Workshop on Game Changing Innovation to drive your Business Strategy Steve Roehm Faculty Member The IBM Executive Business Institute Ho Chi Minh, Vietnam October 5-7, 2005
Think.Differently More Openly "It's impossible to get out of a problem using the same kind of thinking that it took to get into the problem. "If at first the idea is not absurd, then there is no hope for it." Albert Einstein Nobel Laureate Page 2
Do Your Own Thinking "..best practices discovered by others are not as meaningful to organizations as the discoveries they make themselves... we (and they) found that real change happened only when organizations generated their own tools and approaches." Page 3 SOURCE: Richard Foster + Sarah Kaplan, Creative Destruction, 2001
Introductions Your Name Your Organization Your Job Responsibilities One Expectation for this class Page 4
Seminar Objectives To identify strategic innovation opportunities and challenges To identify and apply strategic innovation tools or methods To build an initial assessment of your organizations current innovation state, and what you could do to leverage it Page 5
Agenda Day 1 Strategic Innovation Overview Customer Innovation Focus Open Innovation Asymmetries and Innovation Theory Visual Strategy Strategy Canvas Strategy Framework Day 2 Business Design Assessment Customer Presentation IT and Business Alignment Innovation Capability Assessment Action Plan Page 6
Flow of Seminar Ideas and Customers Customer Innovation Focus Open Innovation Tools and Methods Asymmetries and Innovation Theory Visual Strategy Strategy Canvas Strategy Framework Business Design Assessment Innovation Capability Assessment Action Plan Page 7
Activity #1: Let s examine your definitions of Innovation and Strategy and use them as a basis of discussion for this workshop. In a group at each table, use a flip chart to record your answers to the following: What is your definition of Innovation? What is your definition of Strategy? What is your definition of Strategic Innovation? Be prepared to discuss your definitions. Timing: - Definition 10 minutes - Workshop discussion 10 minutes Page 8
What is a Definition of Strategic Innovation? Strategic Innovation : is applying the appropriate type of innovation via a product, service, or business model that provides the customer the best value, and provides strategic leverage and value for the organization Page 9
Why Strategic Innovation? - 2X Profit!! - TSR Leader - Recovery Leader - Greater New Product Success Rate - Growth and Leadership Page 10
Not Innovating is Costly Also No. 2 Discount Retailer Kmart Files for Bankruptcy Reuters, Jan 23, 2002 In 126 Years, Ericsson Has Never Experienced Anything Like This... FT-4/3/03 Ericsson chairman steps down as losses widen..ft,10/28/01 Lucent Posts $3.25 Billion Q3 Loss $7-9 B Writeoff coming... up to 47,000 to be laid off...ap, 7/24/2001 - S&P Downgrades Lucent Debt to Junk Status, Economist, 6/14/2001 Chief Executive Quits at Merck; Insider Steps Up NY Times, BUSINESS/FINANCIAL DESK May 6, 2005 A crisis of creativity is causing Rumblings in the Food Industry Economist May, 2005 In 1997-2000, innovations in food and beverages outpaced those in another crucial consumer-goods market, personal care products.that has since been reversed. The Economist, 7 May 2005 United Airlines Chairman Resigns FT, 10/28/01 Corus warns of big job cuts...ft,3/12/03 Bethlehem Steel Files for Chapter 11 AP, October 15, 2001 Page 11
What Do These Industries Have In Common? Watches Electric Motors Industrial Robots Autos Photocopiers Machine Tools Cameras Ship Building Optical Equipment Stereos Software Consulting Services Medical Equip Food Processors Computer Hardware Color TV's Microwave Ovens Textiles Hand Tools Athletic Equipment Airlines Radial Tires Semiconductors Financial Services Page 12 M. Tushman + C. O'Reilly, Winning Through Innovation
Coffee/Tea Break -- 20 Minutes Page 13
Types of Innovation Disruptive New Market Competes against non-consumption. Creates new growth by making it easier for people to do something that historically required deep expertise or great wealth. Low End Disruption Occurs when existing products and services are too good and hence overpriced relative to the value existing customers can use. Sustaining Occurs when improvements are made to existing products on dimensions historically valued by customers. Page 14 Source: Seeing What s Next, Clayton Christensen et al, and EBI
