Information BMW Samsung* IndustryMethodologist Novartis Netflix Motorola Nike* Walmart Zynga* Facilitator Target Sony HP Epocrates* * New to list in 2007 * New to list in 2011 Source: futurethink article: 2007 Innovation Tracker Source: The Shift from Creativity to Value The Shift to Social Tech. Confidential/Proprietary Vardy & Associates LLC
  25. 25. Innovation Management Tools Align Assess Status Strategize Operationalize Externalize Organization & Behavior Tools Capabilities Assessment Innovation Fields/Strategy Readiness Assessment Implementation of radical innovation Budget Strategy 3 4th 3rd 2nd 1st 1 Quartile Quartile Quartile 1.1 1.2 1.3 Collaboration Maturity High Quartil Innovation field attractiveness IF 1 e 1) 4.1 4.2 2 People 1.5 1.4 IF 2Technology 2.4 3 6.1 6.2 2.1 IF 4 - Strategic Strategic importance 2.2 7.1 7.2 4 Clarity  2 2.3 5 Middle 7.3 Innovation - Financial and 3.2 3.1 6 core process Competitive Qualification Focus Ability 5.1 4.3 - Management IF 3 6.3 IF 5 & skills  2.5 5.2 Support Process 1 Low Corporate culture Patents & standards IF 6 - Demand/S KU Complexity  5.3 - Levelof SKU’s & (no. of Low Middle High Internal nodes) Collaborati  Qualitative Assessment Innovation strength - on Level of (Structures External  0 0 1 2 3 ) Collaboratio n Improvement potential (Structures Technology Reward/Recognition Communications ) KPI Development - Infrastructure  (ERP) KPI Improvement/Monitoring Inputs>Processes>Outputs> Plan - Tools  Outcomes Return On Innovation Working Operating Capital Profit Map: As -Is Inno. Imp. Inno. Imp. Cos Process Process Revenue t Quantitative Assessment Title Inno. Inno. Inno. Inn Imp. 1 Imp. 2 Imp. o. Process Imp . Step B Quantifying the Gap (Using Key Performance Indicators - KPIs) Supply Chain Input A Marginal Value Improvement Inventory Management: Current Value Unit ($/unit) Potential (%) Process Process Process Output Raw Materials 10,000 $ 1,000.00 50% Input B Step D WIP Finished Product 10,000 10,000 $ $ 1,200.00 1,400.00 20% 25% Step A Unit E C Spare Parts/Other 10,000 $ 1,600.00 30% Inventory Carrying Cost 15% % of COGS Input C Supply Chain Process Improvement Finished Product Management: Current Value Unit Potential (%) Step C On-Time Delivery to Cust. Request Date % On-Time Delivery to Firm Commit Date % $/Occurrence Expediting 500 Qty/month $ 1,000 90% Map: To - Be Supply Chain Minimum Value Maximum Improvement ($/unit) Unit Value ($/unit) Potential (%) Range of Transportation Costs $ 2.00 $ 3.00 10% Average Qty. of Product Transported Yearly 10,000,000 Supply Chain Marginal Value Improvement Process, Cross-Functional Measures: Current Value Unit ($/unit) Potential (%) Title Average forecast accuracy % Order fill rate 80% % 15% Process Orders lost 50% % Step B Planning process cycle time 5 $ 4,000 90% Input A - Qty. of planning occurences per year Scheduling process cycle time 52 6 Occurences $ 1,000 90% Estimated Range of Innovation Benefits - Qty. of scheduling occurences per year 365 Occurences Process Process Process Output Source-to-make cycle time 365 Days 30% Input B Step D New product time-to-market 365 Days 30% Step A Unit E C Manufacturing-Related Measures Minimum (M$) Most Likely (M$) Optimistic (M$) Input C Marginal Value Supply Chain Improvement Non-Recurring Working Capital Benefits $ 13.2 $ 18.9 $ 24.6 Process Current Value Unit ($/unit) Potential (%) Total Nominal Yearly Capacity: 10,000,000 $ 100.00 1.0% Recurring COGS Benefits $ 18.3 $ 26.2 $ 34.0 Step C In Process Rework per Year 40,000 $ 30 50% Recurring Revenue Enhancing Benefits $ 26.3 $ 37.5 $ 48.8 Variable Cost per unit produced $ 20.00 $/unit 5.0% Selling Price per unit produced $ 150.00 $/unit Total qty of units produced per year 10,000,000 Total number of orders per year Average revenue per order $ 100,000 150.00 orders/year $/order TOTAL (M$): $ 57.8 $ 82.6 $ 107.3 Number of setups and changeovers during a month 70 Qty/month $ 1,500 50% Confidential/Proprietary Vardy & Associates LLC
  26. 26. Summary: The 4 Innovation PillarsBusiness Model Innovation Business Model Diagnostics entering new era Convergence of Disparate Data Opportunity for new markets creation Ability to better exploit existing markets New Diagnostic Tools and Skills geared to Data-rich environmentsProcess Innovation Changes in Collaboration Practices are changing Decision Making Making it more timely and effective Sharing of all Strategies and Tactics between trading partnersProduct/Service Innovation Product life-cycles are ever accelerating Service opportunities are creating unique differentiatorsInnovation Culture A new breed of cross functional and cross cultural talent is needed to drive growth for the future Capable of non-linear thinking Able to be equal parts Strategist, Methodologist and FacilitatorConfidential/Proprietary Vardy & Associates LLC
  27. 27. Thank YouJoel M. VardyVardy & Associates, LLC(267) 222-2324 (cell) -