INNOVATION KEY SUCCESS FACTORS FORGROWTH AND PROFIT ON NICHE MARKETSUniversity of Monaco, Masters in Luxury Management 201...
WORLD DOMINANCE  Year 1994 Motorola was world leader in (analogue) mobiles,  seven years later Nokia was world leader in (...
FROM #1 TO CRISIS IN LESS THAN 3 YEAR...Why ?                                          3
Innovation is creative destruction, where entrepreneurscombine existing elements in new ways…                          Aft...
THE LEGO STORYY2000	  "Toy	  of	  the	                                      Y2004-­‐03,	  	  the	     Century"	  by	      ...
THE LEGO STORY§ The situation 2004 § Demand    decreasing, competition from    games, movies, merchandising § Poor qual...
THE LEGO STORY                                         Innovate                                                  Execute  ...
KEY ACHIEVEMENTS§ Clear Raison dêtre: “we help children learn systematic and creative  problem solving—a crucial twenty-f...
KEY ACHIEVEMENTS§ Reduced lead time, 45 to 3 days to store§ Cost saving through offshoring non-core  competencies§ A ne...
LEGO TOTAL INNOVATION MAKEOVER                                  Customer                         External Innovation      ...
THE S-CURVE  The real challenge, LEGO managed, lies in achieving a strategically    balanced portfolio that between exploi...
HYPER COMPETITION“Either you innovate or you’re in commodity hell. If you do whateveryone else does, you have a low-margin...
DOES HARLEY-DAVIDSON SELL MOTOR CYCLES?“…what we sell is the abilityfor a 43-year-old accountant todress in black leather,...
EXCERSICE§ What do you sell?§  5 minutes in groups                                  14
MARKET EQUILIBRUM       Demand                                           Supply• 3 Billion consumers in BRIC              ...
INNOVATE – EXECUTE™         … the world will never be the same                                       16
INNOVATION FRAMEWORK                   Strategic	  ques&on	                   Type	  of	  innova&on	                  Styl...
WHY – STRATEGIC QUESTION                                                     ?                                            ...
WHY – STRATEGYNeed	  seekers	                   Market	  readers	               Technology	  •  look	  for	  potenGal	    ...
WHAT – TYPE OF INNOVATION               Product	  Innova&on	      • The	  development	  of	  a	  new	  or	  improved	  pro...
HOW - STYLE & PEPOLE         “The Devil´s Advocate may never go away, but on a good day, the ten personas                 ...
HOW - STYLE & PEPOLE                                                       Leadership	  and	  style	                      ...
HOW - CAPABILITIES & PROCESS                                          Project                 Product                   Co...
WHEN - SERVICE VALUE WEB      The key to competitive advantage is to understand the service value web where the company an...
BEARING INNOVATION NAVIGATOR™                                 Stockholm – London – Barcelona – Johannesburg               ...
ABOUT BEARING CONSULTING Bearing Consulting is a management consultancy incorporated in United Kingdom with local offices ...
BEARING INNOVATION NAVIGATOR™...within a hypercompetitive market                                                          ...
YOUR SWEET SPOT DEFINES YOUR FUTURE SUCESSE                                                                               ...
VALUE IS CREATED ON THE ”EDGE” OF YOUR BUSINESSBusiness               Product &    Sales &     Delivery &           Operat...
EXAMPLES FROM THE LUXURY GOODS INDUSTRY§ 3 and 3, 10 minutes§ Identify 2 examples where new business models or delivery ...
BEARING INNOVATION NAVIGATOR™                                                                        Bearing Innovation Na...
BEARING INNOVATION NAVIGATOR™Bearing Innovation Navigator™ •  Situation:    Need of capturing and highlighting    your imp...
BEARING INNOVATION NAVIGATOR™...the process of innovation X-raying  Client	  Involvement	                                 ...
BEARING INNOVATION NAVIGATOR™...the navigatorInitiated by the work of Sawhney, M., Wolcott, R. C., & Arroniz, I. (2006). T...
