Seminar on innovation driven competitive advantages for Abu Dhabi Chamber of Commerce and Industry

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Innovation driven competitive
advantages
March 13, 2013
“..because the execution of an idea is always more
important
than the brilliance of the thought..”
(Harvard Business Publishing – Morgan, Levitt & Maleck – INVEST model)

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Föreläsare
Jörgen Eriksson, Founding Partner in Bearing
and adjunct Professor of Innovation Management,
resides in France and works with consulting
internationally.
Has since 1995 led a large number of projects
related to innovation systems, business
development, restructuring and R&D across four
continents.
Presenting today

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We work with clients in three focus areas;
Bearing Consulting is a management consultancy incorporated in United
Kingdom with offices in London, Stockholm, Barcelona, and
Johannesburg
Places & Regions
Finance
Innovation
Over the past 12 years, we have been
engaged in projects across four
continents
About Bearing Consulting
Bearing develops methodology and
also
publish books

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Places where we have worked

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1. Globalisation and Hyper Competition
2. Business in Hyper Competitive Markets
3. What do we mean with Innovation?
4. How can we work with Innovation?
5. Corporate Innovation and common gaps
6. How to make Corporate Innovation work
7. The Innovation Navigator
Agenda

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Globalisation and Hyper Competition

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Why hyper competition?
 Globalisation – less trade barriers and efficient transport (e.g. containers)
 Speed of hyper connected communication and the pace of modern
business
 Disruptive Technologies
A new technology that has a serious impact on the
status quo and changes the way people have been
dealing with something, perhaps for decades
Some drivers of hyper competition

9. Sub heading
9
The European Perspective
“Europe is facing a moment of transformation. The crises has
wiped out years of economic and social progress and exposed
structural weaknesses in Europe´s economy.
In the meantime, the world is moving fast and long-term challenges
such as globalisation, pressure on resources, population ageing,
are intensifying.”
- Quote from Europe 2020 Strategy

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10
The European Perspective
The European Union has set out its vision for Europe´s economy in
the Europe 2020 Strategy, which aims at confronting structural
weaknesses through progress in three mutually reinforcing
priorities:
1. Smart Growth, based on
knowledge and innovation
2. Sustainable growth, promoting a
more resource efficient, greener
and competitive economy
3. Inclusive growth, fostering a high
employment economy delivering
economic, social and territorial
cohesion

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Investing more in research, innovation and entrepreneurship is
at the heart of Europe 2020 and a crucial part of Europe´s response
to the economic crises.
So is having a strategic and integrated approach to innovation
that maximizes European, national and regional research and
innovation potential.
It is about enhancing Europe´s capacity to
deliver smart, sustainable and inclusive
growth, through the concept of smart
specialization.
The European Perspective

12. Sub heading
12
Specialization in Europe

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distribution outside the receivers organisation without prior written approval from Bearing Consulting
Ltd.
Business in hyper competitive markets

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Corporate world dominance
In the year 1994, Motorola was world leader in (analogue)
mobiles,
seven years later Nokia was world leader in (digital) mobiles
0%
10%
20%
30%
40%
50%
60%
Market shares 1994 Market Shares 2001
Motorola
Nokia

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From #1 to crises in less than three years…
Why ?
Nokia share price

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Apple stock price down more than 30%

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“Either you innovate or you’re in commodity hell. If you
do what everyone else does, you have a low-margin
business. That’s not where you want to be.”
Sam Palmisano, former CEO IBM
Hyper competition

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“Managing innovation better may be the only way out of
the abyss called commodity hell”
Jeffrey R. Immelt, CEO General Electric
Hyper competition

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What do we mean with innovation?

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What is Innovation?
The literature
is not giving
us a
consistent
definition

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Innovation is creative destruction, where
entrepreneurs combine existing elements in
new ways…
After Joseph Schumpeter (1883 – 1950)
The definition

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Train Car Airplane
Innovation ?
”Invention” => Innovation => Effect (Globally)
What is Innovation?
Innovation can be incremental or disruptive / radical

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Types of innovation

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How can we work with innovation?

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Innovation across the business system
Product &
Services
Business
Model
Delivery &
Supply Chain
Operation
Sales &
Marketing

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From “hard” to “soft” factors

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Does Harley-Davidson sell motorcycles?

