An Architecture for Systemic Innovation. Petroleum Industry Digital Exchange April 10, 2014 Doug Reeder, Principal Innovation

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1 An Architecture for Systemic Innovation Petroleum Industry Digital Exchange April 10, 2014 Doug Reeder, Principal Innovation

2 Source: Kwoh, Leslie. You Call That Innovation? Wall Street Journal online. 23 May Web. 20 Mar Services

3 Innovation defined Innovation is the process that takes new ideas and implements them in a way that creates value by solving unmet needs. Business Models Products and Services Processes Management Marketing New ideas + Forward-thinking + Feasible + Viable + Valuable 3 Services

4 Innovation is not invention Innovation is the process that takes new ideas and implements them in a way that creates value by solving unmet needs. Invention is the process of taking capital and turning it into knowledge. Innovation is the process of taking knowledge and turning it back into capital. 4 Services

5 Innovation: What we really want Short Cycle Time Do things quickly High First-Pass Yield Do things right the first time Competitive Separation Do disruptive things True value creation 5 Services

6 Business models and processes Existing New Degrees of innovation Value Breakthrough and Disruptive Innovation Incremental Innovation Existing Products and Services New 6 Services

7 Approaches to innovation thinking Divergent Creative / Intuitive Qualitative / Subjective Possibilities / Holistic Conceptual abstractions Convergent Analytic / Rational Quantitative / Sequential Constraint-driven / Objective Specific details START IDEATION KILL DEFINE THE CHALLENGE / OPPORTUNITY FORM TEAM INTERNAL RESOURCES DRAFT NEW PRODUCT CONCEPTS NARROW CONCEPTS UNDER CONSIDERATION OUTLINE FEATURES/ BENEFITS EXPOSE TO TARGET CUSTOMERS (QUALITATIVE) CONTINUE IDEATION EXTERNAL RESOURCES How far back depends on feedback received REFINE May require refinement of business case and financials ESTABLISH SUCCESS CRITERIA HIGH LEVEL REQUIRE- MENTS DEVELOP BUS CASE/OBTAIN APPROVAL TO PROCEED (Mgt Review) EXPOSE TO TARGET PLAN CUSTOMERS FOR DEVELOPMENT VOLUME ASSESSMENT AND (QUANTITATIVE) INITIAL TIME LINE (Proj Request/Sizing) Project Release Management Flow Begins (see next page) EXECUTI VE MANAGE MENT REVIEW (Investme nt Committ ee) KILL DESIGN, DEVELOP & PILOT (Project Launched) TEST MARKETING PREPARATION TEST MARKET (NEW PRODUCT INCUBATOR) Start Project Project Lifecycle KIL L POST TEST MARKET EVALUATION CONTINUE FINAL ROLLOUT PLAN FINAL TIMELINE WAR GAMES EXECUTIVE GROUP REVIEW KILL ROLL -OUT EVALUATION AND MEASUREMENT TURN OVER TO PRODUCT MANAGEMENT TRAINING REFINE Some, or all of these stages may not apply to smaller efforts, or those with low execution risk/low capital investment For large projects, or those requiring post-pilot review and approval, these stages will apply (e.g. Investment Committee level projects). Project Lifecycle End Project Divergent Source: 7 Services

8 Common myths of innovation Myth You have to be creative to be innovative Reality While creative thinking is helpful, innovation is a systematic discipline. Successful innovations require large-scale change The most successful innovations are often the simplest. Innovation is expensive Most innovations require a modest disciplined investment of time and brain power. Innovation is led by R&D & Technology Innovation is an organization-wide responsibility to leverage ideas. 8 Services

9 Framework and Architecture for Systemic Innovation 9 Services

10 A framework for developing a culture of innovation Is a constant, ongoing process that leads to a customer-empathetic, risk-tolerant, trusting and fast-failing environment that focuses on creating business value. It is not a one-time venture. Measure progress Train everyone involved Align management for success Build out an Architecture for Systemic Innovation Promote a sociallyenabled enterprise Empower a small catalyst team Establish executive sponsorship 10 Services

11 Align management for success Grant permission to innovate, then expect it Set realistic expectations Portfolio approach Keep the lights on, and experiment Have catchers to manage innovative ideas Allow employees autonomy, purpose, mastery Daniel Pink Drive Gary Hamel What Matters Now Promote collaboration Enabling tools, approaches, and time Increase tolerance for risk Fail fast and celebrate failure Stephen M. R. Covey The Speed of Trust 11 Services

12 Experimentation and risk I have not failed. I ve just found 10,000 ways that won t work. - Thomas Edison Anyone who has never made a mistake has never tried anything new. Companies are recognizing and awarding failure and questionable risk: Failure Parties "Heroic Failure" award Best New Mistake Biggest Failure Award - Albert Einstein 12 Services