THE SYSTEM• Internet based, work on all standard  devices• Highly user friendly• Client tracking possible• Multilingual• C...
BEARING INNOVATION NAVIGATOR™...the project time line                                                 PresentaGon	  &	    ...
BEARING INNOVATION NAVIGATOR™	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  ...
THE REPORT – 420 DIFFERENT BASIC INNOVATION                    ORGANISATIONAL PROFILES                                    ...
CASE STUDYSituaGon	                                  Perceived	                                SoluGon	  •  Fast	  growing...
CASE STUDYRecommenda&on;	  Strategy	  Alignment	  • The	  IT	  department	  adjust	  its	  leadership	  style	  toward	  t...
CASE STUDYRecommenda&on;	  Involvement	  • Engage	  the	  company’s	  customers,	  suppliers	  and	  partners	  in	  the	 ...
END.INNOVATE - EXECUTE™                         42
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Innovation management university of monaco luxury goods program 2012

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In a world of hyper competition, innovation is imperative to gain competitive advantage. However, the coin has a flip side, as innovations are often expensive and can be easily imitated by competitors. Have a look at one of Magnus Penkers international presentations on the subject, given at the University of Monaco’s Master of Luxury Goods Program 2012.

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Innovation management university of monaco luxury goods program 2012

  1. 1. INNOVATION KEY SUCCESS FACTORS FORGROWTH AND PROFIT ON NICHE MARKETSUniversity of Monaco, Masters in Luxury Management 2012 Magnus Penker, MBA (Henley Business School), BSc (CTH) magnus.penker@bearing-consulting.com
  2. 2. WORLD DOMINANCE Year 1994 Motorola was world leader in (analogue) mobiles, seven years later Nokia was world leader in (digital) mobiles60%  50%   Motorola  40%  30%  20%  10%   Nokia   0%   Market  shares  1994   Market  Shares  2001   2
  3. 3. FROM #1 TO CRISIS IN LESS THAN 3 YEAR...Why ? 3
  4. 4. Innovation is creative destruction, where entrepreneurscombine existing elements in new ways… After Joseph Schumpeter (1883 – 1950) 4
  5. 5. THE LEGO STORYY2000  "Toy  of  the   Y2004-­‐03,    the   Century"  by   owner  &  CEO    Fortune  magazine   Kjeld  Kirk   and  the  BriGsh   KrisGansen  decide  AssociaGon  of  Toy   to  go  back  to   Retailers   basic!     Y2003  –  2004   Y2004-­‐10,  Jørgen   Huge  losses,  close   Vig  Knudstorp   to  bankruptcy     appointed    as  new   CEO   5
  6. 6. THE LEGO STORY§ The situation 2004 § Demand decreasing, competition from games, movies, merchandising § Poor quality § Poor logistics § Slow in adoption § Simplistic leadership and laid-back culture Sources: HBR, DN, Guardian, BBC, Handouts European Offshoring Summit, (2009, Copenhagen) 6
  7. 7. THE LEGO STORY Innovate Execute Stabilize Deliver what operations we promise Improve the Value Creating business Partnership Define Rigid Execution Raison dêtre Platform Organic growth Differentiated Value Chain Offshoring Consumer Driven Restore the Value Chain balance sheet 2200  Opera&onal  Profit   1200   MDK   200   -­‐800   2003   2004   2005   2006   2007   2008   -­‐1800   Year   7
  8. 8. KEY ACHIEVEMENTS§ Clear Raison dêtre: “we help children learn systematic and creative problem solving—a crucial twenty-first-century skill”§ Gained consumer insights through “direct sales to consumers” through BuiltByMe without competing with existing distribution channel§ Co-Branding with strong and selected partners such as Star wars and Harry Potter 8
  9. 9. KEY ACHIEVEMENTS§ Reduced lead time, 45 to 3 days to store§ Cost saving through offshoring non-core competencies§ A new supplier interface§ QA system in place§ Open Innovation, 120,000 persons involved in external innovation work – DesignByMe, DreamtByMe, BuildByMe§ Community driven approach; the open platform Mindstorm encouraging customers to design and develop their own LEGO-robots systems 9
