Slide 1

Dealing with Darwin How Great Companies Innovate at Every Phase of Their Evolution www.dealingwithdarwin.com www.dealingwithdarwin.com Geoffrey Moore Managing Partner Slide 2 2 Presentation Title 2003, TCG Advisors LLC April 30, 2015 The Set Up Why Darwin? Influx of offshore competition and new market formation Natural selection is driving to survival-of-the-fittest outcomes Enterprises must differentiate to gain competitive advantage The Problem Enterprises spend heavily on innovation for competitive advantage Not enough to competitive advantage to show for it (commoditization) High failure rates signal a need for better mental models Crossing the Chasm, Inside the Tornado, The Gorilla Game Dealing with Darwin Better mental models for managing innovation and inertia Best practices based on new models Showcase Cisco as a case study Slide 3 3 Presentation Title 2003, TCG Advisors LLC April 30, 2015 Return on Innovation Waste Catch-UpDifferentiation Productivity Waste: Innovation projects that fail to create definitive separation from competitive offerings: Not going far enough in the right direction Slide 4 4 Presentation Title 2003, TCG Advisors LLC April 30, 2015 Time Revenue Growth Technology Adoption Life Cycle Early Main Street Mature Main Street Declining Main Street Indefinitely elastic middle period End of Life A Fault Line! E D C B Innovations Landscape The Category Maturity Life Cycle Slide 5 5 Presentation Title 2003, TCG Advisors LLC April 30, 2015 Disruptive Innovation Application Innovation Product Innovation Platform Innovation Enhancement Innovation Integration Innovation Experiential Innovation Process Innovation Marketing Innovation Broad Universe of Innovation Types Different Types Get Traction at Different Points Value Migration Innovation Line Extension Innovation Value Engineering Innovation Harvest & Exit Renewal Innovation Organic Renewal Acquisition Renewal Slide 6 6 Presentation Title 2003, TCG Advisors LLC April 30, 2015 Managing Innovation Four Innovation Zones Disruptive Innovation Application Innovation Product Innovation Platform Innovation Enhancement Innovation Integration Innovation Experiential Innovation Process Innovation Marketing Innovation Business Model Innovation Line Extension Innovation Value Engineering Innovation Harvest & Exit Renewal Innovation Product Leadership Zone Operational Excellence Zone Customer Intimacy Zone Value Renewal Zone Slide 7 7 Presentation Title 2003, TCG Advisors LLC April 30, 2015 Innovating for Growth Markets The Product Leadership Zone Disruptive Innovation Application Innovation Product Innovation Platform Innovation Enterprise: Genentech (recombinant DNA) Consumer:Skype (VOIP) Enterprise: Landmark (3-D seismic interpretation) Consumer:Amazon (Internet retailing) Enterprise: Cisco (Internet routers) Consumer:Cuisinart (food processors) Enterprise: Oracle (relational databases) Consumer:Sony (game machines) Return on innovation requires differentiation All these companies achieved separation from their competition Slide 8 8 Presentation Title 2003, TCG Advisors LLC April 30, 2015 Innovation Types for Mature Markets The Customer Intimacy Zone Experiential Innovation Line Extension Innovation Enhancement Innovation Marketing Innovation Enterprise: Cognos (executive dashboards) Consumer:Swatch (fashion watches) Enterprise: McKinsey (relationship marketing) Consumer:Mattel (American Girl franchise) Enterprise: World Economic Forum (Davos) Consumer:Disney (theme parks) Enterprise: Boeing (737 line of aircraft) Consumer:Yahoo (internet portal services) Return on innovation requires differentiation All these companies achieved separation from their competition Slide 9 9 Presentation Title 2003, TCG Advisors LLC April 30, 2015 Innovation Types for Mature Markets The Operational Excellence Zone Process Innovation Integration Innovation Value Engineering Innovation Value Migration Innovation Enterprise: Celera (shotgun genomic sequencing) Consumer:McDonalds (fast food) Enterprise: IBM (hardware to software & services) Consumer:HP (printers to inkjet cartridges) Enterprise: SAP (Enterprise Resource Planning) Consumer:Victorinox (Swiss army knives) Enterprise: TSMC (silicon foundry) Consumer:BIC (ballpoint pens) Return on innovation requires differentiation All these companies achieved separation from their competition Slide 10 10 Presentation Title 2003, TCG Advisors LLC April 30, 2015 Innovating for Declining Markets The Category Renewal Zone Organic Renewal Acquisition Renewal Harvest & Exit Enterprise: Alcatel (from switched voice to IP video) Consumer:Apple (from PCs to consumer electronics) Enterprise: EMC (from storage hardware to software) Consumer:Altria (from tobacco to food & beverage) Enterprise: AT&T (long distance telephony) Consumer:Oldsmobile (automobiles) Return on innovation requires differentiation All these companies achieved separation from competition These did not Slide 11 11 Presentation Title 2003, TCG Advisors LLC April 30, 2015 Managing Inertia The Core/Context Analysis Framework Core Targeted Innovation Vector(s) Context All other Activities Mission Critical Process shortfall creates serious and immediate risk Non-Mission-Critical All other processes Differentiation Risk Supports change Retards change Slide 12 12 Presentation Title 2003, TCG Advisors LLC April 30, 2015 The Natural Cycle of Innovation Inhale/Exhale 2. Deploy 1. Invent 4. Offload CoreContext Mission Critical Non-Mission-Critical 3. Manage Manage Mission-critical Processes At Scale Extract Resources To Repurpose For Core Invent Differentiated Offering Deploy Differentiation At Scale Fund next innovation Slide 13 13 Presentation Title 2003, TCG Advisors LLC April 30, 2015 Mission Critical Non-Mission-Critical Clinging to Context Where Resources Get Stuck 2. Deploy 1. Invent 3. Manage 4. Offload Resources get stuck here Resources are added here for support Resources still get invested here But lack of resources here results in failure to deploy! 4. Onload Mission - critical risk CoreContext Slide 14 14 Presentation Title 2003, TCG Advisors LLC April 30, 2015 CoreContext The Six Levers Model Extracting Resources from Mission-Critical Context 1.Centralize. Bring operations under a single authority to reduce overhead costs and create a single decision-making authority to manage risk 2.Standardize. Reduce the variety and variability of processes delivering similar outputs to further reduce costs and minimize risks. 3.Modularize. Deconstruct the system into its component subsystems and standardize interfaces for future cost reductions. 4.Optimize. Eliminate redundant steps, automate standard sequences, streamline remaining operations, substitute lower- cost components, or otherwise cost- and resource-reduce. 5.Instrument. Characterize the remaining processes in terms of the variability of key parameters and develop monitor-and- control systems to manage their performance. 6.Outsource. Drive processes out of the enterprise entirely to further reduce overhead, variabilize costs, and minimize future investment. Incorporate vendor use of monitor-and-control systems into Service Level Agreement. Slide 15 15 Presentation Title 2003, TCG Advisors LLC April 30, 2015 Unblocking the Flow of Talent Resource Recycling Zones A C B Work circulates clockwise People recycle counter-clockwise within zones IV IIIII I Slide 16 16 Presentation Title 2003, TCG Advisors LLC April 30, 2015 Three Roles for Continuous Innovation Invention Zone Deployment Zone Optimization Zone Business entrepreneurs Think outside the box to create new core Program managers Think inside the box to manage mission-critical processes at scale Process optimizers Use the Six Levers to extract resources from context to repurpose for core