Strategic Innovation Customer Innovation Focus

Transcription

1 Executive Business Institute Strategic Innovation Customer Innovation Focus VN-v9

2 Ideas and Customers Tools and Methods Business Design Assessment Innovation Capability Assessment Action Plan Page 2

3 A Good Place to Start Innovation...with the Customer Only 3 things are critical to business success - innovation, productivity, and total quality. Why? Because they are not imposed by management. They are demands straight from the customer... Allen Jacobsen, Retired CEO-3M Page 3

4 Objectives Define Innovation Customer Segments to be served Examine and apply the Value Chain Evolution Theory to your idea Ask four questions to test your idea Be able to define and successfully apply 3 types of innovation market segments to types of innovation Page 4

5 Innovation Customer Segments to be Served Non-consumers People who lack the ability, wealth, or access to conveniently + easily accomplish an important job for themselves Under-served Customers Consumers who consume a product but are frustrated with its limitations: they display willingness to pay more for enhancements along dimensions important to them Over-served Customers Customers who stop paying for further improvements in performance that historically had merited attractive price premiums Page 5 Source: Seeing What s Next, Clayton Christensen et al

6 Customer Segments to be Served Potential Type Customer Segment Segment Description of Innovation Market Signals Non-consumers People who lack the ability, wealth, or access to conveniently + easily accomplish an important job for themselves New market disruptive Innovation Example: ebay, PC s -Products or services that help people do more conveniently what they are already trying to get done -Explosive rate of growth in new market or new context Under-served Consumers who consume a product but are frustrated with its limitations: they display willingness to pay more for enhancements important to them Sustaining up-market innovation Example: Improved PC Projectors New improved products and services introduced to existing customers. Integrated companies thrive; specialist companies struggle. Over-served Customers who stop paying for further improvements in performance that historically had merited attractive price premiums. Low end disruptive Example: Steel mini-mills Wal-Mart, SaaS Displacing Innovation... Example: CPE In the phone system Downward Migration of required skills. Credit scoring New bus model emerges to serve least demanding customers Emergence of specialist co. targeting mainstream customers Emergence of rules and standardsmigration of provider closer to end customer Page 6 Source: Seeing What s Next, Clayton Christensen et al

7 The Value Chain Evolution (VCE) Theory The VCE states that: Companies should control (i.e., integrate) any activity or combination of activities within the value chain that drive performance along dimensions that matter most to the customer. AKA: Integrate what is not good enough, and outsource whatever is more than good enough How does VCE relate to new market or low-end disruptive Innovation? Motivation Asymmetries Skill Page 7 Source: Seeing What s Next, Clayton Christensen et al Theories

8 VCE Theory Example - Early IBM Mainframes 1960 s - Computers were in their infancy - held great promise to speed up slow but vital tasks and make them more accurate + less costly - complex technology, no standards, chaos IBM s approach - integrate the entire computer design, build, and assembly process = great success - vs. trying to coordinate the many players to deliver a reasonably usable product would have produced an underperforming product that customers would have rejected. Page 8 Source: Seeing What s Next, Clayton Christensen et al

9 VCE Theory Example - Mid-90 s to Now - Dell - From the outset, the IBM/compatible PC market was based on mostly standard components and became more so over time. As PC s became less different, the value to the customer migrated from the technology and system, to convenience and customization. Dell s approach - Tightly integrate the supply chain interfaces. - Tightly integrate customer convenience / ordering/ customizing interfaces. - Outsource the component design and production to specialists. Page 9

10 Value Chain Evolution Theory IBM and Dell Combined View Value Value 1960 s - Inventing the general purpose computer: - chip design was hard - interfaces of computer components was challenging - lots of new technical science involved - customers want computers, but can t do any of the above but IBM could and did by integrating the entire design and build with their own proprietary standards - Configuration was difficult - customers would wait for delivery - customers didn t understand computers that well Page s - PC s over 10 years old - industry runs on standard components - interfaces all standardized - specialist component firms abound - with a few exceptions, everyone s PC is about the same - Providing PC s to consumers: - consumers understand PC s fairly well - customers want speed of delivery, ease of ordering, convenience, and Dell did that by integrating those components - access 7x24 and help via internet or telephone

11 How to begin to test your idea, or find one?.ask 4 Key Questions 1) What are the biggest orthodoxy's (5-10) in your industry?...about IT in your industry? 2) What things (5-10) would customers would NEVER say about your industry?...about IT in your industry? 3) What outcomes, not products or services, do your customers want (value)? What parts of the value chain are most valuable to the customer (re: VCE Theory)? What parts of the value chain should be outsourced (re: VCE Theory)? 4) What would your competitors say about how to succeed in your industry? in IT in your industry?...both traditional and non-traditional Page 11

12 Customer Innovation Activity: 1) Ask yourself the 4 key questions and write down your answers. 2) Using the answers to the 4 key questions and VCE theory as background, fill in the attached template. 3) Answer the 5 th question about the idea, capital, and resource infrastructures. 4) Be prepared to share your answers and template thinking with the class Approximate Timing: - Preparation 30 minutes - Workshop discussion 15 minutes Page 12

13 1) What are the 5-10 biggest orthodoxies in your industry? And, what are the biggest orthodoxies about IT in your industry? 2) What 5-10 Things Would Customers Never Say About Your Industry? Page 13

14 3) What outcomes - not what products or services- do customers most want in your industry? 4) What Would Your Top 3 Competitors (traditional and nontraditional) Say About How to Succeed in Your Industry? Page 14

15 Template for Customer Segments, Products/Values, and Types of Innovation Customer Segment Non-consumers.. Product..Value to customer..type of Innovation..VCE Integration..VCE Outsourcing Your organization s new product, service, or business model Name: Name: Your most Innovative Competitor (new or current product) Name: Your Toughest Traditional Competitor (new or current product) Under-served.. Product..Value to customer..type of Innovation..VCE integration..vce Outsourcing Over-served..Product..Value to customer..type of Innovation..VCE Integration..VCE Outsurcing Page 15 Source: Seeing What s Next,, Clayton Christensen et al and IBM EBI

16 Template for Customer Segments, Products/Values, and Types of Innovation SAMPLE Customer Segment Non-consumers.. Product/svc/bus mdl..value to customer..type of Innovation..VCE Integration..VCE Outsourcing Under-served Your organization s new product, service, or business model Your most Innovative Competitor (new or current product) Your Toughest Traditional Competitor (new or current product).. Product/svc/bus mdl..value to customer..type of Innovation..VCE integration..vce Outsourcing Over-served Low cost airline freq/inexpensive/quality domestic air flights sustaining customer experience, price, pt2pt,etc food, etc Full svc airline lots of connections, many destinations-intl, 1 stop shopping sustaining full service Food,..Product/svc/bus mdl..value to customer..type of Innovation..VCE Integration..VCE Outsourcing/eliminate Low cost airline freq/inexpensive/qual ity domestic air flights Low end disruption Pt2Pt on time flights, low price, fun svc,1 type aircraft Food, Res Seats,etc Page 16 Source: Seeing What s Next,, Clayton Christensen et al and IBM EBI

17 5) Do you have the idea, capital, and talent infrastructures in place to bring your innovative idea to fruition? Please discuss. Page 17