  10. 10. LEGO TOTAL INNOVATION MAKEOVER Customer External Innovation Engagement Internal Innovation Brand Services Supply Chain Business Model Partner Model Product Marketing...and LEGO continue to deliver exceptional profitable growth onan oligopolistic/niched and international toy market... 10
  11. 11. THE S-CURVE The real challenge, LEGO managed, lies in achieving a strategically balanced portfolio that between exploitative and the exploratory Emergent Growth Mature Performance / Value offering Ongoing business Business of the future (EXPLOITATIVE) (EXPLORATORY)Source: Tovstiga (2007) Effort / Time 11
  12. 12. HYPER COMPETITION“Either you innovate or you’re in commodity hell. If you do whateveryone else does, you have a low-margin business.That’s notwhere you want to be.” Sam Palmisano, CEO IBM 12
  13. 13. DOES HARLEY-DAVIDSON SELL MOTOR CYCLES?“…what we sell is the abilityfor a 43-year-old accountant todress in black leather, ridethrough small towns and havepeople be afraid of him“ – an HD executive 13
  14. 14. EXCERSICE§ What do you sell?§  5 minutes in groups 14
  15. 15. MARKET EQUILIBRUM Demand Supply• 3 Billion consumers in BRIC • Global talent market• Growing middle class in BRIC, • Low cost production of 300M Chinese live on western services and products standard • Open communities and crowedsourcing • Instant communication access • Online universities      Hyper competision - > Temporarily competetive advantages 15
  16. 16. INNOVATE – EXECUTE™ … the world will never be the same 16
  17. 17. INNOVATION FRAMEWORK Strategic  ques&on   Type  of  innova&on   Style   Why   What   How     Product  InnovaGon   • Cauldron   Company  Strategy   Process  InnovaGon   • Spirale   • FerGle   • Incremental/   OrganisaGonal  InnovaGon   DisrupGve   • PacMan   Management  InnovaGon   • Need  seekers   • Explorer   ProducGon  InnovaGon     • Market  readers   • Technology  drivers   Commercial/MarkeGng   People   InnovaGon   • 10  Faces  of  InnovaGon   Service  InnovaGon       Capability  &  Process   • IdeaGon     • Project  selecGon   • Product  development   • CommercialisaGon   Where WhenSource: Penker (2011) 17
  18. 18. WHY – STRATEGIC QUESTION ? Strategic To keep competitors Question out keeping/gaining To increase the profit ? market shares? Building the capabilities to increase the Increase barriers to enter or copy internal efficiency Differentiation and neutralization of Cost savings competitors Focus on competitive advantages Disruptive opportunitiesSource: Penker (2011) 18
  19. 19. WHY – STRATEGYNeed  seekers   Market  readers   Technology  •  look  for  potenGal   •  capitalise  on   drivers   opportuniGes  by   exisGng  trends  and   •  drive  for   applying  superior   understanding  of   breakthrough   understanding  of   markets   innovaGons  based   the  market  and   on  new  technology   rapid  go-­‐to-­‐markets   19
  20. 20. WHAT – TYPE OF INNOVATION Product  Innova&on   • The  development  of  a  new  or  improved  product.   Process  Innova&on   • The  development  of  a  new  manufacturing  process.   Organisa&onal   • A  new  venture  division;  a  new  internal  communicaGon   Innova&on   system;  introducGon  of  a  new  accounGng  procedure     Management   • TQM  (total  quality  management)  systems;  BPR   Innova&on   (business  processes  re-­‐engineering).   • Quality  circles;  just-­‐in-­‐Gme  (JIT)  manufacturing   Produc&on  Innova&on   systems;  new  producGon  planning  soiware.   Commercial/Marke&ng   • New  financing  arrangements;  new  sales,  Delivery   innovaGons  in  sales,  market  approaches,  e.g.  direct   Innova&on   markeGng.   Service  Innova&on   • Internet-­‐based  financial  services.  Source:Trott (2008) 20
