Innovative Strategies


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Innovative Strategies

  1. 1. <ul><li>Intent to Action </li></ul><ul><li>At a societal scale </li></ul><ul><li>Technology level innovations </li></ul><ul><li>Social & Policy innovations </li></ul>Ten Rules for Strategic Innovators
  2. 2. <ul><li>A few simple tips to reach world recognition </li></ul><ul><li>Have clarity of direction </li></ul><ul><li>Have clear communication channels across & vertically </li></ul><ul><li>Reduce bureaucracy – make it nimble </li></ul><ul><li>Have a shared purpose and sense of ownership </li></ul><ul><li>Implement R & R at institutional level and local level </li></ul><ul><li>Inculcate tolerance of risks/failures </li></ul><ul><li>Be quick in dropping things that don’t work </li></ul><ul><li>Irreverence for the establishment is detrimental </li></ul><ul><li>Funding for crazy ideas is lethal– gambling money </li></ul><ul><li>The accounting approach is a killer </li></ul>What is Innovation? Knows not that it cannot be done Sees what everyone sees But thinks what no one else does
  3. 3. What should be our strategy? <ul><li>Key component of strategy is : </li></ul><ul><li>Competing for the future </li></ul>Box 1 Manage the present Box 2 Selectively forget the past Create the future Box 3 <ul><li>Unlearning the past </li></ul><ul><li>While managing the present we decide, what do we do today to </li></ul><ul><li>construct tomorrow </li></ul>The fundamental difference in present to future is - present is about linear changes while future is about discontinuous changes
  4. 4. The fundamental question arises as to what effectively should I do today to engineer tomorrow Next 25 years, explosive growth will reach the current level of world income This cannot happen with the same business models The organization response has to be non linear <ul><li>On the development of strategy the following requires to be understood : </li></ul><ul><li>What are the fundamental shifts in the customer demand/satisfaction model </li></ul><ul><li>Non linear shifts </li></ul><ul><li>What are the frames for the penetration in the customer need satisfaction </li></ul><ul><li>Changes at a needs satisfaction level </li></ul><ul><li>Changes in the demographics and those needs </li></ul><ul><li>Need shifts </li></ul>
  5. 5. Change in rules of the game – Competing for knowledge – game shifting from H/w to S/w Britannica & Encarta could not become today’s Google!! Success Models in India :- Pre 1990 Success in license management 1990 – 2005 Reverse Engineering 2006 onwards Innovations <ul><li>Every strategy has a finite life and capability </li></ul>
  6. 6. Olympic Gold Medal Winners in High Jump 1900 1920 1940 1960 1980 1.8 2.6 2.4 2.2 2.0 1.6 Couldn’t find a similar pictures as mentioned in the presentation hardcopy You would require to explain to me the context /background in order for me to find a suitable replacement
  7. 7. Strategic Balance Box 1 Competition for the present Box 2 and Box 3 Competition for the future Performance Gap Opportunity Gap Renewal Restructuring Every Strategy has a finite life and capability BOTH THESE NEED A BALANCE <ul><li>We spend too much time in Box 1 – its more comfortable </li></ul><ul><li>Pull out the energy for the surplus generated today to create Box 2 and Box 3 </li></ul>
  8. 8. Sources of Market Discontinuities <ul><li>How much of our strategy document focuses on ? </li></ul><ul><li>Performance Management Issues </li></ul><ul><li>Opportunity Management Issues </li></ul>This will show our focus on tomorrow Pressure for changing the rules of the game Technology Demographics Competitors Globalization Lifestyle Customers
  9. 9. Box 2 and Box 3 Thinking Breakthrough Ideas Breakthrough Execution x Computer has become an information appliance – the redesign creates the opportunities anew. A breakthrough execution will disrupted Television, Video, rental music recording and many other business models
