5 Steps Towards Distruptive Innovation


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Consolidation of observations on steps creating disruptive innovations

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5 Steps Towards Distruptive Innovation

  1. 1. 5 Steps towards Disruptive Innovations “Start with the end in mind, but more so, know what it is that you are looking for so you can recognise it when you see it; then you will know you have arrived.” Marius vd Leek, September 2011Source: Adaptation Mini-Dissertation ‘The Value of Disciplined Innovation in Fast-moving High-tech ICT Business’ Submitted December 2010, towards MSc Technology Management Prof Leon Pretorius (Supervisor)
  2. 2. AgendaIntroduction: In the search to find the winning formula, managing innovation is based on hard work andreliable data, not entirely on the practice, recognizing necessary but sufficient conditions and context. Aset of propositions potentially lay the foundation for a review of the existing basis for measuringperformance and success in delivering towards shareholder expectations in today’s knowledge era –however, how does existing concepts, methods, approaches, models, practices and theoreticalconstructs support investment decision-making for achieving maximum shareholder value and sustainedbusiness success, recognizing your specific business context, whether starting up, growing, mature or inturn-around.In reality, the tolerances for applying discipline within a chaotic fast-moving high-velocity world is theluxury and privilege of practitioners and masters dedicated to art and science of innovation. There ishowever a way:-The 5 Steps towards successful Disruptive Innovation in a fast-moving high-velocity complex world:• Step 1 – Position: Competitive Strategy (20% of Effort)• Step 2 – Intention: Clarity of Vision (25% of Effort)• Step 3 – Realisation: Rapid and Iterative Design and Development (30% of Effort)• Step 4 – Adoption: Market Performance and Acceptance (15% of Effort)• Step 5 – Review: Continuous Improvement (10% of Effort)The majority effort and commitment (Time, Resources and Quality) is spent up-stream but the entire life cycle in mind, eliminating risks down-stream, whilst increasing confidence in realisation and adoption13 September 2011 © Copyright 2011 Page: 2
  3. 3. Innovation remains complex to manage Technology evolutions are moving through shorter cycles Economic cycles are putting major pressure on available resources Skills shortage are adding to your frustrations Ever-changing Business strategies and imperatives are constantly moving goal-posts Technology acquisition is proving to be more complex All-round, demands on management remain very high13 September 2011 © Copyright 2011 Page: 3
  4. 4. The more things change, the more they stay the same• Tough economic times raise shareholder demands where investments must follow returns.• Modern businesses have to display good governance and practice which requires structure that is interwoven in their decision-making fibre.• ICT Managers are always searching for practical guidelines on ICT investment decision-making.• Some believe that innovation through disciplined efforts can have far reaching benefits.• The need to find appropriate concepts, models, methods, approaches and theories are greater than ever. Simplicity is current in fast-moving high-tech ICT businesses13 September 2011 © Copyright 2011 Page: 4
  5. 5. Understand that you are merely dealing with uncertainty1Opposing Linear Environments Non-Linear EnvironmentsEnvironments2 Industrial era Knowledge era Manufacturing and production Service and software development Process oriented rigor Process maturity Disciplined engineering approach Flexible and adaptive approach Measurable Measurable Benchmarked Benchmarked based in available data Predictable Unpredictable and fluidCharacteristics and Manageable and simple Highly uncertainnature Repeatable Intuitive and future orientated General and broad application Fuzzy and complex Fixed period project portfolios Highly contextual and narrow application Commoditised Variant period project portfolios High levels of liquidity i.e. low Disruptive entry and exit barriers Low levels of liquidity i.e. low entry barriers and high exit barriers1Industrial era decision practices do not necessarily fit modern knowledge era innovation efforts and require areview of the performance measures especially due to the overall uncertain nature of ICT investments.2 These concepts are not clearly defined and is being used in the general sense related to potential but specificcharacteristics and nature in a pure descriptive manner13 September 2011 © Copyright 2011 Page: 5