  21. 21. HOW - STYLE & PEPOLE “The Devil´s Advocate may never go away, but on a good day, the ten personas can keep him in place” (Kelly & Littman, 2005) Learning   OrganisaGonal   Building   personas   personas   personas   Experience   Anthropologist   Hurdler   Architect   Set  Designer   Experimenter   Collaborator   Storyteller   Cross-­‐Pollinator   Director   Caregiver  Source: Kelly & Littman (2005) 21
  22. 22. HOW - STYLE & PEPOLE Leadership  and  style   The  Spiral   The  Cauldron   The  Fer&le  Field   The  PacMan   The  Explorer   Staircase   • An   • A  style  where   • A  style  where   • A  style  where   • A  style  where   entrepreneurial   you  climb   the  organisaGon   you  invent,   you  explore   style  where  the   upwards   tries  to  use   outsource  and   possibiliGes  and   business  model   without  losing   exisGng   finance  start-­‐ invest  Gme  and   is  frequently   the  over-­‐all   capabiliGes  and   ups.     money  in  them   challenged.     goal.   resources  in  a   without   new  way.     demanding   short-­‐term   profit.  Source: Loewe,Williamson, & Wood (2001) 22
  23. 23. HOW - CAPABILITIES & PROCESS Project Product Commercializa Ideation Selection Development tion Supplier and distributor Strategic disruption Diverse user group engagement in ideation decision making and Reverse engineering management process transition plan Independent Technical risk Supplier–partner Production ramp-up competitive insights assessment/ engagement in product from the marketplace management development Regulatory/government relationship Open innovation/ Rigorous decision management capturing ideas at any making around Design for specific goals point in the process portfolio trade-offs Global, enterprise-wide product launch Detailed understanding Project resource of emerging requirement forecasting Product platform management Product life-cycle technologies and trends and planning management Deep consumer and Engagement with customer insights and Ongoing assessment of customers to prove Pilot-user selection/ market potential controlled rollouts analytics real-world feasibilitySource: Jaruzelski & Dehoff (2010) 23
  24. 24. WHEN - SERVICE VALUE WEB The key to competitive advantage is to understand the service value web where the company and the market interact creating value’ (Chesbrough, 2011). Customer   Surrounding Engagement   Environment Includes customers; Service   Service  Co-­‐ may also include Offering   creaGon   partners, competitors or other third parties Design   Elicit  Tacit   Experience   Knowledge     Point   Boundary of the CompanySource: Adopted from Chesbrough (2011) 24
  25. 25. BEARING INNOVATION NAVIGATOR™ Stockholm – London – Barcelona – Johannesburg “..because the execution of an idea is always more important than the brilliance of the thought..” (Harvard Business Publishing – Morgan, Levitt & Maleck – INVEST model)This document is solely for the use of the receiver. No part of it may be circulated, quoted, or reproduced fordistribution outside the receivers organisation without prior written approval from Bearing Consulting Ltd.2009 Bearing Consulting Ltd. Proprietary and Confidential. All Rights Reserved
  26. 26. ABOUT BEARING CONSULTING Bearing Consulting is a management consultancy incorporated in United Kingdom with local offices in London, Stockholm, Barcelona, Geneva and JohannesburgWe work with clients in threefocus areas;Ø  Places & RegionsØ  Bank & FinanceØ  Corporate InnovationThrough a resource pool of more than60 expert consultants, we are currentlyengaged in projects across fourcontinents.Bearing develops methodology and publish books “..because the execution of an idea is always more important than the brilliance of the thought..” Morgan, Levitt & Maleck 26 Harvard Business Publishing
