This document discusses innovation in multiple industries and contexts. It begins by defining innovation as the exploitation of new ideas and discusses how innovation is essential for jobs, businesses, products/services, and environmental processes. It then provides examples of different types of innovations, frameworks for understanding innovation opportunities, and strategies for collaborative innovation both inside and outside an organization. The document emphasizes that innovation is important for companies, employees, nations, and society by enabling new products/services and economic growth. It also stresses that customers and partners are important sources of innovative ideas.

1. Philip C Zerrillo Ph.D.
Singapore Management University
pzerrillo@smu.edu.sg

2. INNOVATION
Innovation, the exploitation of new ideas, is absolutely
essential to safeguard and deliver high-quality jobs,
successful businesses, better products and services for
our consumers, and new, more environmentally
friendly processes.
(RT Hon. Tony Blair)

3. INNOVATION
“Imagination is more important than knowledge “ – Albert Einstein

4. INNOVATION
IS THE
CREATIVITY PROCESS OF
GENERATING CONVERTING
NEW OR CREATIVE
NOVEL IDEAS IDEAS INTO
SOMETHING
OF VALUE

5. Some Thoughts on Innovation
 Inside-outside
 Four Quadrants
 The Innovation Portfolio Pyramid
 Marketing Innovation and the lifecycle

6. There are 10 types of innovations 1
Inside-out Outside-in
Process. Offering Delivery Finance
Enabling Core Product/Service Service Customer Channel Brand Customer Business Value
process process performance system Service experience model Network
assembled basic features,
capabilities performance,
and functionality how you connect how the
your offerings to enterprise
proprietary processes your customers makes money
that add value
(including ICT) extended system that
how you express
surrounds an offering
your offering’s enterprise structure
benefit to customers and value chain
how you service
experience for customers
your customers how you create an overall

7. 12 Ways to Innovate
Traditionally innovations are more often thought of in terms of products and
technology. These are components of innovation, but ultimately innovation is
about business models.
Mohanbir Sawhney, Robert C. Wolcott and Inigo Arroniz, Sloan Management Review, Spring 2006

8. The Sources of Firm Growth (Michael Porter)
Inorganic
Leading companies need a Mergers
Growth
systematic framework for profitable &
growth – sustained growth of Acquisitions
revenues and profits over a long
duration with shareholder returns High risk & return
that
exceed the cost of capital Organic
Expand the Core
‘Sweet spot’ Growth
Moderate risk & higher return
Optimize the Core
Operational
Excellence
Low risk & return

9. The market life cycle, which is different than the technology adoption life cycle, is elastic–meaning profits from a
particular market segment are not inherently finite–and companies can apply different types of innovation at
different times to keep the middle majority market elastic, maximizing profits from products.
Technology Application Product Process Experiential Marketing Business Model Structural
Innovation Innovation Innovation Innovation Innovation Innovation Innovation Innovation
Product Customer Operational
Leadership Intimacy Excellence

10. Some of these are easier than others to engage or overcome.
Marketing Innovation
Experiential Service
Innovation Innovation
Process Business
Innovation Model
Innovation
Product
Innovation
Application Structural
Innovation
Revenue Growth
Innovation
Disruptive
Innovation
Time
Source: Moore (2005)

11. Some Apply More Than Others
“Our Industry is Unique?”
 Environment is low service
 Opportunities for after care service are limited
 Purchase takes place among a series of other purchases
 Customer experience level is high
 Purchase frequency is high
 Transaction needs to be completed immediately
 Customization opportunities are limited

12. So; Where are the Innovation Plays?
1. Cross functional innovation – (Any Where)
 Every function is a place to innovate!
 Finding the systemic business model innovation that
enables market-leadership
 Finding a business model that creates value for multiple
parties
2. Marketplace innovation
3. Product innovation
4. Supply chain innovation (an opportunity any process)
5. Collaborative innovation (Inside and Outside)

13. Why Is Innovation important?-
The Stakeholders- View
 Company: firms that are innovative achieve higher
growth rates and sustained profitability
 Greater market valuation
 Reduced funding costs
 Employees- Experience higher morale, greater work
satisfaction, and esprit de corp
 Easier to recruit, and retain
 Nations with a solid innovation engine have higher
GDP growth, and greater economic prosperity
 Singapore vs. Kenya ?