13 Architecture for Systemic Innovation Foresight Frameworks Insight Environmental Scanning Weak Signals & Trends Strategic Plans Scan R&D, IP & Patents, Regulations & Standards Develop Themes & Scenarios Reference Architectures Identify Constraints & Opportunities Market Innovation Plan of Investigation Invest Operational & Annual Plans Execute Customer Innovation Deliver Innovation Plans Plan of Intent Plan of Record Outcomes and Metrics Facilitate Shared & Open Innovation Execute Business Challenges 13 Services

14 Foresight: Trends, signals, directions & exemplars The objective of foresight is to identify future opportunities, challenges, and potential solutions. 14 Services

15 Foresight The objective of foresight is to identify future opportunities, challenges, and potential solutions. Approaches & tools Environmental Scanning Futures Wheels Futures Cone Scenarios Black Swan Analysis SWOT Extrapolation Surveys Regulatory Reviews Expert Panels Delphi Backcasting Patent Analysis Science Fiction Many others 15 Services

16 Sample Macro Trends Technology does not cause change. It only enables, facilitates and accelerates changes we already want to take place. An old workforce, a new workforce Sharing economy Consumerization Regulations & cyber jurisprudence Freelance economy & Hollywood Model Crowdfunding & P2P lending Utility computing Risk & security management The Internet of Things Urbanization Perfect information Innovate to zero Pervasive simplification 16 Services

17 The IT dissonance Validating research Enterprise 2.0 The Future of Corporate IT The Evolving Workforce: Dell / Intel TNS Global Innovation from Efficiency The C-Suite Challenges IT: New Expectations for Business Value New technology for old processes New processes New business models New opportunities, products and services No business isolation Digital business ecosystems Risk (identify, assess, manage) Efficacy first, refocus on only the right things Create unique customer & business value Drive revenue Efficiency is still important Strategy for tomorrow Business enablement Customer / staff / partner engagement 17 Services

18 IT s transformation essential to 21st Century business success The purpose of the 20 th century firm: To minimize transaction costs and achieve scalable efficiency. The purpose of the 21 st century firm: To accelerate capability building and effectively apply that capability to innovation. Creating new value better & faster New view: Sociallyenabled enterprise operating in a digital business ecosystem. IT is ESSENTIAL to enabling firms to TRANSFORM and INNOVATE with information driven value creation. 18 Services

19 The C Suite perceptions of the CIO 46% Believe the CIO does not understand the business strategy 70% Believe their IT functions will undergo radical change in the next three years 28% Believe their CIO is performing better than their peers 45% Believe their CIO doesn t understand business & technology application risks 2:1 Realize a 2:1 improvement in business performance when the CIO is involved in the business strategy 19 Services

20 The problem with corporate IT 20 Services

21 The problem with corporate IT 21 Services

22 The problem with corporate IT 22 Services

23 Why the dissonance? Low CEO value of CIO Efficiency of scale Scale Efficiency Discipline Today & past Diminishing CIO role in C-suite = how well it works Bigger budgets CMO vs. CIO Effective at the moment Adaptability Engagement Innovation Tomorrow CIO irrelevance = achieves the desired result Only 28% say their CIO is performing better than their peers. 43% use IT as a commodity service to be purchased as needed. Fewer than one-half of C-suite executives rate their own CIO positively in terms of understanding the business (46%) and the technical risks (44%) involved in new ways of using IT. Organizations need to focus on being effective at the moment to create new value CEOs who involve the CIO in business strategy experience 2:1 net return Superior financial performance versus their industry peers 23 Services

24 Enterprise Future of the enterprise Industrial work Creative and knowledge work Focus on repetition, scale and efficiency Focus on originality, innovation and efficacy 2.0 Management 2.0 IT 2.0 Economics 2.0 Capitalism 2.0 From: Planning & directing To: Preparing & mentoring Engaging & framing Changed nature of value as a consequence of the serendipity economy Value will be the product of inthe-moment, at-the-place collaborative creation Smaller, more agile enterprises An ecosystem to speed up the processes of successful selection Effective sociallyenabled enterprise Two-way collaboration between publishers and consumers of content, knowledge and value Staffing & controlling Hierarchical & authoritative Broad relationships & crowd sourcing Strong partnerships and relationships Even among competitors, in order to service customer Complex Information systems Lots of moving parts, known and unknown factors, with varying degrees of understanding Evolution of the workforce Mentoring people versus directing people on how to achieve the outcomes we need 24 Services

25 What must enterprises do to transform Scale Management Control Standardization Specialization Centralization Expertise Hierarchy Alignment Conformance Predictability Extrinsic Rewards Closed Scale Efficiency Discipline Today Adaptability Innovation Engagement Tomorrow Moment Engagement Freedom Diversity Mash-ability Disaggregation Collective Intelligence Community Experimentation Opt-In Serendipity Intrinsic Rewards Open 25 Services

26 Facilitating a culture of innovation Risk Leadership People Processes Tools and techniques Training Facilities Idea capture and management Strategic alignment Metrics Adapted from 26 Services

27 Innovation Execution: Customer Innovation Plan 27 CC BY-NC-SA 3.0 Services

28 THANK