This document discusses building an innovation and strategy process. It emphasizes that operational effectiveness alone is not a strategy and that both operations and strategy are needed for superior performance. It also discusses assessing the current state, getting management buy-in, setting up an innovation governance process, starting with tangible initiatives, and creating structures to support innovation. Additionally, it covers positioning options, scouting options, and stepping stones as stages in innovation and building an opportunity portfolio.

1. BUILDING AN
INNOVATION &
STRATEGY PROCESS
 Alan Harlan CEO
 09/13/2014

2.  Operational Effectiveness (OE) is not Strategy
 Improved OE is important, yet not sufficient
o OE competition does shift the productivity frontier outward
and produces absolute improvement in OE, but relatively
improvement for no one;
o The more benchmarking the companies do, the more
competitive convergence they get (the more
indistinguishable they are from one another )
 OE and Strategy both are required to superior performance
 Company must establish a difference it can preserve
 Productivity frontier is constantly shifting TQM
benchmarking
What is Strategy?

3. 3
Case Study
IKEA’s Activity System

4. 4
Southwest Airlines Case Study

5. New strategy playbook: innovation proficiency
From To
Innovation is episodic Innovation is an ongoing, systematic
Governance and budgeting done the same
way across the business
Governance and budgeting for
innovation separate from business as
usual
Resources devoted primarily to exploitation A balanced portfolio of initiatives that
support the core, build new platforms,
and invest in options
People work on innovation in addition to their
day jobs
Resources dedicated to innovation
activities
Failure to test assumptions; relatively little
learning
Assumptions continually tested; learning
informs major business decisions
Failures avoided and un-discussable Intelligent failures encouraged
Planning orientation Experimental orientation
Begin with our offerings and innovate to
extend them to new areas
Begin with customers and innovate to
help them get their jobs done
5

6.  Positioning options consist of initiatives in which you know there is a demand, but what is
unknown is what combination of technologies and capabilities will be required to address that
demand. Mobile devices such as smartphones in the United States are a bit like this—because
there is no overall standard for wireless service, handset makers need to keep their options open
by maintaining access to various types of standards.
 Scouting options are situations in which you have a capability or technology that you know
how to use, and what you are trying to do is extend its reach into a new arena. That could be a
new customer segment, a new geography, or a new application. Initiatives in this stage require a
fair amount of prototyping and testing before you learn what will ultimately work. Apple, for
example, built a mock-up of its retail store format and rigorously tested every aspect of the
experience before rolling out its actual stores.
 Stepping stones are situations in which you think there will be a demand, and think the
technology will eventually be good enough to address it, but the moment is pretty far off. The
goal here is to begin commercializing with modest applications that solve a real problem but that
aren't too technologically challenging. The way nanotechnology is being developed today is a case
in point—everybody knows that down the road nano manufacturing is going to produce marvels
we can only dream of today. What is commercially available using nano-scale technology today?
Wrinkle-free Docker's pants. Cellphone screens that are fingerprint-resistant. All great, as they will
lead step-by-step to an eventual commercial solution.
6
Positioning Stages

7. Building an Innovation Proficiency
• Step 1. Assess the current State of Things and Define
the Growth Gap
• Step 2. Get Senior Management Alignment and
Resource Commitment
• Step 3. Set Up and Innovation Governance Process
• Step 4. Start Building a System and Introducing It to the
Organization
• Step 5. Start Off with Something Tangible and Real
• Step 6. Create the Supporting Structures for Innovation
7

8. An opportunity portfolio
8
Technical and execution
uncertainty
High Positioning options
Stepping
stones
Medium Platform launches
Scouting
options
Low Core enhancements
Low Medium High
Market and organizational uncertainty

9. A low-growth portfolio
9

10. Competitive AnalysisDifferentiation
10
6
5
4
3
2
1
0
Ranking
Competitive Worksheet
EPAM
SS
Global
Differentiation
worksheet
EPAM SS Global
SDLC Best Practices 2 4 2
UI/UX COE 5 1 3
Analytics DS Practices 3 1 3
Diverse Mobil Port Folio 4 2 3
Embedded Development 0.5 0 3
Retail Vertical 4 2 4
Healthcare Technology 1.5 3.5 4.5
Enterprise Tech/ NetW 4 4 4
Digital Media 5 1 3
Automotive 0 0 5

11. Operational Effectiveness is not strategy
Embody your culture
Fail Fast ( Intelligent Failure )
Have as much FIT as possible
 Differentiate from your competition
Continuous improvement
Have fun!
11
Summary

12. Thank you
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