Description of:
1) business model innovation
2) process innovation
3) product/service innovation
4) innovation culture
and the tools and models needed to understand , create and implement.
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The four pillars_of_innovation
1. The Four Pillars of
Innovation
Joel M. Vardy
Vardy & Associates, LLC
Jan 27, 2012
2. THE FOUR PILLARS of INNOVATION
Business Model Innovation: “When the game gets
tough, change the game”
Radical vs. Incremental (semi-radical) Innovations
The Role of Business Transformation
Business Model Diagnostics (Value Assessment/Creation)
Process Innovation: “the method & language of doing things
differently…making innovation work”
New & Exciting Developments
Product/Service Innovation: “The artifacts of Innovation – the
ultimate output”
Technology & Design
New Channels, Customer Service Concepts
Innovation Culture: “the art of collaboration...changing
organizational DNA to achieve sustained innovation”
How to Ensure Success
How to Maintain It
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3. Innovation: Famous Quotes
“Innovation is the specific instrument of
entrepreneurship. The act that endows resources
with a new capacity to create wealth”
Peter Drucker
“Innovation distinguishes between a leader and a
follower”
Steve Jobs
“Without tradition, art is a flock of sheep without a
shepherd. Without innovation, it is a corpse”
Winston Churchill
Confidential/Proprietary Vardy & Associates LLC
4. Why do previously strong Corporations face
Higher Risks Today?
Periods of High Volatility can Destroy Business Value in
Some Sectors allowing New Value Creation in Others…
Demand Supply Stronger
Demand Supply Stronger Volatility Volatility New Players
Volatility Volatility New Players Corporate
Corporate
Strategy
Strategy
Direction
Direction
Business
Business
Unit
Unit
Direction
Alignment
Corporate
Tactical
Countermeasures
Shifting Closing Global
Global Markets Skills
Differences
Shifting Closing Global
Global Markets Skills
Differences
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5. Key Concept #1
Radical vs. Semi-Radical Innovations
Business Transformation
• Reforming - Strategic new Vision
• Restructuring - Work Flow redesign
• Revitalization - Linking Technology
• Renewal - Changing Behavior
Innovation RADICAL Improvements
(FMEA can be applied here)
2 Continuous Improvement
• Total Quality Management
1
• SPC/SQC
0 Semi-Radical Improvements
Existing Work Processes
• As-Is Process
• First order changes are not enough
• Bus. Trans. required to create dramatic (radical/breakthrough) improvements
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6. Balancing Creativity and Commercialism –
Managing the Paradox
Imagination Innovation Concept to Reality
CREATIVITY PROCESSES VALUE CREATION PROCESSES
Blue - Out-of-Box thinking Portfolio - In-the-box thinking
Ocean
- Raw and refined ideas
- Experimentation Mgt. - Engineering/Manufacturing Ecosystems
- Precision
- Ambiguity/Uncertainty - Well-calculated trade-offs
Disruptive - Research Scenario
- Intuition Foresighting - Buying/Selling of ideas
Innovations - Surprise
- Do things right
- Answer question and
Planning
- Courage verify solutions
- Find the right things Innovation - Avoid major risks
- Ask questions and explore
the unknown innovation Mgt - Find the right things
- Get the product into
- Seize opportunities the marketplace
- Visualize the future and - Bias for incremental
consider all options Program
- Include incremental and
radical innovations Mgt
Source: “Making
Innovation Work”
Davila, Epstein, Shelton
Confidential/Proprietary Vardy & Associates LLC
7. Business Model Innovation
First Pillar of Innovation
“When the game gets tough, change the game”
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8. The Human Brain & Innovation – Making the ‘Connections’
in a land of Complexity and Uncertainty
“The brain appears to be naturally configured for
innovation to work and to have new ideas
because its job is to use information about
the world and innovate by modeling new
ways in which the state of the world out
there might be put together”
James Burke
Science historian, author
and television writer/producer
Confidential/Proprietary Vardy & Associates LLC
9. Business Models: Molding the Process --
Another Key Innovation Concept
1. Visualize to Understand It
2. Model to Simulate It
3. Measure to Improve It
Visualize
Understand
Improve
Measure Model
Simulate
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10. Business Models: Striking the appropriate Balance
between 4 Key Ideas/Metrics
Innovation
Excellence
Front Office Key High
(external) Level Metric:
Time-to-Market
Service
Excellence
Business
Key High
Model
Level Metric:
Commercialization
Order to
Excellence
Deliver Time
Key High
Manufacturing Level Metric:
(Operations)
Time to Scale
Operational Key High
Excellence Level Metric:
Source-to-Make Time Back Office
(internal)
Confidential/Proprietary Vardy & Associates LLC
11. Business Models: Sample Innovation Value Prop. Tree
(/)
KPI TREE
Return
On Inno. Other
Working Net Oper. Fixed Inv.