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Does Harley-Davidson sell motorcycles?
“…what we sell is the ability
for a 43-year-old accountant
to dress in black leather,
ride through small towns
and have people be afraid
of him“
– an HD executive

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The Lego Story
Y2000 "Toy of the
Century" by
Fortune magazine
and the British
Association of Toy
Retailers
Y2003 – 2004
Huge losses, close
to bankruptcy
Y2004-03, the
owner & CEO
Kjeld Kirk
Kristiansen decide
to go back to
basic!
Y2004-10, Jørgen
Vig Knudstorp
appointed as new
CEO

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The Lego Story
 The situation 2004
Demand decreasing, competition from games,
movies, merchandising
Poor quality
Poor logistics
Slow in adoption
Simplistic leadership and laid-back culture
Sources: HBR, DN, Guardian, BBC, Handouts European Offshoring Summit, (2009, Copenhagen)

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The Lego Story
Improve the
business
Stabilize
operations
Organic
growth
Restore the
balance sheet
Define
Raison d'être
Value Creating
Partnership
Deliver what
we promise
Differentiated
Value Chain
Consumer Driven
Value Chain
Rigid Execution
Platform
-1800
-800
200
1200
2200
2003 2004 2005 2006 2007 2008
Operational
Profit
MDK
Year
Innovate Execute
Offshoring

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Lego – key achievements
Clear Raison d'être: “we help children learn systematic and creative
problem solving—a crucial twenty-first-century skill”
Gained consumer insights through “direct sales to consumers”
through BuiltByMe without competing with existing distribution
channel
Co-Branding with strong and selected partners such as Star wars
and Harry Potter

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Lego – key achievements
Reduced lead time, 45 to 3 days to
store
Cost saving through offshoring non-
core competencies
A new supplier interface
QA system in place
Open Innovation, 120,000 people
involved in external innovation work –
DesignByMe, DreamtByMe,
BuildByMe
Community driven approach; the open
platform Mindstorm encouraging
customers to design and develop their

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Lego total innovation makeover
Supply Chain
Business Model
Marketing
Customer
Engagement
Services
Brand
Product
Partner Model
...and LEGO continues to deliver exceptional profitable growth on
an oligopolistic/niche and international toy market...
Internal Innovation
External Innovation

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Corporate Innovation
and common gaps

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Types of innovation

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The S-curve
Emergent Growth Mature
Performance
/
Value
offering
Effort / Time
Business of the future
(EXPLORATORY)
Ongoing business
(EXPLOITATIVE)
Source: Tovstiga (2007)

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En definition...
Common gaps
1. Framework of reference, lack of common terminology
2. Heads on competition in market. Limited focus on
differentiation
3. Corporate Culture
4. Not allow people time and space to be creative
5. Focus only on exploitative business, not exploratory
6. Creativity killed by process and procedure
7. Too long time to market

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How to make corporate innovation work

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What successful development requires
Success with innovation does not require comparative resources.
The Ghaff tree grows in the desert virtually without water.
The key factors for success with innovation are knowledge and creativity

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Strategy

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Blue Ocean Strategy
Blue Ocean
Strategy (2004)

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Blue Ocean Strategy

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Sweetspot analysis
Customers’
needs
Competitors’
offerings
Company’s
capabilities
Sweet
Spot
Context (technology,
industry, regulatory, etc.)
Where your firm meets
customers needs in a
way in which your
competitors cannot
What?
Where?
Why?
How?
1
2
3
Sweet spot = unique spot
How to protect/define boundary 1,2,3
llis & Rukstad (2008). Can You Say What Your Strategy Is?, HBR (April 2008)

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Your Sweet Spot Defines Your Future Success
Customers’
needs
Competitors’
offerings
Company’s
capabilities
Sweet
Spot
Context (technology,
industry, regulatory, etc.)
Where your company
meets customers
needs in a way in
which your competitors
cannot
What?
Where?
Why?
How?
1
2
3
Sweet spot = unique spot
How to protect/define boundary 1,2,3
llis & Rukstad (2008). Can You Say What Your Strategy Is?, HBR (April 2008)
First
DIFFERENTIATE
from competitors