  6. 6. The 5 steps deals with risk and uncertainty with confidence Positioning Intention Realisation Adoption Review Reducing levels of uncertainty 100% through the phases of the life Significant Confidence and Benefit cycle Risk and Uncertainty 75% High Increasing levels of confidence 50% Medium 25% Interim points or gates for critical review Low Idea or Conceptual Detailed Build and Operations and Source: Adapted from Systems Need Design Design and Production End-of-life Engineering and Analysis , Figure 2.12 (Blanchard and Fabrycky, 2006:46) Development Innovation Life Cycle13 September 2011 © Copyright 2011 Page: 6
  7. 7. Step 1 – Bringing innovations to market requires in depthanalysis and understanding of your competitive position Quadrant 3: The innovation Quadrant 1: The innovation process is institutionalized process is institutionalized however, analytics and data and diligence exist in collection happen in an ad- analytics and data collection hoc fashion with investment with formalized investment 3 1 Innovation Opportunity decision-making based on some future benefit aligned to immediate business needs decision-making methods offering insight into realistic investment returns Innovation Context Quadrant 2: Innovation is Quadrant 4: Innovation is driven by need and happens 4 2 Innovation Threats driven by need and happens from necessity coupled to intuitive decision-making based on future benefits from necessity coupled to decision-making based on analytics and data collection with formalized investment timed to match business decision-making methods needs that may exist at the Innovation Innovation offering insight into realistic time Weakness Strengths investment returns Ability to Execute Source: Innovation Position Matrix Quadrants (Author, 2010) Position innovations for success13 September 2011 © Copyright 2011 Page: 7
  8. 8. Step 1 – Understanding your real competitive positionthrough analysis of the business and technology landscapeDrucker argues that innovative business ideas require the purposeful evaluation and assessment through arepeatable process or method, specifically, insisting on consistency including clear focus on seven areasof opportunity.According to Drucker, successful innovation result from a conscious purposeful search for innovationopportunities, found only in limited situations – four exist within but three outside the company. Theopportunity areas are:-1. Unexpected occurrences;2. Incongruities;3. Process needs;4. Industry and Market changes;5. Demographic changes;6. Changes in perception;7. New knowledge;Drucker has recorded classic examples on how innovations have emerged insuccessful commercialisation. The purposeful, systematic innovation process Method:begins with the analysis of sources of , however, he maintains that it is difficult Porter’s 5to foretell whether a given innovation will end up as big business or modest force modelachievement. Source: Drucker, Peter F. 2002. The Discipline of Innovation, Best of Harvard Business Review, Reference R0208F, August 2002.13 September 2011 © Copyright 2011 Page: 8
  9. 9. Step 2 – Formulate and socialise absolute clarity of visionand strategy to set the wheels of innovation in rapid motionThe Rational Actor model (Allison 1971) suggests that strategic success depends on careful analysis andplanning before action is taken. In his book on "groupthink," Janis (1982) argues that extensiveconsideration of goals and a wide range of alternatives is a prerequisite to sound decision making.Where these studies focus on crisis and time-constrained decision making, one might conclude that"rational" processes are appropriate for high velocity environments.This early study recognize the directing of company resources towards effecting greater returns restingwith top management through a process of decision-making, based primarily on rational analysis or madepiecemeal, adaptively, and in small increments, rather than comprehensively and in large, purposefulchunks.Their findings conclude that in high velocity environments, :-1. the more analytic the strategic decision making process,2. the more comprehensive the search for strategic alternatives,3. the clearer and more explicitly articulated the institutional goal, the better the performance of the firm - however, in high velocity environments, political behaviour is associated with poor performance.The overall lessons are a series of apparent paradoxes: Plan carefully andanalytically, but move quickly and boldly. CEOs should be decisive, but also Method:delegate. Choose and articulate an overall strategy quickly, but put it in place Classiconly as it becomes necessary – viability of the rational model is seen as Strategycontingent upon a stable environment and a bureaucratic organization. Source: Bourgeois III, L.J., and Eisenhardt K.M. 1988. Strategic Decision Processes in High Velocity Environments: Four Cases in the Microcomputer Industry. INFORMS, Institute for Operations Research and the Management Sciences, Vol. 34, No. 7 (Jul., 1988), pp. 816-83513 September 2011 © Copyright 2011 Page: 9
