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Unleashing innovation across the value chain
The document discusses unleashing innovation across the value chain. It defines innovation as using existing resources and leveraging external factors like technology and policies to improve efficiency. The document advocates for an "innovation hub" structure within organizations to promote ideation, implementation, sustainability, and permeability of innovation. It provides examples of innovation at Tata Nano and Devi Prasad Shetty Hospitals. The conclusion emphasizes measuring innovation at all levels and tying it to overall performance, delivering value through innovation, and the role of education and government in fostering a culture of innovation.
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Unleashing innovation across the value chain
- 1. UNLEASHING INNOVATION ACROSS THEVALUE CHAIN GREATLAKES INSTITUTE OF MANAGEMENT JEEWANT SINGH GUPTA GUNEET GYANI
- 2. What is Innovation Innovation is not just inventing a new product; but it is more about using the already existing resources and leveraging external factors (like technology, government policies etc.) in ways that improve the efficiency of the complete value chain Innovation Across Value Chain Page 2 Source Ref: Competitive Advantage: Creating and Sustaining Superior Performance, Porter/
- 3. JUGAAD - INDOVATIONEXISTS IN OUR DNA Sources for the images: articles.economictimes.indiatimes.com
- 4. Indovation- Tata Nano. External Inputs- Designers, customer expectations, competitive environment Engineering Operations Component Marketing Design & Sales Two cylinder engine. Four presses were installed instead of two used in Club multiple components “A Promise is a Promise” Engine in the rear. traditional press shops. into a single piece to reduce “Brand positioning and Adding dummy weights to procurement costs. Reduced the time for door repositioning” balance the horizontal and production by half, thereby Integrate components to “Effective promotion through lateral vibrations. bringing the overall costs serve more than one function SBI loans- push + pull down. at a time. strategies” Gandhian Engineering- Minimalistic approach to production. Source:, National Geographic: http://www.youtube.com/watch?v=8wZ8ZU6swxo
- 5. CURRENT INNOVATION GAPSin a typical Indian enterprise AS IS CURRENT GAP TO BE IDEATION IMPLEMENTATION &EXECUTION REALIZATION & NON RECEPTIVE CHANNELIZATION RECEPTIVE INNOVATION HUB UN- SUSTAINABLE SUSTAINABLE IMPERMEABLE PERMEABLE Tap current resources and Create new opportunities Page 5
- 6. THE INNOVATION HUB– STRUCTURE INNOVATION HUB Indovation Champions Internal External CHANGE AGENTS Vertical specific Indovation Champion Middle Level Indovation Leads Grass Root Level Indovation Workers – SCOUTS Page 6
- 7. AS IS TO BE NON RECEPTIVE RECEPTIVE IDEATION IMPLEMENTATION &EXECUTION UN- SUSTAINABLE SUSTAINABLE IMPERMEABLE PERMEABLE Page 7
- 8. THE INNOVATION HUBWORKFLOW IDEATION to IMPLEMENTATION & EXECUTION Indovation Champions moderation, evaluation of idea at organization level. Internal External Typically honorary positions. Regular Unit level work, appraisal of Leads, Appraisal A Part of the appraisal linked to Vertical specific Indovation the overall effect on the bottom- of ideas, final sign off. Champion line and the topline due to the ideas implemented in the unit Implementation, regular Middle Level Indovation A part of the overall appraisal work, appraisal of the scout. Leads linked to the number of ideas in execution. Ideation, Execution, Grass Root Level Innovation Appraisals directly linked to the dissemination and Workers – SCOUTS number of quality ideas compliance. generated and disseminated NON – RECEPTIVE to RECEPTIVE
- 9. AS IS TO BE NON RECEPTIVE RECEPTIVE IDEATION IMPLEMENTATION &EXECUTION UN- SUSTAINABLE SUSTAINABLE IMPERMEABLE PERMEABLE Page 9
- 10. UNSUSTAINABLE to SUSTAINABLE CIRCULATORY SYSTEM of INNOVATION No. of Ideas reduce as they filter to the next level No. if Innovative ideas (Research and Development) 1st Level Screening 2nd level screening Rejected Ideas are circulated Approval and Feasibility back for rework and modification test depending upon the level and Quality of Idea Pilot Launch Launch Many good and innovative ideas get rejected because they are not worked upon or presented well. Page 10
- 11. AS IS TO BE NON RECEPTIVE RECEPTIVE IDEATION IMPLEMENTATION &EXECUTION UN- SUSTAINABLE SUSTAINABLE IMPERMEABLE PERMEABLE Page 11
