Bearing Consulting presentation at the Place Excellence conference in Izmir, Turkey, in April 2012

1. Innovative Places (and Companies)
Conclusions for Izmir
Jörgen Eriksson
Izmir April 5, 2012
Bearing Consulting
Innovation is creative destruction, where entrepreneus combine
existing elements in new ways... – Joseph Schumpeter (1883-1950)

2. Innovative places (and companies)
1. Innovation in our time
2. How to make a place innovative
3. How to make companies innovative
4. Conclusions for Izmir
2

3. To achieve Place Excellence requires innovation
3

4. Literature on innovation
We live in
Litterature a time of
n visar många vägar... Increasing
speed
4

5. A definition of innovation
Innovation is creative destruction, where entrepreneurs
combine existing elements in new ways…
After Joseph Schumpeter (1883 – 1950)
5

6. Innovative places (and companies)
An approach for how to make a
place innovative
6

7. Seattle in the 1970s – a place in decline
In the 1970s Seattle became synonymous with urban decline
7

8. Seattle – example of success
World class companies
based in Seattle:
- Microsoft (Redmond)
- Amazon.com
- Starbucks
- Nordstroms
Seattle's growth reveals the benefits of concentrating smart people in dense
cities
Cities like Seattle succeed by attracting smart people who educate and employ
one another
Today, Seattle is one of the wealthier and most productive metropolitan areas in
the United States. - Per-capita income is 25 percent above the average
- Per-capita productivity is 37 percent above the average
8

9. What is the lesson from Seattle?
1. Keep and attract talented people
2. Set up an innovation support system
9

10. What is included in an innovation support system?
1. Keep and attract talented people
2. Set up an innovation support system
Innovation centers are a key.
This includes:
• Technology transfer centers at Universities
• Science parks
• Industry Cluster Organisations
• Business labs
• Business Incubators
• Business Acceleration Centers
• You also need Investors and Venture Capital!
10

11. Example of TTO: University of Porto UPIN
The University of Porto established a
Technology Transfer Office in 2004.
Activities includes R&D funding
programmes, R&D, entrepreneurship
and Industry-University liaison
11

12. Technology transfer processes
Definition:
Technology transfer means a process in
which science or knowledge or capabilities
are transferred or moved from one entity
to another for the purpose of further
development and commercialization
It is important to have a multi-disciplinary
approach, which connects scientific discovery
with development of intellectual property
and business
Usually, technology transfer processes
includes identifying and evaluating
technologies, protecting IPR and developing
commercialization strategies including
marketing or licensing or spin-off creating
Proprietary and Confidential. All Rights Reserved

13. Business Incubators and Innovation Centers
In European Union there are currently 10 000
business incubators and innovation centers
www.ebn.be
13

14. Example of innovation centre: ESADE Creapolis
ESADE Creapolis is a joint venture
between ESADE, a consortium of
Spanish financial institutions, local
government institutions and
business associations
The organisation manages a
technology and innovation park on
the ESADE campus in Sant Cugat
outside Barcelona
Traditionally, companies innovate
through independent generation of More than 70-multi sector companies are
ideas and knowledge. ESADE located at ESADE Creapolis, sharing a
Creapolis speeds up innovation by common goal:
opening up the process and
fostering cross-fertilization with To accelerate innovation
other participating companies
14

15. Sophia Antipolis – Second Generation of Science Parks
70% nature and parks
No building can be higher then the surrounding trees
An early science park in Europe. Created by Senator Pierre Laffitte in 1968 15

16. Other examples of science parks
Mjärdevi Science Park
Sweden
16

17. Venture Capital Value Chain
Traditional
National and
“Regional international
Funds
Expansion
Regional
Funds”
early stage
“National
funds
Expansion
Funds”
Business
Angels
Investment
€ 0.01m 0.1m 0.3m €1m €3m €10m Amount
Research The ”GAP” ”Venture Capital” Value Chain
Funding
Seed / Start Up Capital Early Expansion Capital Later Expansion Capital
17

18. Key elements for creating a regional innovation support system
Key business elements Finance Know-how
(or “assets”) as the base Growth companies
Venture and
for creation of a regional industrial
Incubator
programs
capital
innovation support system Start-up companies
Innovation centers are the key: Business plan
Entrepreneur
Seed
• Science parks financing
skills and
training
• Business labs Business idea
• Incubation
• Acceleration Patent
• Alumn Pre-seeding
Advice and
scouting
• Growth Innovation
Research and education
18

19. Innovative places (and companies)
What results can we expect from
the innovation support system?
19

20. How successful is disruptive technology development?
Proprietary and Confidential. All Rights Reserved

21. Challenges of technology transfer
Formula for achieving success:
Assuming high success probabilities:
Even with high success probabilities in each factor, the cumulative effect is only 54%
Proprietary and Confidential. All Rights Reserved

22. Innovative places (and companies)
The challenge for Izmir and Turkey
22

23. The Challenge for Izmir and Turkey
Turkey has a high growth, yet a trade deficit
Turkey should move towards manufacturing
added value products and services
= Knowledge economy
23

24. A hyper competitive world requires added value products and services
Gaining added value by moving from:
Low complexity High Complexity
Tangibles Intangibles
24