  10. 10. Elements of Strategy <ul><li>Non – Linear shifts </li></ul><ul><li>Fundamental Tectonic shifts </li></ul><ul><li>Strategic intent </li></ul><ul><li>Current core competencies </li></ul><ul><li>Growth initiatives </li></ul><ul><li>New core competencies </li></ul>
  11. 11. Growth Initiatives Core Business Adjacent Space Non – Adjacent Space Horizon 1 Horizon 3 Horizon 2 Here & Now Extending Core Competencies beyond current business 5 -10% resources to conduct experiment ‘Don’t bet your Company Time Continuum 2006 2008 2008 - 2015
  12. 12. <ul><li>Mission Statement </li></ul><ul><li>≠ </li></ul><ul><li>Strategic intent </li></ul><ul><li>Mission Statements are not necessarily passion statements – they have the ability to engage /relatable to the viewers </li></ul><ul><li>This statement is for all stakeholders </li></ul>
  13. 13. Criteria For Strategic Intent <ul><li>Direction </li></ul><ul><li>Motivation </li></ul><ul><li>Challenge </li></ul>Strategic Intent usually includes a wide failure probability What is probability of success even if the objective probability is 5%. The successful organization sees the universe within the 5%
  14. 14. The Apollo Program <ul><li>We will put a man on the moon and bring him back before the end of this decade </li></ul><ul><li>- John F. Kennedy </li></ul>
  15. 15. Apollo 13 EARTH MOON X
  16. 16. Apollo 13 EARTH MOON X
  17. 17. Apollo 13 EARTH MOON X
  18. 18. “ We will “ - has a ring of confidence & conviction – only then does the flock follow <ul><li>Apollo 13 mission teachings :- </li></ul><ul><li>Brought the whole team together – Communication </li></ul><ul><li>Tore the flight plan – Symbolism </li></ul><ul><li>Detractors – go away – they will </li></ul><ul><li>Draw energy – Skeptics will feed on failure </li></ul><ul><li>All new ideas came from the frontline </li></ul>
  19. 19. <ul><li>Will have a difficulty in closing the opportunity gap </li></ul><ul><li>Top has an interest in status quo </li></ul><ul><li>Strategy group – can it not include those sitting next to the opportunity </li></ul><ul><li>The future strategy is already in the organization – how do we tap into these hard disks </li></ul><ul><li>Engineering model of strategy </li></ul><ul><li>Processes v/s Art </li></ul><ul><li>Make It Happen v/s Do IT </li></ul>Think Make Sure Do
  20. 20. The Top 10 Things You Can Do With a Dead Horse <ul><li>10. Whip the horse a little harder </li></ul><ul><li>9. Change the rider </li></ul><ul><li>8. Harness several dead horses together for increased speed </li></ul><ul><li>7. Emulate the best practices of companies riding dead horses </li></ul><ul><li>6. Proclaim that it’s cheaper to feed a dead horse </li></ul><ul><li>5. Affirm that “ This is the way we have always ridden this horse” </li></ul><ul><li>4. Declare that “ This horse is not dead” </li></ul><ul><li>3. Have the lawyers bring suit against the horse </li></ul><ul><li>2. Engage a consultant to study the dead horse </li></ul><ul><li>1. Promote the dead horse to a senior management position </li></ul>
  21. 21. Payoffs From A Bold Intent Resources Ambition A Very High Slack Limited B Very Limited Stretch Very Large Is there enough experimentation happening to make current models obsolete? Make a judgment between ‘’cannibalization” vs. creating new business models as a consequence
  22. 22. Xerox’s Rules of the Game <ul><li>Target corporate users </li></ul><ul><li>Direct sales force </li></ul><ul><li>Central copying </li></ul><ul><li>24 hour service </li></ul><ul><li>Package pricing </li></ul><ul><li>Leasing </li></ul><ul><li>Two ways to deliver service : </li></ul><ul><li>Make a product that does not break </li></ul><ul><li>Have a 24X7 service with a lousy machine bundled pricing will confuse the customer </li></ul><ul><li>Bundled pricing will confuse the customer </li></ul>