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Your Sweet Spot Defines Your Future Success
Customers’
needs
Competitors’
offerings
Company’s
capabilities
Sweet
Spot
Context (technology,
industry, regulatory, etc.)
Where your company
meets customers
needs in a way in
which your competitors
cannot
What?
Where?
Why?
How?
1
2
3
Sweet spot = unique spot
How to protect/define boundary 1,2,3
llis & Rukstad (2008). Can You Say What Your Strategy Is?, HBR (April 2008)
THEN expand border 3 north
toward customer needs

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Innovation Capabilities
Innovation Capabilities
- Determines how well you will succeed with your innovation efforts
Examples:
• Personas
• Knowledge
• Team structure
• Tools
• Processes.
The most successful companies are those that focus on
a particular, narrow set of common and distinct
capabilities that enable them to better execute their
chosen strategy.

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...the navigator
Bearing Innovation Navigator
Initiated by the work of Sawhney, M., Wolcott, R. C., & Arroniz, I. (2006). The 12 Differetnt Ways for Companies to
Innovate. MIT Sloan Management Review , 75-81.

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Comparisons
Bearing Innovation Navigator

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Case – African Frontier Holdings

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Client Involvement
•In-depth interviews interviews with key stakeholders
•Survey: Capturing imperatives of the business, scoping the
case
•Survey: Capture strategies, weaknesses, market structures,
key drivers
•Internal and external communication / enrolment
•Presentation with recommendations
Analysis process
•Hypothesis
•Internal and external data collection (survey)
•Generating relevant benchmark data and innovation
patterns
•Analysis
•Strategic options generation
•Evaluation and conclusions
•Recommendations
...the process
The Process

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Overall snapshot
Overall snapshot “innovation capability footprint”

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Benchmark against benchmarking database (AFH = red)
Comparison with database

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Respondent categories

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The Innovation Radar
Wolcott, Lippitz, “Grow from Within”

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Offerings
Offerings are a firm’s products and services.
Innovation along this dimension requires the creation of new products
and services that are valued by customers.

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Platform
A platform is a set of common components, assembly methods or
technologies that serve as building blocks for a portfolio of products or
services.
Platform innovation involves exploiting the “power of commonality” —
using modularity to create a diverse set of derivative offerings more
quickly and cheaply than if they were stand-alone items.
Innovations along this dimension are
frequently overlooked even though
their power to create value can be
considerable.

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Solutions
Solutions A solution is a customized, integrated combination of
products, services and information that solves a customer problem.
Solution innovation creates value for customers through the
breadth of assortment and the depth of integration of the different
elements.

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Customers
Customers are the individuals or organizations that use or consume
a company’s offerings to satisfy certain needs.
To innovate along this dimension, the company can discover new
customer segments or uncover unmet (and sometimes unarticulated)
needs.
Compare – Blue Ocean Strategy

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Customer Experience
Customer Experience This dimension considers everything a customer
sees, hears, feels and otherwise experiences while interacting
with a company at all moments.
To innovate here, the company needs to rethink the interface between
the organization and its customers.

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Value Capture
Value Capture refers to the mechanism that a company uses to
recapture the value it creates.
To innovate along this dimension, the company can discover untapped
revenue streams, develop novel pricing systems and otherwise expand
its ability to capture value from interactions with customers and partners.

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Processes
Processes are the configurations of business activities used to
conduct internal operations.
To innovate along this dimension, a company can redesign its processes
for greater efficiency, higher quality or faster cycle time. Such changes
might involve relocating a process or decoupling its front-end from its
backend.

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Organization
Organization is the way in which a company structures itself, its
partnerships and its employee roles and responsibilities.
Organizational innovation often involves rethinking the scope of the firm’s
activities as well as redefining the roles, responsibilities and incentives of
different business units and individuals.

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Supply Chain
Supply Chain A supply chain is the sequence of activities and
agents that moves goods, services and information from source
to delivery of products and services.
To innovate in this dimension, a company can streamline the flow of
information through the supply chain, change its structure or enhance the
collaboration of its participants.

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Presence
Presence Points of presence are the channels of distribution that
a company employs to take offerings to market and the places
where its offerings can be bought or used by customers.
Innovation in this dimension involves creating new points of presence or
using existing ones in creative ways.

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Networking
Networking A company and its products and services are connected
to customers through a network that can sometimes become part of the
firm’s competitive advantage.
Innovations in this dimension consist of enhancements to the network
that increase the value of the company’s offerings.