  10. 10. Step 3 – Realise intent through pragmatic and systemicassessment and evaluation of design and developmentAccording to Blanchard and Fabrycky, when evaluating past experiences regarding the development oftechnical systems, most of the problems noted could be contributed to not applying a disciplined top-down ‘systems approach’. Less effort applied early on or upstream in the systems development orinnovation life cycle process, consistently leads to poor results down-stream, highlighting the effect of theabsence of a complete and methodical manner.Some of the benefits associated with the application of concepts and principles of a disciplined approachcan be best described as follows 1:-1. Reduction in cost of systems design and development, production and/or implementation, systems operations and maintenance and support, retirement and final decommissioning and disposal.2. Reduction in system acquisition time (or the time it takes from the initial identification of customer need to the delivery of the system).3. More visibility and a reduction in the risks associated with the design decision-making process.A large percentage of the total cost for many systems is a direct result of thedownstream activities associated with the operations and support of systems,with the commitment of investments based on engineering and management Method:decisions made upstream - To address economic issues, one must look at total Systemscost in the context of the overall life cycle, and particularly during the early Engineeringstages of advanced planning and conceptual design. Source: Blanchard, B.S., and Fabrycky, W.J., 2006. Systems Engineering and Analysis Fourth Edition. Prentice Hall International Series in Industrial and Systems Engineering.13 September 2011 © Copyright 2011 Page: 10
  11. 11. Evaluation of returns must consider the type of investmentin the innovation and technology but it’s about value also1Investment type Notes Benefit Probability of Evaluation return (margin)Infrastructure Support the business – may Allows new initiatives 0.2 – 1.0 (0.5) Option for future applications include future investments Initial investment costRequired Managerial Cost of doing business Stay in business 0 – 0.5 (0.2) Lowest-cost route to enableControl (No return) features of the applicationNo alternative Enabling new task or process Improves customer 0.5 – 1.0 (0.75) Cost reduction against experience potential benefits realisationDirect return from Structure, cost-benefit, NPV Marginal if IT investment 0.7 – 1.0 (0.9) Linear quantitative plus realIT and IRR not leveraged OPM (non-linear evaluation)Indirect returns Potential return but Substantial but not easily 0 – 1.0 (0.5) Evaluate non-linearfrom IT qualitative benefits quantifiableCompetitive Ticket to the match – cost of Follower / Reactive model 0 – 1.0 (0.2) Business value vs cost benefitnecessity not investing? offer marginal benefit analysisStrategic application Return or benefits High potential Leader 0 – 1.0 (0.5) Future benefit non-linear realization after model high risk investment evaluation (OPM) implementationTransformational IT Combined with changes in High potential Innovator 0 – 1.0 (0.5) Change impact cost-benefit company philosophy model high risk non-linear evaluation Source: Lucas, H.C. Jr., 1999. Information Technology and the Productivity Paradox: Assessing the Value of Investing in IT. Oxford University Press, New York Oxford. 1999. 1 See Step 4 related to managing disruptive technologies13 September 2011 © Copyright 2011 Page: 11
  12. 12. Step 4 – Innovation performance will drive user adoption butrecognize the intended market may initially reject it‘Sustaining is incremental improvement of established technologies. Disruptive is a new concept ofvalue. Managers faced with disruptive technologies fail their companies when they let organizationalforces overpower them.’Summary (verbatim extract):-1. Market progress is separate from technology progress. Customers do not always know what they need.2. Innovation requires resource allocation which is extraordinarily difficult for disruptive technologies.3. Disruptive technology needs a new market. Old customers are less relevant. Disruptive technology is a marketing problem, not a technological one.4. Organizations have narrow capabilities. New markets enabled by disruptive technologies require very different capabilities.5. Information required to make investment decisions does not exist. Failure and iterative learning are required.6. It is not wise to always be a leader or always a follower. Disruptive innovations reward leaders.7. Small entrant firms enjoy protection because they are doing things that do not make sense to the industry leaders.‘Sustaining is incremental improvement of established technologies. Disruptive Approach: 5is a new concept of value. Managers faced with disruptive technologies fail Principles oftheir companies when they let organizational forces overpower them.’ Disruptive Technologies Source: The Innovator’s Dilemma: hen New Technologies Cause Great Firms to Fail, Clayton M. Christensen, Cambridge, Massachusetts: Harvard Business School Press, 1997 Prepared by: BB McBreen13 September 2011 © Copyright 2011 Page: 12