Capital Inno. Profit Costs Holding
(-)
Production
Process Process Net Oper. (x)
Innovation Innovation Margins
Improvement 1 Improvement 2.
Primary Influences
Measured KPI’s
Revenue (-) Variable for analysis
Costs
Product Lost Manufacturing
Expedite
Innovation Orders Inno. Improvement
Overtime Logistics Inno.
Bus. Forecast Other
Accuracy Drivers Rework/
Supply Wide Spec
On Time Customer Inno. Imp.
Delivery Service Levels
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12. Process Innovation
Second Pillar of Innovation
“the method & language of doing things differently…making
innovation work”
Confidential/Proprietary Vardy & Associates LLC
13. Process: The Innovation Process
Stage Gate Stage Gate
Gathering Filtering Supporting Bringing ideas
the ideas the ideas ideas to the market
Source: MCE Management
Centre Europe
Putting ideas through the selection Process
• any number of ideation processes to gather ideas
• market and financial gate criteria required
• strong commercialization infrastructure critical to profitable
execution as well as talented project managers
Confidential/Proprietary Vardy & Associates LLC
14. Process: Accelerating the Innovation Process
$ Time to
$ Market
Existing 30-50%
revenue increase
through accelerated
and more sustained
revenue
Existing Time
10-40% less through
Development time compression and greater
Costs efficiencies
Four Key Elements to Achieve these Results:
1. Time-to-Market
2. Internal Integration
3. Collaboration
4. IT enablement
Source: IBM Global Business
Services analysis. 2006
Confidential/Proprietary Vardy & Associates LLC
15. Process: Key Factors in Driving Innovation --
Complexity, Uncertainty and Change
Complexity
Maturing market (SKU proliferation starts to address different
segments).
Needs to be embraced rather than feared.
Process complexity can be reduced while embracing
product/service complexity.
Uncertainty
Byproduct of higher levels of complexity
Market volatility
Needs to be managed and minimized
Change
Constant
It cannot nor should it be eliminated
It actually represents new opportunities, frequently exploited by
new startups.
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17. Process: Decision Process Workshops get the
Critical Organizational Buy-in
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18. Product/Service Innovation
Third Pillar of Innovation
“The artifacts of Innovation – the ultimate output”
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19. Product/Service: Key Concept for Innovation-Driven
Programs: Factoring People, Process & Technology
„Formula-Raw Materials‟ „Procedure‟
People Process
50%* 30%*
Knowledge of
Process
how to measure
of running a
& incent people 20%* superior
business
Enablement
of People & *Audited Project
Processes Technology Success Factors
Accelerator
„Catalyst‟
Enabler
Technology – though accounting for only 20% of project success factors is the most confusing due to
rapid changes. Key to either accelerating or enabling possible people & process factors.