  27. 27. BEARING INNOVATION NAVIGATOR™...within a hypercompetitive market How  can  you  measure,   improve  and  invent  new   What  is  your   compeGGve  advantages?     future  compeGGve   advantage?   Where  is  your   value  created?     27
  28. 28. YOUR SWEET SPOT DEFINES YOUR FUTURE SUCESSE Where your firm meets What? customers needs in a way Where? in which your competitors Why? Competitors’ Customers’ cannot How? offerings needs 3 1 Sweet Spot Sweet spot = unique spot 2 How to protect/define boundary 1,2,3 Company’s capabilities Context (technology, industry, regulatory, etc.) 28Source: Collis & Rukstad (2008). Can You Say What Your Strategy Is?, HBR (April 2008)
  29. 29. VALUE IS CREATED ON THE ”EDGE” OF YOUR BUSINESSBusiness Product & Sales & Delivery & Operation Model Services Marketing Consumptio 29
  30. 30. EXAMPLES FROM THE LUXURY GOODS INDUSTRY§ 3 and 3, 10 minutes§ Identify 2 examples where new business models or delivery / consumption formats scoped out competitors 30
  31. 31. BEARING INNOVATION NAVIGATOR™ Bearing Innovation Navigator THE  STORY  •  The  Model  was  originally  invented  by  an   occasion  when  trying  to  understand  why   some  firms  did  success  with  profitable   business  development  while  other  did  not  -­‐   the  insights  were  found  in  the  linkages   between  capabiliGes,  market  structure  and   customer  behaviour.    •  It  is  based  on  year  of  research  and   pracGGoners  work    •  The  approach  is  very  hands-­‐on  and  provide   you  with  pracGcal  steps  to  execute  •  The  Navigator  is  from  year  2012  codified   and  implemented  as  a  web-­‐enabled  mulG-­‐ lingual  system  •  All  projects  are  executed  based  on  an   extensive  and  real-­‐world-­‐experience-­‐ oriented  process,  system  and  templates    •  All  consultants  are  accredited  with  +15   years  experience  of  driving  innovaGon  as   consultants  and  execuGves   31
  32. 32. BEARING INNOVATION NAVIGATOR™Bearing Innovation Navigator™ •  Situation: Need of capturing and highlighting your imperative capabilities for success •  Complication: Possible lack of capability insights/foresights and unique sweet spot •  Resolution: 1. Collect, analyse and benchmark your innovation capabilities, strategy, leadership, culture in a 360 degree analysis 2. Define possible opportunities, weaknesses 3. Discover possible misalignments in the strategy work 4. Analyse whether needed capabilities, culture and leadership style is in place, or not, in order to carry out the innovation strategy of the firm 3. Align innovation strategy, capabilities, leadership style and culture with corporate and functional goals and over all strategies 4. Outline a game plan 32
  33. 33. BEARING INNOVATION NAVIGATOR™...the process of innovation X-raying Client  Involvement   Analysis  process   • CEO  Interview,  in-­‐depth  interviews  interviews    with  key   • Hypothesis   stakeholders   • Internal  and  external  data  collecGon  (survey)   • Survey:  Capturing  imperaGves  of  the  business,  scoping  the  case   • GeneraGng  relevant  benchmark  data  and  innovaGon  parerns   • Survey:  Capture  strategies,  weaknesses,  market  structures,  key   • Analysis   drivers   • Strategic  opGons  generaGon   • Internal  and  external  communicaGon  /  enrolment   • EvaluaGon  and  conclusions   • Analysis  walk  through     • RecommendaGons   • PresentaGon  with  recommendaGons   33
  34. 34. BEARING INNOVATION NAVIGATOR™...the navigatorInitiated by the work of Sawhney, M., Wolcott, R. C., & Arroniz, I. (2006). The 12 Differetnt Ways for Companies toInnovate. MIT Sloan Management Review , 75-81. 34
  35. 35. THE SYSTEM• Internet based, work on all standard devices• Highly user friendly• Client tracking possible• Multilingual• Customizable, robust scalable database design and system architecture• High Security, fast access• Work trough firewalls, spamfilters• All data anonymous 35