14. The Stakeholders View-
Impact on Society
 Innovation enables a wider range of goods and
services to be delivered to people worldwide
 Media, efficient food production, telecommunications,
improved medical technologies, better transportation
etc.
 Increases gross domestic product or the output of the
society by making labor and capital more efficient and
effective

15. Who is missing?
 Who is the missing party in this innovation discussion?
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16. Who is Missing?
 The partner and customer firms!
 a study of 756 technology CEO’s reported that
customers and partners were a significantly greater
source of ideas for innovation than their own
employees and R&D staff (IBM Industry Innovation
CEO report)
 The highest quartile of performers source 30% more
ideas from outside their firm

17. Who is Missing?
 Firms that look outside and inside perform best!
 80% of the highest performing quartile cited collaboration is
of great importance to their innovation process, as opposed
to under 50% for the remaining firms.
If you think you have all of the answers, or that it must be
invented here- you are wrong

18. Collaboration
 Collaboration insures
 Customer centric innovations
 Ready market
 Committed market
 Informed market
 Reduces commercialization cost
 Provides certainty

19. Problems With Collaboration
 Control
 Timing
 Speed
 integration
 Varying commitment
The most successful innovation partnerships come when
the firm is open, quick and experienced in working
together.

20. A Few Examples of Collaborative
 Johnson Controls
 Seats to interiors
 Dell
 The payoff to collaboration!
 Win - Win: How to get your supplier to fund your
innovation
 The airline Industry

21. There are five mutually exclusive Market Responding Growth Drivers that create top-
line unit growth.
High-Level Growth Drivers
Increase
Acquire New
Volume/Revenue with
Customers
Existing Customers
1. 2. 3. 4. 5.
Improve Create New Stimulate Customers of Non-Users of
Retention Uses Current Uses Other Product /
Companies Service
While Growth Drivers provide a high level sense for what behavior we want to change or
reinforce, further specificity is often required.
Determining which of these is the right course of action is a meaningful first step

22. Market Driving Strategies
Bring “Best  Make an acquisition that “domesticates” the market and
Practices” reduce intensity of competition
inside  Example: Haliburton purchase of Landmark Graphics
(reservoir flow visualization)
Modify the
Value
 Change traditional power structure in value chain
Creation  Example: Sony Playstation vs. game developers and
Process publishers- (used third party developers to build scale)
Change the  Develop scale that changes the competitive dynamic
Basis of
Scale  Example: The Auto-industry and the capital allocation
 Eliminate players in the value chain, such as traditional
Rethink distribution channels and suppliers
Eliminate
Players or – Example: Dell computer, online books, music….
Stages

23. Market Responding
 Everything starts with the customer. Begin with the customer and
develop your business model---start with a demand and work
backward---- The Market responding or Customer centric firm takes their
lead from the customer
 To be terrific they must go outside of the customer and understand the
context in which their business takes place
 Understand the “other forces” that will effect performance and the customer’s
demand (e.g., competition and the environment )
 Responding firms need to have insightful information and disseminate it
broadly within the firm
 Market driven organizations systemically outperform their rivals
 Customer satisfaction, retention, loyalty advocacy

24. Acquire Player in Value Chain

27. Garden.Com√√√

28. Delivering Value to Customers
Product/Service Basis for Differentiation
Characteristic Value Mechanism
Price Lower Price
Search Attributes
Performance Unique Features
(Tangibles)
Benefits Service Packages
Experience and Credence Reliability Service Quality
Attributes Responsiveness Service Delivery
Managed Risks
Perceived Risks
(Intangibles and Reward Loyalty
Relationships
Non-Monetary Costs) Trust Image, Expertise
Source: Rajendra Srivastava
Executive Briefing

29. Customer/Brand Value at Capital One
Product/Service Basis for Customer Value
Characteristic
Annual fees Interest rates
Search Attributes Credit limit Late fees
(Tangibles) Air-Miles Auto insurance
Experience and Credence Knowledgeable Service Reps.
Attributes
Time spent on hold (phone & mail jail)
(Intangibles and Accuracy of postings
Non-Monetary Costs) Dispute resolution
Prestige & reputation Good Value
Cares about customers Trust
Which attributes are important for attracting new customers? ….. keeping
old ones?
Source: Rajendra Srivastava
Executive Briefing

30. 45%
20%
15% 15%
Better Cheaper Lack of Inadequate
Product Product Personal or Rude
Attention Service
Search Attributes Experience Attributes
Customer Attraction Customer Retention
Source: Technical Assistance Research Programs Institute
30

31.  Leverage technology to
improve responsiveness
 One stop shopping
 Service excellence at a fair
price
 Event-driven X-sell and Up-
sell
Customer insight
management
Risk monitoring
31

33. To Develop a True Growth Culture- We Need
Champions –Everywhere!
1. Framework for understanding the innovation event
2. Insight into the opportunities for innovation
3. An understanding of where we can commit
disproportionate resources for disproportionate results
4. Detailed planning process charged with action
5. Frameworks for monitoring performance
6. Creation of Innovation coaches/champions/ninja

34. Airline Industry 1980- the
Albatross
 Key issues
 “Seat is a seat”
 Costs are overwhelming
 Conventional logic-
 “low innovation industry- mange costs!”
 Key Costs
 Fuel
 Labor
 Capital