Six hints for building an effective business innovation system

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<ul><li>1.Six Hints for Building anEffective Business Innovation System Miguel Senz de Viguera Aizpurua 2007 PMI Distinguished Contribution Award msaenzdeviguera@hotmail.com November 2010Six Hints for Building an Effective Business Innovation System - Miguel Senz de Viguera Aizpurua</li></ul><p>2. Introduction: The Shift of the Economic ParadigmOn August 6, 1991, Tim On August 6, 1991, TimThe New EconomyBerners-Lee (CERN) posted Berners-Lee (CERN) posted a summary of the World a summary of the World On 1991 the humanity entered in a new era ofWide Web project on theWide Web project on the instantaneous, global diffusion of informationalt.hypertext newsgroup. alt.hypertext newsgroup. and knowledge at practically no cost, the era ofThis date marked the debutThis date marked the debutInternet of the Web as a publicly of the Web as a publiclyThe WWW is the main responsible of theavailable service on the available service on theInternet.Internet.dramatically fast globalization of the economyand of the appearance of an increasingly wildHe wrote:He wrote: competition at any industry during the last years.The WorldWideWebThe WorldWideWeb The main responsible too of the economical (WWW) project aims to(WWW) project aims to growth of the emergent countries that ten yearsallow all links to be made to allow all links to be made toago, practically, didnt count in the economic any information anywhere.any information anywhere. arena and now are in the way of becoming the[...] The WWW project was [...] The WWW project wasstarted to allow high energywinnersstarted to allow high energy physicists to share data, physicists to share data, In the New Economy, for the Companies of thenews, and documentation. news, and documentation. EU and USA, from now and for the future, it isWe are very interested inWe are very interested in not possible competing by cost. Competing byspreading the web to other spreading the web to other quality becomes more and more difficult eachareas, and having gatewayareas, and having gateway day for them. Business Innovation is, the onlyservers for other data. servers for other data. Collaborators welcome!"Collaborators welcome!"way that they have to get a sustainablecompetitivenessSix Hints for Building an Effective Business Innovation System - Miguel Senz de Viguera Aizpurua 1/30 3. What are we speaking about when we mention Business Innovation? When Speaking about Business Innovation, werefer ourselves to Product Innovation, Innovationof Processes and Innovation of the Business Model, all togetherThe Innovation of the Business Model, many times the most critical Innovation, also calledBusiness Transformation, demands transformingthe Key Processes of the Organization and/or itsPrimary Infrastructure Most of these Transformations are Enabled bythe Efficient Use of the New TechnologiesSix Hints for Building an Effective Business Innovation System - Miguel Senz de Viguera Aizpurua 2/30 4. Why Companies Need Innovation Management Systems?Managing the Paradox between Creative Improvisation and Discipline I define creativity as the entire process by which ideas I define creativity as the entire process by which ideasare generated, developed, and transformed into value.are generated, developed, and transformed into value.Since it is a process, it can be planned and managedSince it is a process, it can be planned and managedMoreover, when we add information technology to the Moreover, when we add information technology to themix of creativity and knowledge, we get a particularlymix of creativity and knowledge, we get a particularly potent combination: capabilities to represent, deploy and potent combination: capabilities to represent, deploy andtrack knowledge coupled with technologies to promote track knowledge coupled with technologies to promoteProfessor John KaoHarvard Business School collaboration across divergent disciplines and collaboration across divergent disciplines andMIT Media Lab.perspectives. When properly managed, the combinationperspectives. When properly managed, the combination results in creative combustion results in creative combustion Innovation is about implementation. Being creative and Innovation is about implementation. Being creative and maybe even radical does not necessarily mean success maybe even radical does not necessarily mean success The ambiguity, complexity and improvisation of creative The ambiguity, complexity and improvisation of creativeorganizations require specially tailored managerialorganizations require specially tailored managerial systems and processes, to transform creative ideas intosystems and processes, to transform creative ideas into value and discipline for its implementationvalue and discipline for its implementation Professor John Kao Professor John Kao Six Hints for Building an Effective Business Innovation System - Miguel Senz de Viguera Aizpurua3/30 5. First Hint: Innovate your