2. PDMA Outstanding Corporate Innovator
• Why Kennametal? Why Now?
– Our commitment to innovation during a down economy
– Tools, Processes, and Executive Engagement
– The creation of an Innovation Venture Group targeting EBO’s
Sally E. Kay
Chair, PDMA OCI Selection Committee
Strategic Alignment, Disciplined Processes, and Executive
Involvement are Key Success Factors for Sustainable Innovation
3. What We Do…
$2.4+ Billion 2011 Revenues
80,000 + Active Customers
11,600 + Employees
1,700 + Patents
42% % Revenues From Products < 5 years
60 + Global Countries
<3% Largest Single Customer
Provide Cutting Tools and Wear Components for nearly all the world‟s
critical manufacturing processes through Advanced Materials
Solutions
5. Becoming a Breakaway Company
Early 2000s Recession Results
Breakaway
11%
Acquired
9%
Other 8%
Private
1%
Bankrupt/
Liquidate Survive
23% 48%
Source: R Gulati/HBS
Opportunity to Reinvent Ourselves with Innovation Focus
6. How We Go To Market Today
Kennametal Enterprise Organization Earthworks
Aerospace & Transportation
General
Energy
Engineering
Defense
Five Segment Leaders
Regional Sales: Deliver Solutions through Customer Intimacy
Global Functions: Excellence / Synergy / Efficiency
Infrastructure
Industrial
Business Business
A Market-Driven Enterprise Approach to Improve our Customer Intimacy
7. Language and Measures of Innovation
Emerging
Opportunities
Test Business Models,
Growth Prove Viability, Capability, Value
Business Seed Growth Businesses
Proven Business Model
Timing
Core Increase Share & Breakthrough
Grow to Opportunity • Project-based Milestones
Business
Extend/Defend, Adjacent Market Growth • Creating Business Design
Increase Productivity • In Market Pilots
& Profit Contribution • Market Share Gains
• New Customer Acquisition
Achieve Revenue Profit • Profit
• Revenue, Profit
, ROIC, Costs, Productivi
ty or Efficiency Learning Required
Innovation is Delivering Ever-Increasing Value to Customers
8. Stage Gate Development for the Core
Leadership Commitment to Innovation
A Linear Process
Quick Business New
Product
Business 2
Assessment
Case
Development
$ Development
4 Field Test 5 Launch LC Product
Sales
PL
Executive Level Gatekeeper Participation at
Gate 3 (“Money Gate”) and Post-Launch
Review:
• Ensures High-Level awareness of pipeline
activity
• Guarantees strategic alignment of
development programs
• Controls quality of execution for programs
entering and exiting the pipeline
• Provides Opportunity for Growth and
Development of our People
NPD is a Business Process – it is not an R&D Process
9. NPD Efficiency & Effectiveness Measures
Advance with
Technology
Technology and Innovation
Increasing our
new product % 55% reduction in
NPD cycle time
Decreasing SKUs
Driving New Products at an Accelerated Rate
10. Learnings About Core
If the philosophy is ….
• Focusing on how to do better what has previously There Is Statistical Evidence
been done That Companies “Built To Last”
• Managing a group as good or better than their Regularly And Systematically
predecessors Underperform In The Market!
• Better optimizing the performance of their teams
• Focusing on core
capabilities, customers, assets, functionality, etc.
and defending the core with incremental
opportunities to extend it
• Take care of the short term, the long term will take
care of itself
The end result will deliver ….
• Late to new innovations
• Breakthroughs never develop
• Incapable of addressing market challenges
“Great Companies Missed Opportunities To Compete More Efficiently”
11. Another Rationale for Focus on EBO’s
Evolutionary vs. “New to X”
Profit Impact 39% 61%
When Successful…
Revenue Impact 62% 38%
4x Revenue Potential
10x Profit Potential
Business Launch 86% 14%
0% 20% 40% 60% 80% 100%
Kim & Mauborgne, “Blue Ocean Strategy”, 2005
Breakaway Companies Target Emerging Business
Opportunities
12. Innovation Ventures Group
IVG is not about long range R&D Different Outcome Requires Different Process
It is about capturing New Sources of Customer „Core‟ Processes
Value in ways not done today by KMT EBO • ACE: Execution focused against
Core defined SMART Objectives
• Standardized deliverables with goal
Emerging
Core Growth to minimize process variability
Business IVG Processes
Business Business
Opportunities • Governance Council
Time to Cash Time to Market Time to Pilot • Probe & Learn: Change course
based on market feedback
IDEATION INCUBATION TRANSITION
• Market Mapping: Evaluate market • Market Development: Develop critical
dynamics in white space • Systems level approach often with customer base by achieving first sales
external technology integration
• Open Innovation and Technology • Structure strategic alliances and ensure
Mapping: Define technology landscape • Prototype testing in the market qualification of external supply chain
and influence technology strategy partners
• Determine business model and path to
• Collect VOC, translate unarticulated market with sustainable commercial • Validate financial model assumptions
needs into requirements opportunity
• Lead commercial launch activities
• Begin testing to define value • Develop technology/vendor including product promotion and
proposition and articulate opportunity partnerships manufacturing scale-up
Leading Growth Into New Spaces with Innovative Solutions
14. Summary
• Innovation is the Process of Delivering Ever-Increasing Value to
Customers
– Business Strategies need to be aligned with the market
– Innovation strategies must be aligned to the business
• Create a common language for Innovation in your company
– Different forms need different management processes
• Executive Involvement critical
– Culture
– Resources / out-of-cycle budget needs
– Multi-aligned / unaligned opportunities
Strategic Alignment, Disciplined Processes, and Executive
Involvement are Key Success Factors for Sustainable Innovation