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Brand
Brand are the symbols, words or marks through which a company
communicates a promise to customers.
To innovate in this dimension, the company leverages or extends its
brand in creative ways.

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The twelve dimensions of innovation

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Innovation framework
Why
Strategic question
Profit / Market share
Company Strategy
•Incremental/
Disruptive
•Need seekers
•Market readers
•Technology drivers
What
Type of innovation
Product Innovation
Process Innovation
Organisational Innovation
Management Innovation
Production Innovation
Commercial/Marketing
Innovation
Service Innovation
How
Style
•Cauldron
•Spirale
•Fertile
•PacMan
•Explorer
People
•10 Faces of Innovation
Capability & Process
•Ideation
•Project selection
•Product development
•Commercialisation
Source: Penker (2011)

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Why – Strategic Question
?
Strategic
Question
Increase barriers to enter or copy
Differentiation and neutralization of
competitors
Focus on competitive advantages
Building the capabilities to increase
the internal efficiency
Cost savings
Disruptive opportunities
To keep competitors
out keeping/gaining
market shares?
To increase the profit ?

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How – Style & People
“The Devil´s Advocate may never go away, but on a good day, the ten
personas can keep him in place” (Kelly & Littman, 2005)
Source: Kelly & Littman (2005)
Learning
personas
Anthropologist
Experimenter
Cross-Pollinator
Organisational
personas
Hurdler
Collaborator
Director
Building
personas
Experience
Architect
Set Designer
Storyteller
Caregiver

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What – Types of Innovation
• Creating or reinventing the business in itself
Business model
• Changing the organisational structure, in its business
practice, workplace organisation or external relations
Organisational
structure
• Creation of better or more efficient internal processes
Processes
• Improve the production stream and business methods
Production
• Development of new or improved products
Products
• Development of new or improved services
Services
• Development or implementation of more efficient or
better management systems
Management
systems

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Innovation style
• An entrepreneurial
style where the
business model is
constantly challenging
and is frequently
challenged
The Cauldron
• A style where you are
constantly innovating
the existing business
and it over time
changes its nature.
While it seems to stay
in the same place.
The Spiral
Staircase
• A style where the
organisation tries to
use existing
capabilities and
resources in a new
way beyond the
company’s existing
operations.
The Fertile Field
• A style where you
invest in start ups that
have already done
the strategy
development and
R&D
The PacMan
• A style where you
explore possibilities
and invest time and
money in them
without demanding
short-term profit
The Explorer
Source: Loewe, Williamson and Wood
(2001)

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The Innovation Personas
Source: Kelly and Littman (2005)
The world is changing at an accelerating
speed and these personas are needed to
help teams from becoming too internally
focused.
Learning
Personas
• The Anthropologist
• The Experimenter
• The Cross-Pollinator
Enables the ideas to move forward in the
organisation as even the best ideas must
compete got time, attention and
resources.
The Organising
Personas
• The Hurdler
• The Collaborator
• The Director
The building roles apply insights from the
learning roles and channel the
empowerment from the organising roles
to make innovation happen.
The Building
Personas
• The Experience Architect
• The Set Designer
• The Storyteller
• The Caregiver

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How – Capabilities & Process
Ideation
Supplier and
distributor
engagement in
ideation process
Independent
competitive insights
from the marketplace
Open
innovation/capturing
ideas at any point in
the process
Detailed
understanding of
emerging
technologies and
trends
Deep consumer and
customer insights and
analytics
Project
Selection
Strategic disruption
decision making and
transition plan
Technical risk
assessment/manage
ment
Rigorous decision
making around
portfolio trade-offs
Project resource
requirement
forecasting and
planning
Ongoing assessment
of market potential
Product
Development
Reverse engineering
Supplier–partner
engagement in
product development
Design for specific
goals
Product platform
management
Engagement with
customers to prove
real-world feasibility
Commercializa
tion
Diverse user group
management
Production ramp-up
Regulatory/governme
nt relationship
management
Global, enterprise-
wide product launch
Product life-cycle
management
Pilot-user
selection/controlled
rollouts
Source: Jaruzelski & Dehoff (2010)

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Bearing on the web
Bearing has a blog with
an active debate
blog.bearing-consulting.com
Read more about what we
do on the Bearing homepage
www.bearing-consulting.com

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INNOVATE - EXECUTE™