1 innovation academy wednesday 21st april 2010 stephen spring [email protected]
TRANSCRIPT
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The New Industrial OrderAggressive newcomers have never been more plentiful:
• Bunnings
• Dell
• eBay
• Virgin
• Amazon
• Subway
• E*Trade
• Sephora
• Vodafone
• Starbucks
• Phoenix University
• Jet Blue
• Fedex
After Hamel ‘Strategos’ 2000
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The New Industrial OrderNot to mention the consumption of new products:
• Luxury hybrid 4WDs
• Sports drinks
• NetBooks
• iPhone
• LED Screens
• eBooks
• Digital cameras
• Kindle/iPad
• Fresh mashed potatoes
• Alco-pop
• WiFi
• Online study
• BlueRay
• Polar Fleece
• Pre-filled gas bottles
• DNA
After Hamel ‘Strategos’ 2000
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The New Industrial Order . . . and incumbency has never been worth less:
• BA
• SAP
• AT&T
• Kodak
• K-Mart
• Compaq
• Coke
• IBM
• Sears
• Nissan
• Unisys
• Motorola
• Marks & Spencer
• Proctor & Gamble
• Myer
• McDonalds
After Hamel ‘Strategos’ 2000
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Evolution of Competitive Advantage
Natural monopolies What:
How
Who:
When:
Capital formation
Creating breakthroughs
Financiers
1875 - 1900
Research & Development What:
How:
Who:
When:
Big science
Creating breakthroughs
Scientists
1900 - 1950
Consumer Marketing What:
How:
Who:
When:
Big brands
Manufacturing wants
Marketers
1950 -2000
Industry Revolution What:
How:
Who:
When:
Big ideas
Inventing business models
Entrepreneurs
2000 - ????
Hamel ‘Strategos’ 2000
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Non-Linear ChangeAccelerating pace of change
∆ B
∆ A
Internet Data Storage Wireless Penetration De-regulation Gene Coding Capital Flows Bandwidth
Change
TimeHamel ‘Strategos’ 2000
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Management’s challenge is to reinvent the rules
• Embracing the challenges of radical innovation
• Stimulating business concept innovation
• Managing the innovation process
• Building an innovation friendly company
Activism matters (the entrepreneur)
After Hamel ‘Strategos’ 2000
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Business Concept Innovation
NonlinearInnovation
BusinessConcept
Innovation
ContinuousImprovement
BusinessProcess
Reengineering
Rad
ical
Incr
emen
tal
Component Systemic
i i I
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The Four Portfolios every Company must Manage
Experiments VenturesPortfolio of BusinessesIdeas
Imagine Test Launch Grow Many Few
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Origin & Evolution of New Businesses
Develop a plan, assemble well qualified team, and raise venture capital…………
Only 5% of Inc. 500 fast growing companies. And less than 1% of US new businesses in total
Bhide 2000
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Industry View
“The problem is not how to get new innovative thoughts into your mind, but how to get the old ones out.”
Dee Hoc, Founder of VISA card
“We need systematic ways to get people to unlearn”.
“The hardest thing is to unlearn tacit knowledge”.
John Seely Brown, Xerox Park
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Strategy Emergence (Strategy Innovation)Increase involvement from the breadth and depth of the organisation
Emergent Strategy
Hearing New Voices
EncouragingExperiments
Seeing NewPerspectives
Finding NewPassions
Having NewConversations
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Innovation Pipeline
Imagine Develop Experiment Assess Scale
Imagine Develop/experiment Assess/Scale Assess/Scale
Ideation Lab. Action Lab. Foresight Lab. Game Changer Lab.