- 12. UNPERMEABLE to PERMEABLE Current Value Chain Inbound Outbound Marketing Operations Service Logistics logistics and Sales Drill Holes within the system Inbound Outbound Marketing Service Operations Logistics logistics and Sales Flow of Innovation Page 12
- 13. The Innovation ValueChain: A Systematic Way of Improving and Measuring the Innovation Process IDEA GENERATION CONVERSION DIFFUSION IN-HOUSE CROSS- EXTERNAL SELECTION DEVELOPMENT SPREAD POLLINATION Collaboration Screening and Movement Dissemination Creation within Collaboration with parties initial funding from across the a unit across units outside the idea to first organization firm result KEY Do people Do we create Do we source Are we good Are we good at Are we good QUESTIONS in our unit good ideas by enough good at screening turning ideas at diffusing create good working across ideas from and funding into viable developed ideas on their the company? outside the new ideas? products, ideas across own? firm? businesses, the company? and best practices? KEY Number of Number of Number of Percentage Percentage of Percentage PERFORMANCE high-quality high-quality high-quality of all ideas funded ideas of penetration INDICATORS ideas ideas ideas generated that that lead to in desired generated generated generated end up being revenues; markets, within a unit. across units. from outside selected and number channels, the funded. of months to customer firm. first sale. groups; number of months to full diffusion. Source: The Innovation Value Chain. By Morten Hansen and Julian Birkinshaw. Harvard Business Review, July 2007.
- 14. EDUCATIONAL & GOVERNMENTSUPPORT for SUSTAINED INNOVATION – An External Barrier EDUCATIONAL • Firms should leverage and collaborate with Educational institutes for Research and constant innovation. Government • Companies should look out for young Scouts. Target schools and colleges. • Support PHD graduates and faculty and fund research Educational Enterprise GOVERNMENT Institutes • Innovation generates economic value, new jobs in the economy and cultures of entrepreneurship. • Fund R&D departments specially for SME’s • Government to provide support for companies high on patents • Redesign curricula to emphasis on industrial Innovation, problem-solving, design, experimentation. Page 14 Source : http://knowledgecommission.gov.in/downloads/documents/NKC_Innovation.pdf
- 15. CASE STUDY -DEVI PRASAD SHETTY HOSPITALS Indovation in Service Industry This hospital caters the lower section of the society with more than 30000 operations a day at affordable prices OPERATIONS & LOGISTICS MARKETING Agile 40 : 60 pricing DISCRIMINATION strategy Equipment is on rent basis Cutting down costs 40 % people who can afford surgery pay the tremendously rack rate Family is trained to take care of the patient. 60 % below the rack rate Hence nurses are concentrated in the ICU Educating doctors about the financial No Air-conditioning apart from ICU and other implications of their decisions important medical rooms The Henry Ford concept of creating economies of scale through mass production was duplicated in health care TAKE AWAY: • Lower Operating Leverage in order to be agile and innovate under low cost • Focus on LEAN technology practices and cost – effective marketing and pricing strategies . Page 15 Source : http://www.youtube.com/watch?v=ISA0ZvHp5MA
- 16. Conclusions Strategic approachto unleashing innovation across the value chain. Channelizing and realizing the “jugaad” potential. Measuring innovation at each level and tying it with the overall functioning to make it a part of the DNA. Innovation is not an end, but a means to an end- delivering value. Educational institutes and government have a major role to play in fostering a culture of innovation at the macro level. Page 16
- 17. We are nowopen for questions. GREATLAKES INSTITUTE OF MANAGEMENT JEEWANT SINGH GUPTA GUNEET GYANI
Editor's Notes
- #3 How exactly do we define Innovation?On analyzing how organizations across the world view innovation, we concluded that innovation is not just inventing a new product; but it is more about using the already existing resources and leveraging external factors (like technology, government policies etc.) in ways that improve the efficiency of the complete value chain. Thus, in our study, we conclude that innovation is not the end, but a means to achieve the end result of creating value for all the stakeholders across the entire gamut of activities of an organization.