  23. 23. Marathon Race We Are Here 400 Meters 400 Meters 400 Meters Miles 26 <ul><li>Planning for first 400 M should be made </li></ul><ul><li>Think Big, Start Small, Scale up fast </li></ul><ul><li>Allocate resources in the short term </li></ul><ul><li>One initiative at a time – else the organization ducks </li></ul><ul><li>Every 400 m, you get : </li></ul><ul><li>A view of the lay of the land </li></ul><ul><li>Developed learning cycle </li></ul><ul><li>Building a solid, confident culture </li></ul>
  24. 24. Xerox’s Bullet – Proof Castle Patents Direct Sales Force Service Organization Lease Base Brand Name
  25. 25. Xerox’s Bullet – Proof Castle Patents Direct Sales Force Service Organization Lease Base Brand Name IBM Kodak
  26. 26. Xerox’s Bullet – Proof Castle Patents Direct Sales Force Service Organization Lease Base Brand Name CANON R.I.P IBM R.I.P KODAK
  27. 27. Core Competencies What They Are Not <ul><li>Profitable Products ≠ Core Competencies </li></ul><ul><li>Profitable Markets ≠ Core Competencies </li></ul><ul><li>Physical Assets per se ≠ Core Competencies </li></ul><ul><li>Technologies per se ≠ Core Competencies </li></ul>
  28. 28. Core Competencies Definitions <ul><li>Harmonization of a set of skills that are strategically critical and provide competitive advantage for the firm’s portfolio of current and future business models </li></ul>
  29. 29. Core Competencies Three Tests <ul><li>Harmonization of a set of skills that are strategically critical and provide competitive advantage for the firm’s portfolio of current and future business models </li></ul><ul><li>Potential breath of applications </li></ul><ul><li>Significant as a source of competitive differentiation </li></ul><ul><li>Defensible in the medium term </li></ul>(3) (2) (2) (4)
  30. 30. Honda Small Engine Design Automobiles Snowmobiles Outdoor Power Tools Snow Blowers Lawn Mowers Lawn Mowers Motorcycles <ul><li> Tests </li></ul><ul><li>Leveragability </li></ul><ul><li>Customer Value </li></ul><ul><li>Non - imitability </li></ul>Strategic Intent “ Six Honda in a Two – Car Garage”
  31. 31. Prioritizing New Business Opportunities <ul><li>Strength of core competency required </li></ul>Large Size of the opportunity Small Low High 1 2 3
  32. 32. Outline <ul><li>Concept of business model innovation </li></ul><ul><li>Why change the rules of the game </li></ul><ul><li>Why bottom up process for changing the rules </li></ul><ul><li>Logic of Silicon Valley </li></ul><ul><li>Logic of biological evolution </li></ul><ul><li>Bringing Silicon valley inside </li></ul><ul><li>Ecology for innovation : 3M </li></ul><ul><li>Application exercise </li></ul><ul><li>If Strategy has to change, the organizational Structure and its elements have to change- change rules of the organization </li></ul><ul><li>How does the organization become an innovation machine? </li></ul><ul><li>Creating inequilibrium in both peers & proff </li></ul><ul><li>Spaces need to keep changing </li></ul><ul><li>The entire organization needs to be involved in innovation </li></ul>
  33. 33. What is the logic of Silicon Valley? <ul><li>Laboratory of innovation, younger mindset </li></ul><ul><li>Agglomeration of particular kinds of talent </li></ul><ul><li>First generation immigrants </li></ul><ul><li>Infrastructure and enabling environment </li></ul><ul><li>Unorthodox culture – support system </li></ul><ul><li>Chaos happening, no punishment </li></ul>Can some of the above be inculcated within the company
  34. 34. Concept of Business Model Innovation Value Chain Architecture Customer Value
  35. 35. Role of Venture Capitalists <ul><li>Attract new venture ideas </li></ul><ul><li>Screen and fund </li></ul><ul><li>Nurture/incubate/protect/guide </li></ul><ul><li>IPO and scale up </li></ul>
  36. 36. Venture Capital Industry <ul><li>5,000 Plans </li></ul><ul><li>Funded (99% rejected) </li></ul><ul><li>Total Loss </li></ul><ul><li>Break Even </li></ul><ul><li>2 times return </li></ul><ul><li>5 times return </li></ul><ul><li>10 times return </li></ul><ul><li>1 100 times return </li></ul>Average Return on Investment