Types of Innovation Disruptive New Market Competes against non-consumption. Creates new growth by making it easier for people to do something that historically required deep expertise or great wealth Internet ebay Palm Pilot Automobile Mainframe computer Airplane Telephone Page 15 Source: Seeing What s Next, Clayton Christensen et al, and EBI
Types of Innovation - Example Low End Disruption Occurs when existing products and services are too good and hence overpriced relative to the value existing customers can use. Low cost airlines Software as a Service Wal-Mart Steel Mini-mills Page 16 Source: Seeing What s Next, Clayton Christensen et al, and EBI
Types of Innovation - Example Sustaining Occurs when improvements are made to existing products on dimensions historically valued by customers. Features of telephones Enhancements to parts of airplanes Incremental enhancements to any product/service Page 17 Source: Seeing What s Next, Clayton Christensen et al, and EBI
What Type of Innovation Does Your Idea Represent? And, why? Activity #2: 1) From below, select what type of innovation your idea represents? a) Disruptive New Market Competes against non-consumption. Creates new growth by making it easier for people to do something that historically required deep expertise or great wealth b) Low End Disruption - Occurs when existing products and services are too good and hence overpriced relative to, the value existing customers can use. c) Sustaining - Occurs when improvements are made to existing products on dimensions, historically valued by customers. 2) What are the important characteristics or attributes of the type of innovation you selected, and why does it match your new idea? 3) Please be prepared to discuss your assessment. Approximate Timing: - Preparation 10 minutes - Discussion 10 minutes Page 18
Ingredients for Strategic Innovation Ingredients Ingredients 1- Ideas 2- Capital 3- Talent Page 19 SOURCE: G. Hamel, Strategos
Discussion: Ideas to Build Strategic Innovation Let s discuss your organization: Who is responsible for generating ideas? How are ideas evaluated, and compensated? How is the failure of an idea assessed, and what is the impact? How many ideas does your organization generate, and how many make it to the CIO? the CFO? versus what a Venture Capitalist sees? Page 20
Capital Needed for Strategic Innovation Financial Structural Intellectual Imagination Entrepreneurial Is the capital there to support Innovation in your organization? Page 21 SOURCE: G. Hamel, Strategos
Talent Needed for Strategic Innovation Resource Attraction vs. Resource Allocation How are resources allocated in your organization? Page 22 SOURCE: G. Hamel, Strategos
Summary Defined Strategic Innovation Why Strategic Innovation is Important Types of Innovation Ingredients for successful Strategic Innovation.a baseline to begin our dialog Page 23
Sample Readings/Sources Henry William Chesbrough, Open Innovation, 2003 Clayton Christensen, The Innovator's Dilemma, 1997 Clayton Christensen and Michael Raynor, The Innovator's Solution, 2003 Clayton Christensen et al, Seeing What s Next, 2004 Richard Foster and Sarah Kaplan, Creative Destruction, 2001 Tom Friedman, The Lexus and the Olive Tree, 1999 Tom Friedman, The World Is Flat, 2005 Gary Hamel, Leading the Revolution, 2000 Marco Iansiti et al, The Keystone Advantage, 2004 Frans Johansson, The Medici Effect, 2004 W. Chan Kim and Renee Mauborgne, Blue Ocean Strategy, 2005 Michael Lewis, Next: The Future Just Happened, 2001 Jeff Mauzy and Richard Harriman, Creativity, Inc, 2003 Carlota Perez, Technological Revolutions and Financial Capital, 2003 Michael Schrage, Serious Play, 1999 Robert Sutton, Weird Ideas that Work, 2001 Adrian Slywotzky, D. Morrison, B. Andelman, The Profit Zone, 2001 Strategy & Innovation Magazine Peter Schwartz, The Art of the Long View, 1995 M. Tushman and C. O'Reilly, Winning Through Innovation, 1997 Eric Von Hippel, Democratizing Innovation, 2005 Page 24
Thank You! scroehm@us.ibm.com (845) 512-5278 IBM Executive Business Institute Palisades, New York 10964 - USA http://www.ibm.com/ibm/palisades/abi Page 25
Another View - Types of Innovation Strategic Disruptive New Market Disruptive New Product Disruptive New Market Or, Low-end Disruption Disruptive Business Concept DEGREE Sustaining Sustaining ++ Incremental Continuous Improvement Business Process Re-engineering Component BREADTH System Page 26 SOURCE: G. Hamel, Leading the Revolution