- #5 Tata Nano is the perfect example of innovation at every level of the value chain. From procurement of materials at a low cost, to efficient manufacturing practices like The Gandhian Engineering Approach (minimalistic use of components) and a strong emotional connect with the audience through powerful Brand Positioning and reposition, Tata Nano is a prime example of how Indian-ness has helped enterprises Indovate and Innovate.
- #6 Innovation in the Indian Context- barriers:We have approached the problem statement keeping the Indian Enterprise in mind. From focus group discussions with members of the PGWPM batch at Great Lakes Institute of Management (working professionals, average age 35, holding middle management positions), we have come to the conclusion that the biggest deterrent to innovation within a typical India enterprise is insecurity of managers at the middle management level. These insecurities arise due to multiple reasons like the inability to adapt to radical changes and the aversion of coming out of the comfort zone that the middle management is fine tuned to in their daily work routine. We have given suggestions based on the premise that we need to make every stakeholder comfortable and accountable in order to make innovation a part of the DNA and everyday functioning of the organization at large.
- #7 A Typical Value Chain:Proposed by Mckinsey and later formulated and developed by Michael Porter, the concept of value chain has gained a lot of traction in the recent past as the size of organizations keeps increasing. Value chain analysis help the organizations perform in an increasingly complex global business environment. Porter and McKinsey formulated the value chain concept with the help of this diagramThe Solution: Innovation Hub as a separate support function.We propose that every organization that wants to implement innovation in its fabric should think about establishing an independent “innovation hub” as a support function in the value chain. The value chain diagram as laid down by Mckinskey would be modified as above
- #11 Sustainability: There are two major ways in which we would be sustaining innovation across the value chain using the innovation hub. First, we reward and motivate the people at each level of the innovation hub according to their aspirations and second, we make a funnel-structure repository of rejected ideas so that the ideas are not outrightly rejected and taken up at appropriated stages.Rewards and motivation:At the scout level, since we are linking the appraisal directly to the quantity and quality of the ideas, it makes a lot of immediate sense for the scout to sustain innovation in order to sustain his own growth. At the Innovation lead level, we are linking a part of the appraisal pie with the number of ideas executed, ensuring that implementable ideas are actually implemented. Implementing these ideas will in turn improve the overall efficiency of the team lead’s team and have an exponential effect on bumping up the other appraisal parameters of the lead. Thus, the innovation lead benefits dually from the direct impact and the indirect impact of implementing the idea.At the Unit head level, innovation is indirectly impacting the overall bottomline and topline of the unit, which are generally linked to the bonuses being doled out to the Unit Heads across organizations.Idea Repository:The idea behind the idea repository is to log the progress of an idea at every stage of its bottom-up movement from the ideation at the scout level to the approval at the unit head level. Now, in the process, some ideas might get rejected in one of the many stages we have identified in the below diagram. We suggest that each idea be taken up for rework from the stage of rejection and not be rejected altogether. This will ensure that the ideation is sustainable over a long period of time. We can also prioritize ideas with respect to their rejection stage. An idea that was rejected at a higher stage would require less rework as compared to an idea that was rejected at the ideation stage. Hence, the former should be prioritized higher than the latter.
- #15 The most important external barrier to Innovation, as perceived by both large firms and SMEs, is skill shortage due to the lack of emphasis on industrial Innovation, problem-solving, design, experimentation, etc. in the education curricula Other prominent external barriers are lack of effective collaboration with research in universities and R&D institutions, excessive government regulation as well as insufficient pricing power to derive value from Innovations.