Confidential/Proprietary Vardy & Associates LLC
20. Product/Service: Exploiting New and Traditional
Innovation Tools & Concepts
Innovation Fields/Strategy Project Portfolio Selection
3
1.1 1.2 1.3
4.1 4.2
High
1.5 1.4
IF 1) 1 2.4
Innovation field attractiveness
6.1 6.2 2.1
IF 2
Strategic importance
2.2 7.1 7.2
IF 4 2 2.3
7.3
3.2 3.1
5.1 4.3
6.3
Middle
2.5 5.2
IF 5 IF 3
1
5.3
Low
IF 6
0
0 1 2 3
Low Middle High
Improvement potential
Innovation strength
Creating a balanced portfolio of product/service projects
that maximizes return on innovation and mitigate risks
Confidential/Proprietary Vardy & Associates LLC
21. Innovation Culture
Fourth Pillar of Innovation
“the art of collaboration...changing organizational DNA to
achieve sustained innovation”
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22. Culture: The Innovation Culture Continuum
Foundation Advanced Breakthrough
Hierarchical Departmental Silos Self-directed Virtual Management
Command & Control Teams
Transactional and Integration across Learning & Service Information
Aggregated the Enterprise Delivery Architecture
Cost and Risk Productivity Collaborative Operations
Reduction Improvement Improvement
Product Segmented but Customer’s Individual Customers
still Product Based Needs and Values
Growth Growth and Innovation Strategy
Performance
“There is no guarantee that an innovation culture leads to innovation
but it certainly is a prerequisite.”
Source: Ivey Business Journal
Jan/Feb 2006
Confidential/Proprietary Vardy & Associates LLC
23. Culture: New Game Changing Strategies
-- Managing Uncertainty using Collaboration to
Highly Evolved
Incorporating both
Co-marketing and
Co-development
Across the ecosystem
Integrated
Ecosystem High
Integrated Internal
Collaboration IV
Level Of
Decision
High Systems
Integrated
Value
II III External
Collaboration
Integration
Level Of Low
Information
Systems
Integration
I
Low
Functional Internal External
Collaboration
Scope Scope
Source: Cayuga Partners
Confidential/Proprietary Vardy & Associates LLC
24. Culture: The Innovators
Top 10 - Most Innovative Companies
Traits of the
top 10 2006 2007 2010 2011
Apple Apple Facebook Apple
Company
Google Google Amazon Twitter
Leadership
Sony Toyota* Apple Facebook
Ideas
3M YouTube* Google Nissan*
Strategy
Microsoft Microsoft Huawei Groupon*
JetBlue Starbucks First Solar Google
Personal
Starbucks Motorola PG&G Dawning*
Strategist Information
BMW Samsung* Industry
Methodologist Novartis Netflix
Motorola Nike*
Walmart Zynga*
Facilitator Target Sony
HP Epocrates*
* New to list in 2007
* New to list in 2011
Source: futurethink article:
2007 Innovation Tracker Source: fastcompany.com
The Shift from Creativity to Value The Shift to Social Tech.
Confidential/Proprietary Vardy & Associates LLC
25. Innovation Management Tools
Align
Assess Status Strategize Operationalize Externalize Organization &
Behavior
Tools
Capabilities Assessment
Innovation Fields/Strategy Readiness Assessment Implementation of radical innovation
Budget Strategy 3
4th 3rd 2nd 1st
1
Quartile Quartile Quartile 1.1 1.2 1.3
Collaboration Maturity
High
Quartil
Innovation field attractiveness
IF 1
e
1)
4.1 4.2
2 People 1.5 1.4
IF 2
Technology 2.4
3 6.1 6.2 2.1
IF 4
- Strategic
Strategic importance
2.2 7.1 7.2
4 Clarity
2 2.3
5
Middle
7.3
Innovation - Financial and 3.2 3.1
6 core process Competitive
Qualification Focus
Ability
5.1 4.3
- Management
IF 3
6.3
IF 5
& skills 2.5 5.2
Support
Process
1
Low
Corporate
culture
Patents &
standards
IF 6 - Demand/S
KU
Complexity
5.3
- Levelof SKU’s &
(no. of
Low Middle High Internal
nodes)
Collaborati
Qualitative Assessment Innovation strength - on
Level of
(Structures
External
0
0 1 2 3
)
Collaboratio
n Improvement potential
(Structures
Technology
Reward/Recognition
Communications
)
KPI Development - Infrastructure
(ERP)
KPI Improvement/Monitoring
Inputs>Processes>Outputs> Plan
- Tools
Outcomes Return
On
Innovation
Working Operating
Capital Profit
Map: As -Is
Inno. Imp. Inno. Imp.
Cos
Process Process Revenue t
Quantitative Assessment
Title Inno. Inno. Inno. Inn
Imp. 1 Imp. 2 Imp. o.