  37. 37. Logic of Silicon Valley Market for Talent Market for Ideas Market for Capital Attract and retain entrepreneurs First generation immigrants Younger Huge upside potential No Stigma for failure Basic research at Standford /Berkeley/Caltech Company building infrastructure Rich network of relationships High employee mobility Availability of risk capital Distributed resource allocation model
  38. 38. Logic of Biological Evolution Variation Retention Selection Exploitation Exploration <ul><li>Species who survive are not the strongest but the most </li></ul><ul><li>adaptable </li></ul><ul><li>Selection and reproduction creates the community which </li></ul><ul><li>becomes strong </li></ul><ul><li>Too much chaos/order is an issue </li></ul><ul><li>At the edge of chaos is where </li></ul>
  39. 39. Organizational DNA of Rule Changers <ul><li>Variety generation </li></ul><ul><li>Pervasive experimentation </li></ul><ul><li>Intelligent selection mechanisms </li></ul><ul><li>Fast scale up of successful experiments </li></ul><ul><li>CEO’s task to keep this DNA Group </li></ul><ul><li>Challenge is to filter, back, and keep them coming inspite of rejections </li></ul>
  40. 40. Ecology for Innovation : The Case of 3 M <ul><li>15 % Option </li></ul><ul><li>30% Rule </li></ul><ul><li>Dual – ladder career path </li></ul><ul><li>Seed Capital </li></ul><ul><li>Tolerance for failure </li></ul><ul><li>Rewards for success </li></ul><ul><li>R& D spending </li></ul><ul><li>Three – tiered research </li></ul><ul><li>Technology forums </li></ul><ul><li>Customer contact </li></ul>
  41. 41. Business Model Comparison <ul><li>Software </li></ul><ul><li>Journalism </li></ul>Core Competency Can predict next years results +/- 100% <ul><li>+/- a few percent from prediction </li></ul>Uncertainty <ul><li>Update news all day long </li></ul><ul><li>Design Interactive Content </li></ul><ul><li>Build/maintain internet infrastructure </li></ul><ul><li>Sell digital ads </li></ul><ul><li>Generate subscriptions </li></ul><ul><li>Gather news </li></ul><ul><li>Sell ads </li></ul><ul><li>Print </li></ul><ul><li>Distribute </li></ul>Value Chain Architecture <ul><li>High Quality Content </li></ul><ul><li>Price </li></ul><ul><li>Interactive Multimedia </li></ul><ul><li>More than NYT </li></ul><ul><li>High Value Content </li></ul><ul><li>Premium Price </li></ul>Value Proposition <ul><li>Global Readership </li></ul><ul><li>Internet Companies </li></ul><ul><li>Wealthy, Elite, </li></ul><ul><li>sophisticated Reader </li></ul><ul><li>Primarily in NY area </li></ul><ul><li>Fortune 500 </li></ul><ul><li>advertisers </li></ul>Customer NYTD NYT
  42. 42. Forgetting – Three Common Mistakes <ul><li>Hire only from within </li></ul><ul><li>Report to CoreCo </li></ul><ul><li>Adopt CoreCo’s performance measures </li></ul>
  43. 43. Borrowing – Three Common Mistakes <ul><li>Borrow Too Much </li></ul><ul><li>CoreCo’s Short – Term Incentives Are Too Powerful </li></ul><ul><li>Neglect tensions between NewCo and CoreCo </li></ul>
  44. 44. Learning – Three Common Mistakes <ul><li>Rigid Accountability to Plans </li></ul><ul><li>Shared Planning Meetings with CoreCo </li></ul><ul><li>Annual Planning Cycle </li></ul>
  45. 45. Borrowing – Three Common Mistakes <ul><li>Borrow Too Much </li></ul><ul><li>CoreCo’s Short – Term Incentives Are Too Powerful </li></ul><ul><li>Neglect tensions between NewCo and CoreCo </li></ul>
  46. 46. The Best Sign of a Healthy Learning Process : <ul><li>Predictions Improve as the Business Matures </li></ul>Learning Accuracy of Predictions Years Wild Guesses Informed Estimates Reliable Forecasts
  47. 47. Ten Rules <ul><li>Ideas are only beginnings </li></ul><ul><li>Hire outsider, in influential positions </li></ul><ul><li>NewCo reports above CoreCo </li></ul><ul><li>Redefine NewCo’s performance measures </li></ul><ul><li>Leverage Only 1-2 of CoreCo’s Valuable Assets </li></ul><ul><li>Anticipate Tensions at Points of Interaction </li></ul><ul><li>Make Borrowing Easy for CoreCo </li></ul><ul><li>Hold NewCo Accountable for Learning </li></ul><ul><li>Increase NewCo’s Planning Frequency </li></ul><ul><li>Hold Separate Planning Meetings for NewCo </li></ul>FORGET BORROW LEARN