Business Strategy Strategy Innovation is aboutchallenging existing industry methodsof creating customer value, in order tomeet newly emerging customer needs, add additional value, and create newmarkets and new customer groups forthe organizationSix Hints for Building an Effective Business Innovation System - Miguel Senz de Viguera Aizpurua 4/30 6. First Hint: Innovate your Business Strategy Why Innovating the Business Strategy? All countries and industries are now suffering the NewEconomy of wild, global competition Changes of the business environment and the competition aredramatically deeper and faster each day In the New Economy, the new paradigm, the old models forbusiness strategic analysis and planning are not more valid But Business Strategy should drive the Business InnovationEffort In the new economy, business strategy should be defined,evaluated and refined frequently, through the application of thelast best proven models, tools and techniques for businessstrategic analysis and planningSix Hints for Building an Effective Business Innovation System - Miguel Senz de Viguera Aizpurua 5/30 7. First Hint: Innovate your Business Strategy Focus your innovation strategy on the new strategic options for your business 1980 2001 Michael PorterArnoldo C. Hax Dean L. Wilde IIHarvard Business SchoolMIT Sloan School of ManagementCompetitive StrategyThe Delta ProjectThe NewStrategic SystemLock-InOptions DistinctStrategicPositions Total CustomerBest SolutionsProductGeneric StrategiesThe Delta ModelTraditional EconomyThe New Economy The New EconomyTraditional EconomyThree Distinct Strategic Options Three Distinct Strategic OptionsTwo Generic Competitive StrategiesTwo Generic Competitive Strategies Best Product Best Product Cost LeadershipCost LeadershipTotal Customer Solutions Total Customer Solutions Product DifferentiationProduct DifferentiationSystem Lock-in System Lock-in Six Hints for Building an Effective Business Innovation System - Miguel Senz de Viguera Aizpurua 6/30 8. First Hint: Innovate your Business StrategyThe Delta Model: The Three New Distinct Strategic Positions (Arnoldo C. Hax &amp; Dean L. Wilde II, MIT Sloan School of Management) Management) System Lock-In Based on: System Economics Strategy: Market Dominance Objective: Achieving Complementors Share Mostly Enabledthrough Effective Use of TechnologyTotal Customer SolutionsBest Product Based on: Customer Economics Based on: Product Economics Strategy: CooperationStrategy: Best than Competitors Objective: Achieving Customer ShareObjective: Achieving Product ShareSix Hints for Building an Effective Business Innovation System - Miguel Senz de Viguera Aizpurua 7/30 9. First Hint: Innovate your Business Strategy The Three New Distinct Strategic Positions, Main Features and Compared SustainabilitySystem Focus on the Full SystemLock-Inas the Relevant Scope to get Power (The Business, Customers, Suppliers andComplementors)Key Strategic Driving Force Gaining Complementors Shared as the main objective because they are theIncreasedBasis for the Consolidation of the Power SustainabilityTotalCustomerBestSolutionsProduct Its Aim is a Unique Value Proposition toEmphasize Product Orientation Individualized Customers by means of aCustomized Portfolio of Products and ServicesKey Driving Forces Supply Chain Efficiency (Cost &amp; Quality)Key Driving Forces New Product Development Capability Careful Segmentation of the Customers Base Securing of Distribution Channels Joint Development Efforts with Customers and KeySuppliers guided by the Individual CustomerThreatExpectations Commodization Six Hints for Building an Effective Business Innovation System - Miguel Senz de Viguera Aizpurua8/30 10. First Hint: Innovate your Business Strategy Some Strategies towards the New Strategic PositionsSystemMost of theMost of theLock-Inorganizations have organizations haveDominantProprietary not a dominant not a dominantExchangeYellow PagesStandardMicrosoftexchange position,exchange position,eBayIntel cannot get the cannot get theExclusive exclusivity of theexclusivity of theChannelTelefnica channels of channels ofNespresso distribution that distribution that Increasedcustomers use to customers use toStrategy avail themselves of avail themselves of Horizontal Sustainability their products and their products andLow Cost Breadth Fidelity Easy Jet, Clickiaireither, not haveeither, not haveTotal Air Berlinthe possibility to the possibility toCustomerBest develop and getdevelop and getSolutionsProductthe ownership of the ownership ofthe standards of Redefining the CustomerDifferentiation Customer Integration Bang &amp; Olufsen the standards of Relationship Indra, EDSSony Wega the industrythe industry MCIAccenture Not Every organization has the possibility to reach thestrategic position of System Lock-InSystem Lock-InSix Hints for Building an Effective Business Innovation System - Miguel Senz de Viguera Aizpurua 9/30 11. First Hint: Innovate your Business StrategyMCI, an Example of Strategy for Redefining the Customer RelationshipSix Hints