25. Innovative places (and companies)
The Bearing A3 model
for development of
3G innovation systems
25

26. Building blocks for a 3G innovation system
26

27. Your Sweet Spot Defines Your Future Success
Where your city meets What?
target markets needs in a Where?
way in which your Why?
Competitive Customers’ competitors cannot How?
places offerings needs
3
1
Sweet
Spot
2 Sweet spot = unique spot
How to protect/define boundary 1,2,3
Your own city
assets and
capabilities
27
Source: Collis & Rukstad (2008). Can You Say What Your Strategy Is?, HBR (April 2008)

28. A model for design and implementation of innovation systems
Competitive ‘clusters of competencies’
obtain strengths by mastering available
resources, by constructing new
capabilities, and by attaining access to
clusters elsewhere and to global
business networks.
1. Actors: Typically, clusters are constituted
by innovative firms, R&D labs and
supporting institutions, investors, and, as
important stakeholders, resourceful
clients, lead customers, other user
groups.
2. Assets – particularly the capabilities for
invention, original design and prototyping,
and the related infrastructure of a cluster
– are enablers of innovation. Clusters
contain tangible as well as intangible
capabilities.
3. Activities – above all the processes in
support of innovation – are at the core of
the cluster, communicate its rationale, and
shape its success. 28

29. 3G Innovation Systems
Nordic City of Living and Learning – Chengdu, China
The 3G Innovation System is perceived
as the quintessence of the ‘knowledge
triangle’ of research, education and
business-related innovation, when all three
functions are located closely together –
sometimes even in the same building.
29

30. The Bearing A3-model – Implementation in Chengdu
30

31. Innovative places (and companies)
How to make companies
innovative
31

32. The current situation in the world markets
...within a hypercompetitive market
How can you measure,
improve and invent new
What is your competitive advantages?
future competitive
advantage?
Where is your
value created?
32

33. Change can happen very quickly…
In the year 1994, Motorola was world leader in (analogue) mobiles,
seven years later Nokia was world leader in (digital) mobiles
60%
50%
Motorola
40%
30%
20%
10% Nokia
0%
Market shares 1994 Market Shares 2001
33

34. FROM #1 TO CRISIS IN LESS THAN 3 YEAR...
Why ?
34

35. HYPER COMPETITION
“Either you innovate or you’re in commodity hell. If you do what
everyone else does, you have a low-margin business.That’s not
where you want to be.”
Sam Palmisano, CEO IBM
... an absolute truth also for places, regions and countries!
35

36. Disruptive and emerging technologies
36

37. Challenges
“..because the execution of an idea is
always more important than the
brilliance of the thought...”
(Harvard Business Publishing – Morgan, Levitt &
Maleck – INVEST model)
Proprietary and Confidential. All Rights Reserved

38. Case study – The Lego Story
Proprietary and Confidential. All Rights Reserved

39. Case study – The Lego Story
Y2000 "Toy of the Y2004-03, the
Century" by owner & CEO
Fortune magazine Kjeld Kirk
and the British Kristiansen decide
Association of Toy to go back to
Retailers basic!
Y2003 – 2004 Y2004-10, Jørgen
Huge losses, close Vig Knudstorp
to bankruptcy appointed as new
CEO
39

40. Case study – 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) 40

41. The Lego story of transformation
Innovate Execute
Stabilize Deliver what
operations we promise
Improve the Value Creating
business Partnership
Define Rigid Execution
Raison d'être Platform
Organic
growth Differentiated
Value Chain
Offshoring
Consumer Driven
Restore the Value Chain
balance sheet
2200
Operational Profit
1200
MDK
200
-800 2003 2004 2005 2006 2007 2008
-1800 41
Year

42. Lego key Achievements
Clear Raison d'être: “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
42

43. Lego 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 people
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
43

44. 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 on
an oligopolistic/niched and international toy market...
44

45. Also for Companies - Your Sweet Spot Defines Your Future Success
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.)
45
Source: Collis & Rukstad (2008). Can You Say What Your Strategy Is?, HBR (April 2008)

46. Value is Created on the ”Edge” of Your Business
Business Product & Sales & Delivery &
Operation
Model Services Marketing Consumption
46

47. Bearing Innovation Navigator
Initiated by the work of Sawhney, M., Wolcott, R. C., & Arroniz, I. (2006). The 12 Different Ways for Companies to
Innovate. MIT Sloan Management Review , 75-81. 47

48. Innovative places (and companies)
Conclusions for Izmir
48

49. Conclusions for Izmir
1. Develop a unique place brand based on historic
values and icons, stretched into a modern context
49

50. Conclusions for Izmir
2. Create a clear place development plan, with
stepwise milestones
Achieving
the milestones
will create trust
50

51. Conclusions for Izmir
3. Develop attraction factors to recruit and retain
talented people
51

52. Conclusions for Izmir
4. Develop an innovation support system
52

53. Conclusions for Izmir
5. Work with leadership and achiving consensus for
place development plan across Izmir
53

54. Summary - conclusions for Izmir
1. Develop unique place brand based on historic values and icons,
stretched into a modern context
2. Create a clear place development plan, with stepwise milestones.
Achieving the milestones will create trust
3. Develop attraction factors to recruit and retain talented people
4. Develop an innovation system
5. Work with leadership and achiving
consensus for place development
plan across Izmir
54

55. www.placemanagement.net
55

56. INNOVATE - EXECUTE™
Innovation is creative destruction, where entrepreneus combine
existing elements in new ways... – Joseph Schumpeter (1883-1950)
56