Presented at Managing the Strategic Value of Innovation programme by Imperial College Business School

1. Managing the Strategic Value of Innovation
Using Platforms
Jeremy Caine
IBM Executive Architect
25 June 2012
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2. Agenda
Innovation through Platforms
Current Trends
Discovery Techniques
Example
Exercise
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3. Innovation through Platforms
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4. Why Does Innovation Matter?
Generates high-value,
higher-paying jobs
Fuels wealth creation
and profitability
Creates new industries
and markets
Spurs productivity and
economic growth
Raises standard of living
Goes beyond invention
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5. Do you have an Innovation ‘Ambition’?
A novel creation that
produces value
Invest along a broad
spectrum of risk and reward
Transformation requires you
to do things differently
Key management dimensions
of a Total Innovation System:
Talent; Integration; Funding,
Pipeline, Metrics
Source: Harvard Business Review, May 2012 (R1205C)
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6. Switch to multi-sided Consolidation of
platform business model platform business model
2001 2003 2008
© Apple Using Platforms | © IBM Corporation 2012
Inc
© businessmodelgeneration.com 6

7. What can you expect from Innovation activities?
INVESTMENT RETURNS
Focus of innovation activity
10% translated into returns
Companies targeting the
20% “Golden Ratio” typically
outperform peers with P/E
CORE 70%
premium of 10-20%
Different ambitions, different
allocations
70%
Transformational initiatives are
ADJACENT 20%
the engines of blockbuster
growth
TRANSFORM 10%
Source: Harvard Business Review, May 2012 (R1205C)
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8. Technology is changing business
Technology Area Emerging Technologies Implication
Automation Cloud computing, BPM Optimised infrastructures
Access to Public sources, real-time feeds, Informed customers, network
Information event systems effects, richer databases
Real-time video analysis, Potential exploitation of
Digitisation semantic tagging unstructured data
Increasing affordability, online Total transaction history
Storage backup availability
Stream Processing Increasingly sophisticated, real-
Analysis Event Processing time analysis
Rich local ecosystem (suppliers,
Instrumentation Smart Planet partners, customers.)
Web 2.0, Mobile, Social / Digital natives viewing using
Collaboration Real-time Media services as part of ecosystem
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9. Required shifts to keep current and competitive
Make and sell Sell and make
Product-centricity Customer-centricity
Output Performances
Transaction Relationship
Value delivery Value co-creation
Competition Co-supply
Value chain Value network
Miraglia and Davies 2009
Client relationships and ecosystems matter
What does your ecosystem look like?
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10. Digital Platforms for Transformational Growth
Disruptive
Disruptive
Business
Business
Business
Business Business
Business
Platform
Platform Platform
Platform
Products & Services Capability Integrated Product-
Capabilities enhancement Service systems
Costs, profits Technology Value creation and
enablement market control
Strategies
Processing efficiency Multi-sided business
Revenue streams
Increase straight- models
through processing Open connectedness
Per-click business to partners and
models suppliers
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11. Innovate through a Platform evolution strategy
Open
Standards
UTILITY INDUSTRY
Level of Standardisation
PLATFORM PLATFORM
External
Connectivity
INTERNAL VALUE NET
PLATFORM PLATFORM
None
Business Supply Chain Cross
Unit Industry
Value derived from Platform
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12. Current Trends
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13. Mobile, Social and Real-time Business is a cultural change, not a fad
70% of Gen Y will be “mobile first”
by 2015
Gen Y will be 45% of the
workforce in 2020
Shifting demographics, global
lifestyles, shared life events
complicate segmentations
Products, services and pricing
must address the complexity
Fine grained segmentation driven
by event and location factors
Percentage of Consumers with Accounts on Social Sites
Source: IBM Institute for Business Value Analysis, CRM 2011; sample size N=1056
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14. The Consumer Web is influential to Platform Strategy
Opinion on information, products and
services is the new influencer
Linked networks allow
data capture that can be
scary powerful
Key platform protocols such as OAuth
and RESTful services should not be
overlooked
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15. Connecting to and collating data is an innovation opportunity
Transactions
History Your data What’s happening?
Their data Opinion
Personal details on them
shared
Net worth Self-promotion
Information sharing
insight
World events Outside data
Real-time influencing
Capitalise
React
Data is the new landfill
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16. Platform “Gamification” might seem pointless…
Collecting badges is one
pointless by-product of
using a platform
…but think of providing goals as a means for driving real transactions
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17. Look at what Foursquare has been building up to
© Foursquare Labs
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18. Discovery Techniques
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19. How do you find Business Platforms?
How is value being What value could How could our unique
captured by the be “platformed”? capabilities drive value
organisation today? capture in the future?
Industry,
Market and
Capabilities Social trends Candidate Platforms
Value levers Vision
Business Process and Control points
Unique
Organisation
capabilities Industry Standards
(Component) models
Financial models Partner Ecosystem
Technology models Emerging Technology
technologies
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20. Five patterns for creating new sources of client value
Augment
1 Products
Instrument products to create new
data and extend notion of client value
Codify Expand use of differentiated capabilities
2 Services
through ecosystems or business platforms
to create additional value
Interconnect Use information to create new value
3 Industries
chains that reduce waste and bridge
gaps between organizations
Trade
4 Information
Translate data into information that is
of value to adjacent industries
Digitise
5 Assets
Transform analogue into digital assets
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21. Think about the systems architecture commercially
Open Platform Platform
Open Applicati Applicati
Access
Access
What data
on on
o
API
accessible
should be W hat d rs
free and com petito Commercial Gateway
?
why? pay for ou
t do y
monetise
W ha ?
charge API
eed
Data Provision APIs n ck
o
to be r d
n
solid a e
siv API
respon
Data Organisation
API
proprietary
Data Consolidation There’s
going to be
lots of it
Crowd
Sensor Data Core Data
Source Data
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22. In Summary
Invest appropriately in your Innovation Ambition
Define an ecosystem that could fuel transformational growth
Understand the external industry and technology influences
Envision what data you need to drive your “secret sauce”
Develop a platform strategy and architecture
Get there first !
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23. Example
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24. PayPal created an $18Bn business through a standard, secure payment service
• 1999- Founded- Max Levchin, Peter Thiel
• 2000 Launches an e-mail payment system
• 2002 Acquired by e-bay- Initially a competitor to e-bay’s Bill Point.
• 2004 $1.4 billion revenues
• 2005 Secure Payments enabled with acquisition of VeriSign
• 2008 Tipping point. TPV off ebay. 60 million active accounts worldwide
• 2010 Paypal X Launched. 87 million active Accounts
• 3 Stage Strategy- US e-bay, International, Merchant Services
• It uses the access to Bank accounts that Banks intended to use between each other
Disruptive technology analysis | © IBM Corporation 2012
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25. The “Invisible Platform” in Retail Payments – PayPal X
2009 Paypal starts to open up it’s platform and code to a select group of developers.
2010 it further opened up its code to developers. 15,000 developers accessing platform.
Now anyone with rudimentary programming skills has access to the kind of technology and
payment-industry experience that powers PayPal itself
2011- 50,000 developers from 129 countries which produced 1000 new apps since last year.
Over $15M of payments were being processed on new services through PayPal
Compared to the $2+ trillion annual credit card and $1+ trillion debit card spend this is a drop in
the ocean.
PayPal X Developer Challenge with $160,000 USD in prizes
Examples include: Off Internet use (Mobile/ Point of Sale)