Generating a portfolio of ideas or growth platforms with potential to revolutionize a product, market or entire industry
Scope out boundaries of opportunity spaceIdentify and structure potential partnershipsIdentify deep sources of competitive advantageModel broad financial implicationsIncubator environment
Explore the implications of disruptive change and competitive innovation on businessIdentify innovative ways to harness these forces to create future growthFrame strategic choices around migration to a new business model
Make explicit company and industry conventionsUnderstand the “toxic” conventionsIdentify innovative ways to break the rulesCreate future growth & strategic choices for new business model migration around new rules
Institutionalizing Innovation (Innovation Strategy)
Four Critical Requirements:
Create New Measurements
Build New Capabilities
Generate New Ideas
Take Unorthodox Action
Amount of time employees spend developing new ideasThe number of star employees retained vs those who leave to new ventures or start-upsThe number of ideas generated from beyond the strategic planning groupThe “hope” to “anxiety” ratioNew knowledge vs outdated knowledge per annumStrategy decay rate, measuring the decline in economic value generated in current strategy
Introduce employees to new forms of:LeadershipTeamworkCreativity
And new skillsDifferent core competenciesEntrepreneurshipRapid prototypingNew venture financing
New voicesNew perspectivesNew passionsNew conversationsChallenge orthodoxiesDevelop foresight
With the intent to:Create an internal market for ideasCreate a competitive atmosphere that fosters the most creative thinking
Experiment:Reinvent the recruitment process or compensation structureAttract the non-traditional thinkers and support their developmentEstablish a New Venture Board or a Corporate University
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Activist’s (Internal Entrepreneur’s) Starter Kit
• Diagnosing your own strategy
• Revealing your company’s orthodoxies
• Developing perspective – trends
• Domain mapping for opportunities
• Organizational networks
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Two Questions
1. Where in the organisation will we find the least genetic diversity?2. Which groups in the organisation has most emotional equity invested
in the past?
Hierarchy of experience
Senior Management
Front Line Employees
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Two Questions
1. Where in the organisation will we find the least genetic diversity?2. Which groups in the organisation has most emotional equity invested in
the past?
Hierarchy of experience
Front Line Employees
Hierarchy of Imagination
Senior Management
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Are your management processes toxic to innovation?
• Calendar driven• Conversation – oriented• Biased towards existing business model?• Focused on existing customers and
markets?• Owned by defenders of the past• Implicitly risk adverse
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The Mind of a Heretic
• Surfaces the dogmas• Never stops asking why• Celebrates the stupid• Goes to extremes• Searches for the ‘and’• Separates form and function• Starts new conversations
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Learn to be a Novelty Addict
• Go cool hunting
• Search outside the boundaries
• Look for transcendent themes
• Connect the dots
• Look for history’s recurring patterns
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Shared Orthodoxies
• What business we’re in• How we measure success• Who our “customers” are• What our “customers” want• How we go to market• What our competencies are• How we extract value
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Department Store Cosmetics vs. Sephora
Department Store Sephora
Sales staff on commission Yes No
Gift with purchase Yes No
One brand per counter Yes No
Easy to sample No Yes
Shop unmolested No Yes
Easy to compare No Yes
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Uncovering Orthodoxies
If orthodoxies are the key beliefs we hold about what drives a company’s success, then examine the following.
From the following list – choose an industry:
e.g. Letters
1. List 3 things you would never hear said about this industry
3. Which of these represent orthodoxies worth challenging?
2. What are the shared orthodoxies in all companies in this industry? What do competitors believe in common? What do they agree upon?