for Building an Effective Business Innovation System - Miguel Senz de Viguera Aizpurua 10/30 12. First Hint: Innovate your Business Strategy Fidelity, an Example of Strategy for Expanding theBreadth of Products and Services provided to the CustomerSix Hints for Building an Effective Business Innovation System - Miguel Senz de Viguera Aizpurua 11/30 13. First Hint: Innovate your Business Strategy Business Strategy for the New Economy, ConclusionsThe competencies required to successfully perform in the Best ProductStrategy A Strong Product Base A Solid Supply Chain Infrastructure Strong Internal Innovation Capabilitiesvery often are not enough to create or defend sustainable competitiveadvantages in the new economyThe transformation that any company should undertake toThe move away from a Product-Centered Mentality towards a TotalProduct-Centered Mentality towards a TotalCustomer Solutions Position, and towards a System Lock-InSolutions Position, Lock-In Position, if it has possibilities, is a mandatory challenge for all executives executives Professor Arnold C. Hax (MIT) Professor Arnold C. Hax (MIT) CAF, DANOBAT RAILWAY SYSTEMS and the recent announcement of the CAF, DANOBAT RAILWAY SYSTEMS and the recent announcement of thestrategic alliance between IKUSI and ORMAZABAL are examples of Basquestrategic alliance between IKUSI and ORMAZABAL are examples of BasqueCompanies, strategically trying to move from a position of "Best Product" towardsCompanies, strategically trying to move from a position of "Best Product" towards another one of "Total Customer Solutions", an intelligent strategic movement another one of "Total Customer Solutions", an intelligent strategic movement Six Hints for Building an Effective Business Innovation System - Miguel Senz de Viguera Aizpurua 12/30 14. Second Hint: Implement an Efficient, Idea Management ProcessImplement an Efficient, Structured Process for: for:I IIIII Encouraging the Encouraging the Evaluating, Prioritizing Evaluating, PrioritizingBuilding an Efficient Building an Efficient Generation, Capture and Generation, Capture andand Selecting the ideas and Selecting the ideasDevelopment Process thatDevelopment Process that Refinement of Ideas forRefinement of Ideas forthat have the greatestthat have the greatestProvides Excellence in theProvides Excellence in the Innovation fromInnovation from potential to add value topotential to add value to Development and Development and Customers, EmployeesCustomers, Employeesthe Business the Business Implementation of theImplementation of theand other Stakeholders ofand other Stakeholders ofSelected Innovations Selected Innovationsyour Organizationyour Organization ProposalsProposalsSix Hints for Building an Effective Business Innovation System - Miguel Senz de Viguera Aizpurua 13/30 15. Second Hint: Implement an Efficient Idea Management Process Keys for Boosting the Generation of Innovation IdeasCommunicate that creativity and innovation have high priority in the organization. The High Management demonstrably should boost innovation If no one believesProvide free education and training on creativity and creative problem solvingthat your firm isserious about Give to the people free time and other resources innovation, few (mentoring, space, tools,...) to refine, test, developing the people will take it concept and presentation for creative ideasseriously Reward rather than discourage creative thinking. Show thatIf no one knowsfailures are tolerated, indeed they are seen as valuableabout your ideas learning opportunities.campaign, no one will Set aside some additional budget for refining and testingparticipatethe more radical ideas Small rewards forImplement and communicate a system to gather and ideas can be aprocess the innovation ideas. The goal: not one idearemarkably powerfulwithout answer from management means of promoting Communicate your process, for assessing, filtering ideasparticipationand deciding which ones to invest inSix Hints for Building an Effective Business Innovation System - Miguel Senz de Viguera Aizpurua 14/30 16. Second Hint: Implement an Efficient Idea Management Process Example of Practices for Boosting the Generation of Innovation Ideas IN-HOUSE ENTREPRENEURSHIP PROGRAMMMESSix Hints for Building an Effective Business Innovation System - Miguel Senz de Viguera Aizpurua 15/30 17. Second Hint: Implement an Efficient Idea Management ProcessWhat are doing the Innovation Champions to Select which ones are the Innovation Proposals to be Developed?Rejected The Most Innovative Companies, have a Initiatives multifunctional, Innovation Steering Committee (ISC) InitiativesPortfoliocomposed by members of the top management with the mission of assessing, prioritizing and selecting the innovation ideas The ISC meets periodically (monthly in most of theAllSelected cases) to select the innovation proposalsInitiativesThe ISC establishes and publishes, within theInitiativeIdeasorganization, the scoring system applied, that takesDevelopmentinto account, at least the follow...</p>