  36. 36. BEARING INNOVATION NAVIGATOR™...the project time line PresentaGon  &   RecommendaGon  CEO  MeeGng   (1/2  day)   InnovaGon   Implement   Audit  (4  weeks)   InnovaGon   Game  Plan   (30-­‐60  weeks)   6-8 weeks 36
  37. 37. BEARING INNOVATION NAVIGATOR™                                                                  Deliveries  • Analysis:  Levels,  GAPs/Misalignments,     CorrelaGons/  ConjuncGons  within  the     organisaGon/Industry  • Strategic  quesGon   • Strategies   • Leadership   • Personas   • CapabiliGes    • Report  with  recommendaGons  • PotenGal  InnovaGon  Game  Plan   • InnovaGon  objecGves   • InnovaGon  strategy   • Cost/benefit  analysis   • InnovaGon  process   • InnovaGon  plan   • InnovaGon  team   • KPIs  (for  Navigator  Tracking)   37
  38. 38. THE REPORT – 420 DIFFERENT BASIC INNOVATION ORGANISATIONAL PROFILES 38
  39. 39. CASE STUDYSituaGon   Perceived   SoluGon  •  Fast  growing  awarded   ComplicaGon   •  Nine  generated   e-­‐commerce  fashion   •  Growth  pain   recommendaGons   company   •  New  compeGtors  •  Entrepreneur  of  the   entering  the  scene   year,  A  Great  Place  To   •  Lost  the  barle  in  on   Work,  AAA  rated,   country   Super  Gazell   •  Perceived  quality  issues   in  deliveries   •  Lack  of  capitalizaGon  of   innovaGon  iniGaGves   39
  40. 40. CASE STUDYRecommenda&on;  Strategy  Alignment  • The  IT  department  adjust  its  leadership  style  toward  that  of  the  company,  i.e.  ferGlity   field—meaning  a  style  where  the  organisaGon  tries  to  use  exisGng  capabiliGes  and   resources  in  a  new  way,  focusing  on  sales  and  profit.    • Make  clear—within  the  organisaGon—where  the  company  is  going  for  growth  or   profit  as  main  objecGve,  enrol  all  stakeholders.      Recommenda&on;  Recrui&ng  • Employ  Hurdlers,  Cross  Pollinators,  Anthropologists  and  Experience  Architects  Recommenda&on;  Leadership  • Today,  the  customer  service  department,  according  to  itself,  has  a  non-­‐goal-­‐oriented   leadership.  This  must  be  addressed,  as  the  customer  service  funcGon  is  vital  to   adjusGng  the  lacking  capabiliGes  pointed  out  in  the  analysis.  It  is  imperaGve  that  this   be  addressed  appropriately.  Recommenda&on;  Product  Development  • Launch  more  new  products  to  keep  up  the  pace  in  the  market,  especially  considering   that  the  other  kind  of  innovaGon  is  low.     40
  41. 41. CASE STUDYRecommenda&on;  Involvement  • Engage  the  company’s  customers,  suppliers  and  partners  in  the  development  • Establish  a  reward  system  internally  and  eventually  externally,  using  both  extrinsic   (monetary)  as  well  as  intrinsic  (acknowledgment,  involvement,  competence   development,  etc).    Recommenda&on;  Organisa&on  &  Systems  • Test  pilots  and  learn  from  them  • Undertake  frequent  independent  market  research  • Make  systemaGc  risk  assessments    • Put  an  effecGve  product  management  system  in  place    Recommenda&on;  Enlarged  scope  • The  type  of  innovaGon  that  the  company  is  engaged  in  is  product  innovaGon,  typically   for  retail-­‐oriented  companies.    • However,  service  innovaGons,  delivery  innovaGons  and  business  model  innovaGons   are  gevng  more  and  more  important  and  the  company  scores  very  low  here.    • Keeping  in  mind  that  the  company  is  technology-­‐driven  and  ferGle  field,  there  are   many  more  opportuniGes  to  use  exisGng  customers,  consumers,  capabiliGes,  systems,   products  and  technology  to  innovate  for  more  profit  and  market  shares  by  applying   business  model  innovaGon,  service  innovaGon  and  delivery  innovaGon.     41
  42. 42. END.INNOVATE - EXECUTE™ 42

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