4. If you overturn these orthodoxies, what opportunities for radical innovation emerge?
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Trends1. Social Welfare Budgets
2. Need for Social Support
3. Youth Unemployment
4. Proportion of Aged Population
5. Globalization of Corporations
6. Communism
7. Awareness of Environment Issues
8. Asian Economics
9. Opening up China and Eastern Europe
10. Europe as a Trading Block
11. Deregulation of Financial Markets
12 Use of Internet
13 Personalization of Products / Services
14 Bank Branches
15 Alliances between Financial Institutions & other Company
16 Jobs for Over 50’s
17 Educational Opportunities for All
18 Power of Trade Unions
19 Large Corporations as Employers
20 Importance of Small Business in the Economy
21 Gene Coding
22 Usage of Wireless/ Handheld Communication Devices
Trends1. Social Welfare Budgets
2. Need for Social Support
3. Youth Unemployment
4. Proportion of Aged Population
5. Globalization of Corporations
6. Communism
7. Awareness of Environment Issues
8. Asian Economics
9. Opening up China and Eastern Europe
10. Europe as a Trading Block
11. Deregulation of Financial Markets
1. Use of Internet
2. Personalization of Products / Services
3. Bank Branches
4. Alliances between Financial Institutions & other Company
5. Jobs for Over 50’s
6. Educational Opportunities for All
7. Power of Trade Unions
8. Large Corporations as Employers
9. Importance of Small Business in the Economy
10. Gene Coding
11. Usage of Wireless/ Handheld Communication Devices
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Opportunity Discovery – Mapping Industry Domains
One very common industry orthodoxy is the view of what industry a company is actually in. Looking at traditional industry definitions is dangerous in the context of today’s ever-churning and re-defining business landscape.
Industry domains are competitive arenas defined to identify potential white space opportunities for strategy innovation and to detect competitive threats from new entrants coming from new directions.
There are three steps to re-defining one’s industry domain to reveal these opportunities and vulnerabilities:-
1.Identify the critical activities in the value chain;
2.Identify businesses strategically-related to these activities;
3.Group players by core competencies and strategic assets.
The goal of this exercise is to identify white space opportunities in the domain and re-calibrate your perspective of what defines your industry. The domain mapping, once completed, can also be used to measure share of wealth creation in the new domain
Objective of the ProcessAn industry domain has a vertical and horizontal dimension.
The vertical dimension consists of the activities in your value chain.
The horizontal dimension consists of businesses that are strategically-related by strategic assets and core competencies
Book Sales Example Used Books
Book Publishing
Book SalesMass Retailing Specialty Retailing Mail Order
Internet Commerce
There are five steps to the process of defining your industry domain:
1. Identify the most important activities in the value chain
2. List the key players in each activity
3. Group players by strategic assets and core competencies
4. Construct the industry domain
5. Identify competitive threats and white-space opportunities
Worksheet: Key Players in the Value Chain
Value Chain Key Players
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Expand your Networks
• Phase 1 - Centralized
• Phase 2 - Transnational
• Phase 3 - Open
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P & G’s Innovation Challenge
Organic growth of 4% to 6% year in, year out. That is - $4 billion of new business from innovation
In 2000, P & G concluded that the invent-it-ourselves model was not capable of sustaining high levels of top-line growth.
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Changing Innovation Landscape
Model Centralized Transnational Model
Open Innovation
Period Pre 1980s 1980 - 2000 Post 2000
Key Resource
Central Labs Internal
Network
External Network
Scientists 7,500 1,500,000
Cost as % of Sales
4.8% 3.4%
External Ideas
15% 35%
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Outsourcing vs. Open Innovation
• Outsourcing– Transfer innovation to low cost
providers
• Open Innovation– Find good ideas– Bring them into the organization– Enhance them internally
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P & G Innovation Networking
• Proprietary Networks– Network of 70 technology entrepreneurs– Network of suppliers
(Top 15 have R & D staff of 50,000)
• Open Networks– NineSigma - 700,000 researchers– InnoCentive - 75,000 contract scientists– YourEncore - 800 retired scientists– Yet2.com - Fortune 100 Companies
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P & G Innovation Focus
Ideas and products that will benefit specifically from the application of P & G technology, marketing, distribution, or other capabilities.– Top 10 consumer needs– Adjacencies– Technology Game Boards
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Critical Steps
1. Build a point of view2. Write a manifesto3. Create a coalition4. Pick your targets5. Co-opt and neutralize6. Find a translator7. Win small, win early, win often
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Old Truism. . .
“Culture eats strategy for lunch every day”
In other words, culture is omnipotent. Culture can kill the best strategic plan. There is no contest. If culture is the sum of our values, beliefs and rituals, culture is reality.
Curran 2002