Process Imp
.
Step B
Quantifying the Gap (Using Key Performance Indicators - KPIs)
Supply Chain
Input A
Marginal Value Improvement
Inventory Management: Current Value Unit ($/unit) Potential (%)
Process Process Process Output
Raw Materials 10,000 $ 1,000.00 50%
Input B Step D
WIP
Finished Product
10,000
10,000
$
$
1,200.00
1,400.00
20%
25%
Step A Unit E C
Spare Parts/Other 10,000 $ 1,600.00 30%
Inventory Carrying Cost 15% % of COGS Input C
Supply Chain Process
Improvement
Finished Product Management: Current Value Unit Potential (%) Step C
On-Time Delivery to Cust. Request Date %
On-Time Delivery to Firm Commit Date %
$/Occurrence
Expediting 500 Qty/month $ 1,000 90%
Map: To - Be
Supply Chain
Minimum Value Maximum Improvement
($/unit) Unit Value ($/unit) Potential (%)
Range of Transportation Costs $ 2.00 $ 3.00 10%
Average Qty. of Product Transported Yearly 10,000,000
Supply Chain
Marginal Value Improvement
Process, Cross-Functional Measures: Current Value Unit ($/unit) Potential (%) Title
Average forecast accuracy %
Order fill rate 80% % 15% Process
Orders lost 50% %
Step B
Planning process cycle time 5 $ 4,000 90%
Input A
- Qty. of planning occurences per year
Scheduling process cycle time
52
6
Occurences
$ 1,000 90%
Estimated Range of Innovation Benefits
- Qty. of scheduling occurences per year 365 Occurences
Process Process Process Output
Source-to-make cycle time 365 Days 30%
Input B Step D
New product time-to-market 365 Days 30%
Step A Unit E C
Manufacturing-Related Measures
Minimum (M$) Most Likely (M$) Optimistic (M$)
Input C
Marginal Value
Supply Chain
Improvement Non-Recurring Working Capital Benefits $ 13.2 $ 18.9 $ 24.6 Process
Current Value Unit ($/unit) Potential (%)
Total Nominal Yearly Capacity: 10,000,000 $ 100.00 1.0%
Recurring COGS Benefits $ 18.3 $ 26.2 $ 34.0 Step C
In Process Rework per Year 40,000 $ 30 50%
Recurring Revenue Enhancing Benefits $ 26.3 $ 37.5 $ 48.8
Variable Cost per unit produced $ 20.00 $/unit 5.0%
Selling Price per unit produced $ 150.00 $/unit
Total qty of units produced per year 10,000,000
Total number of orders per year
Average revenue per order $
100,000
150.00
orders/year
$/order
TOTAL (M$): $ 57.8 $ 82.6 $ 107.3
Number of setups and changeovers
during a month 70 Qty/month $ 1,500 50%
Confidential/Proprietary Vardy & Associates LLC
26. Summary: The 4 Innovation Pillars
Business Model Innovation
Business Model Diagnostics entering new era
Convergence of Disparate Data
Opportunity for new markets creation
Ability to better exploit existing markets
New Diagnostic Tools and Skills geared to Data-rich environments
Process Innovation
Changes in Collaboration Practices are changing Decision Making
Making it more timely and effective
Sharing of all Strategies and Tactics between trading partners
Product/Service Innovation
Product life-cycles are ever accelerating
Service opportunities are creating unique differentiators
Innovation Culture
A new breed of cross functional and cross cultural talent is needed to drive
growth for the future
Capable of non-linear thinking
Able to be equal parts Strategist, Methodologist and Facilitator
Confidential/Proprietary Vardy & Associates LLC
27. Thank You
Joel M. Vardy
Vardy & Associates, LLC
(267) 222-2324 (cell) - jvardy@aol.com
Notes de l'éditeur
Phases are numbered because different engagements will follow different paths.Most will start with Access Status.Some columns will have more tools. Others less. Columns don’t need to be filled.Icons will consist mostly of tiny versions of tools reduced and turned into some kind of picture whose resolution is low enough that they can’t be reverse engineered if they are blown up.If some tools extend across phases or can be used in multiple phases, that’s fine.