26. DIGITAL PLATFORM EXERCISE
Example Paypal vision
To be the payment provider of choice for all consumer transactions (Internet,
Vision mobile and possibly more)
Opportunity To be the payments mechanism inside app based services; drive up the transaction volumes;
disintermediation of the banks
Banks, application developers, companies who would be banks, mobile
Partners companies
Data Standard Secure open web standards for integration; two-factor authentication
Service Standard Low cost of entry to payments capabilities; Verisign backed security
Vanilla payments transactions; electronic alternative to traditional paper
Unique Capabilities methods;
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27. DIGITAL PLATFORM EXERCISE
Exercise
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28. DIGITAL PLATFORM EXERCISE
Define the platform vision
To become the global platform provider for …
Vision … leveraging unique capabilities xxx.
Reduce costs (eco friendly), Provide business agility
Opportunity Create Revenue: Advertising revenue. Faster conversion revenue.
Telco – Network access, Application Software vendors, New Hardware xxx,
Partners Business Partners – EU, US, Asia, Advertisers, Manufacturers.
Data Standard Data model, Product definition, Feedback/experiences
Service Standard Access services, Advertisement, Product Information, Product Selection
Unique taxonomy, Process, Business Engine, Delivery Platform, Feedback
Unique Capabilities analyser.
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29. DIGITAL PLATFORM EXERCISE
Digital Platform Exercise
1. What frustrates you, what would 2. What sort of platform ecosystem
constitute progress? could help?
3. What could success look like, what 4. Who would need to be involved?
would be the benefit / payback?
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30. DIGITAL PLATFORM EXERCISE
Define the platform vision
Vision
Opportunity
Partners
Data Standard
Service Standard
Unique Capabilities
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31. Jeremy Caine
IBM Executive Architect and Client Technical Advisor
http://uk.linkedin.com/in/jeremycaine
Jeremy Caine is an IBM Executive Architect and Client Technical Advisor to UK and Ireland
Retail Banking Sector. He provides technology leadership and architectural guidance to clients.
Jeremy has previously worked for eighteen years on services engagements in IBM’s major
financial services clients. In Chief Architect roles, Jeremy has designed and delivered a number
of complex system integration solutions in business transformation programmes.
Jeremy is leading initiatives for Digital Platform adoption as part of IBM Industry Innovation
growth. He is an advocate of new technologies, standards and trends in platform architectures.
Jeremy is a Member of UK Affiliate to the IBM Academy of Technology. He is a UK Chartered
Engineer with a B.Sc. in Physics and Astrophysics, and M.Sc. in Information Technology.
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