  13. 13. Step 5 – Review progress at each phase to remain ahead ofthe curve• Budget for Innovation i.e. make it part of you daily routine and create a portfolio, start with the end in mind – how, Budget to what, why, who, when … make it part of the business fabric – Innovate but it has to be economical and justifiable and above all, identify the problem first• Monitor spending and work within sound business cases i.e. Closely Trace know your numbers and apply diligent thinking at least, Monitor Operations Spending whatever you measure must be measurable or ‘SMART’, demarcate and scope• Track progress through a process of elimination and (re)prioritisation i.e. adopt a process that works for your business context, remember at each stage, step or phase, you have a different ‘market’ or audience to convince, no matter Structure Religiously what the speed of the business – discipline is required Decision- Track• Structure for innovation i.e. start with your capital making Progress investment decision-makers to enable federated agility but control led centrally, someone is accountable for setting and achieving the numbers, there must be some authority• Remember shareholders, even if you are driving political Approach: agendas i.e. someone will have to answer to them and offer Systemic traceability and a level of transparency of operations Evaluation Make it, and keep it simple, step by step13 September 2011 © Copyright 2011 Page: 13
  14. 14. Questions13 September 2011 © Copyright 2011 Page: 14
  15. 15. References1. Radjou, N.,Innovation Networks, Forrester Research Inc., 17 June 20042. Council on Financial Competition, Applying Innovation, Key Findings, Catalogue Number 1-XTGJX, Corporate Executive Board, 20033. Regnault, C., An investigation into innovation in South Africa, November 2003, (p.5-6, 86)4. Gartner Focus Report, Innovative Technologies: Whats the Impact for IT Services Providers and End-User Organizations?, November 6, 2002, p.415. Harris, K., Rozwell, C., Flint, D., Halpern, M., Harris, R. G., Gartner Research Managing Innovation: A Primer, ID Number: G00139716, 25 May 20066. Council on Financial Competition, Leveraging Consumer Trends and Technology, Catalog Number: CFC12IA10A Corporate Executive Board, September 2004,7. Fenn, J., Gartner Research: Survey Shows Adoption and Value of Emerging Technologies, ID Number: G00138453, Publication Date: 23 March 2006, p.6.8. Porter, M.E., The Technology Dimension of Competitive Strategy, Reprint from Burgelman and Maldique : Strategic Management of Technology and Innovation, First Edition, 19889. Milbergs, E., Innovation Metrics: Measurement to Insight, Centre for Accelerating Innovation10. Morris, l., Innovation Metrics: The Innovation Process and How to Measure it, InnovationLabs White Paper, InnovationLabs LLC, November 200811. Derry, S., An Integrated Approach to Managing Innovation, White Paper Project Leaders International12. Peter F Drucker, Innovation and Entrepreneurship: Practice and Principles, 2nd Revision Edition, 2004. p.127.14. Jolly, V., Commercialising New Technologies, Harvard Business School Press, Harvard College, 199715. SRI International, The SRI Value Creation Partnership Program, The Discipline of Innovation Workshop. SRI Program Flyer, 200616. Drucker, Peter F. 2002. The Discipline of Innovation, Best of Harvard Business Review, Reference R0208F, August 2002.13 September 2011 © Copyright 2011 Page: 15
  16. 16. References17. Stratten, R. and Mann, D. 2003. Systematic innovation and the underlying principles behind TRIZ and TOC. Journal of Materials Processing Technology 139 (2003) 120-126, Elsevier Science, 2003.18. Phillips, J.and Hering, D. 2005. Innovate on Purpose™, A systematic approach to sustainable, repeatable innovation using the Concept to Cash™ business process. NetCentrics Corporate, 10 August 2005.19. Milbergs, E., and Vonortas, Prof. N., Innovation Metrics: Measurement to Insight: White Paper. Centre for Accelerating Innovation and George Washington University for the National Innovation Initiative 21st Century Working Group20. Project Leaders International, White Paper: An integrated approach to managing innovation, www.project- leaders.net21. Morris, L. , 2008. Innovation Metrics, The innovation process and how to measure it. InnovationLabs White Paper, InnovationLabs LLC, November 2008.22. Westcott, J. and Goransson, L., 2006. Business Value Pricing: Using IT Innovation to Power Business Results. IBM Canada Ltd., IDC White Paper, September 200623. Sahu, P., Strategy-focused product innovation with product scorecard and product innovation scorecard, unpublished24. Myburgh, A.J.B., 2009. Towards understanding the relationship between process capability and enterprise flexibility. Insyte Information Systems Engineering (Pty) Ltd. 21 January 200925. Verhoef, C. 2002. Quantitative IT Portfolio Management. Science of Computer Programming 45 (2002) 1 – 96. Free University of Amsterdam, Department of Mathematics and Computer Science. 15 July 200226. Fauscette, M., 2008. Innovation, People, and Processes: How Three Global Innovators Are Bringing Winning Products to Market. White Paper, IDC. September 200827. Rainey, D. L., 2006. Sustainable Business Development: Inventing the Future through Strategy, Innovation, and Leadership. Cambridge University Press, New York. 2006.28. Rainey, D. L., 2006. Sustainable Business Development: Inventing the Future through Strategy, Innovation, and Leadership. Cambridge University Press, New York. 2006.13 September 2011 © Copyright 2011 Page: 16
  17. 17. References28. Rainey, D. L., 2006. Sustainable Business Development: Inventing the Future through Strategy, Innovation, and Leadership. Cambridge University Press, New York. 2006.29. Northcott, D. Capital Investment Decision-making. The advanced management accounting and finance series. Academic Press in association with the Chartered Institute of Management Accounts.30. Evans, J. R., 1991. Creative Thinking In the Decision and Management Sciences. South-Western Publishing Co. 199131. Dewhurst, R.F.J. .Business cost-benefit analysis. School of Industrial and Business Studies, University of Warwick. McGrawHill, 1972.32. Desouza, C.K., Dombrowski, C., Awazy, Y., Baloh, P., Papagari, S., Jha, S., and Kim, J. (2009).Crafting Organisational Innovation Process. eContent Management (Pty) Ltd. Innovation management, policy & practice 11:6-3333. Lempert, J.R., (2002). A new decision sciences for complex systems. PNAS. Volume 99 Supplement 3 p7309-7313. May 14, 2002.34. Linton, D.J., Walsh, S.T., Morabito, J., (2002). Analysis, ranking and selection of R&D Project in a Portfolio. Blackwell Publishers Ltd. R&D Management 32, 2, 2002.35. Cooper, R.G., Edgett, J.S., and Kleinschmidt, E.J., (1999). New Product Portfolio Management: Practices and Performance. J PROD INNOV MANAG 1999,16:333-351.36. Butler S., Chalasaniy, P., Jha, S., Raz, O. and Shaw, M.(1999). The Potential of Portfolio Analysis in Guiding Software Decisions. Proceedings of the First Workshop on Economics Driven Software Engineering Research, IEEE Computer Society, May 1999.37. Bollou, F., and Ngwenyama, O. (2008). Are ICT Investments Paying Off in Africa? An Analysis of Total Factor Productivity in Six West African Countries from 1995 to 2002. Wiley Periodicals, Inc. published online in Wiley InterScience (www.interscience.wiley.com). DOI: 10.1002/itdj.20089. Information Technology for Development, Vol. 14 (4) 294–307 (2008)38. Fasanghari, M. and Roudsari, F.H. (2008). Optimized ICT Project Selection Utilizing Fuzzy System. World Applied Sciences Journal 4 (1): 44-49, 200813 September 2011 © Copyright 2011 Page: 17
  18. 18. About the AuthorMarius van der Leek has been a keen observer and studying the management of technology within environments that are fast moving and require high-tech large-scale multi-channel multi-platform multi-vendor complex business systems and corporate solutions.He is passionate about creating a renewed focus on the value of competitive strategy and architecture, a promoter of design and an advocate for implementing structure towards the realisation of architected solutions to re-establish the relationship between ICT delivery units, business, solution providers and shareholders.Visit my Company website:- http://www.mobyl.comConnect via my LinkedIn Profile:- http://za.linkedin.com/in/mariusvanderleekFollow me on Twitter:- http://www.twitter.com/#!/mobyldesignRead my Blog:- http://www.mobyl.com/ibSend me an e-mail:- marius@mobyl.comVideocall me on Skype:- marius.vanderleekCall me on my mobile:- +27 83 458 4120 (Blackberry) or +27 82 867 6875 (Samsung Tablet)Other presentations in the ‘Discipline in …’– series:-• Disciplined Innovation – promoting structured innovation and diligence in ICT investment decision- making recognising the importance of appropriate techniques and measures• Disciplined Competitive Analysis – promoting comprehensive analytics to create strategic advantage• Disciplined Strategy Socialisation – sending a clear message to various key constituents in the ICT organisation to realise your strategy and for making a difference13 September 2011 © Copyright 2011 Page: 18