Framework for Innovation Capability

Building a Framework for Innovation / Growth Capability growth@valize.com

What our 30 day innovation sprint will provide 1.

2.

3.

4.

5.

6.

A clear framework within which the innovations will operate A design for connecting strategy and the innovation program An opportunity portfolio assessment with recommended actions A recommended approach to training and skill-building A design for up to 3 early pilot projects Governance model design

Building Innovation Capability Enterprise Level Framing ● ● ● ●

Work Plan

Assessment ●

Innovation Objectives Scope Resources Scorecards

● ● ● ●

Innovation Proficiency (IMS) Team Effectiveness Interviews Portfolio review “As is”

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●

Governance Model Project Prioritization Operating Rhythm

Project / BU Level Projects ● ● ● ●

SparcHub Checkpoints Learning Plan Portfolio Updates

Capabilities ● ● ●

On Demand Workshops Office Hours

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This proposal covers the Framing Challenge Enterprise Level Framing ● ● ● ●

Work Plan

Assessment ●

Innovation Objectives Scope Resources Scorecards

● ● ● ●

Innovation Proficiency (IMS) Team Effectiveness Interviews Portfolio review “As is”

●

●

Governance Model Project Prioritization Operating Rhythm

Project / BU Level Projects ● ● ● ●

SparcHub Checkpoints Learning Plan Portfolio Updates

Capabilities ● ● ●

On Demand Workshops Office Hours

3

Innovation Objectives

Five Levers To Drive Growth: What is your growth gap?

New Initiatives

Business Value ($Billion)

Services Geographic Expansion

The role of the Innovation and Growth Program

Business Model Innovation

Current Business Portfolio

Underlying Business Growth or decline

Baseline valuation of company 5

Every management decision has both NPV and Option Value

Option Value Present Value Low

High

Uncertainty

Technological Uncertainty

An activity portfolio

Positioning

Stepping Stones

Platform Positioning

Core

Platform Scouting

Scouting

Market Uncertainty

Technological Uncertainty

An activity portfolio

Positioning

Stepping Stones

Platform Positioning

Core

Platform Scouting

Scouting

Market Uncertainty

Core Enhancement: Launches make your core business stronger: expanding customer satisfaction, improving efficiency, taking cost out, being responsive, and investing in quality improvement.

Example: Enabling WFH, digitizing a customer portal, adding features to the web site

An activity portfolio Technological Uncertainty

Platform Positioning: Putting

Positioning

Stepping Stones

sufficient resources behind the initiative to prompt the formation of a favorable ecosystem; collaborate with standards bodies; “accelerate” venture stage

Example: Adobe Creative Cloud

Platform Positioning

Platform Scouting: Transition Core

Platform Scouting

Scouting

Market Uncertainty

from early adopting customers to mass market customers; a complete offering does a customer ‘job’ superbly; “accelerate” venture stage

Example: Amazon Web Services

Technological Uncertainty

An activity portfolio Positioning Options: You Positioning

Stepping Stones

Platform Positioning

Core

Platform Scouting

Scouting

Market Uncertainty

know there is demand, what you don’t know is which solution will meet the demand, whether the potential solutions will work, or what the standards will be.

Example:

Telepresence - whatever will replace Zoom (not a minute too soon!)

Technological Uncertainty

An activity portfolio Scouting Options: Positioning

Stepping Stones

Platform Positioning

Core

Platform Scouting

Scouting

Market Uncertainty

the business equivalent of an experiment. The purpose is to test well developed hypotheses. Even if the test fails, at least you’ve learned something.

Example: Second-Day Sushi

Technological Uncertainty

An activity portfolio Stepping Stones: Positioning

Stepping Stones

Platform Positioning

Core

Don’t know how to do it, don’t know if anyone wants it, but think the long-run potential is irresistible!

Example: Autonomous Vehicles Platform Scouting

Scouting

Market Uncertainty

First big question • Will the portfolio you have in the platform and options area fill your growth gap?

• If not, we need to make the case for an innovation / growth program

• With specifically defined growth targets, worked back from the future

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Technological Uncertainty

Typical Company profile

Positioning 125 Platform Positioning

• 25 Core Core 25

5

120

200+

5

Stepping Stones

Promised, but unworked on

75 75

75 110 110

Platform Scouting 95

210

Unfocused

Scouting

Market Uncertainty

Number of person-months devoted to a project

35

5

Not transparent Some projects with no activity

Scope of projects

Second Big Question: What is your scope and how will you create alignment?

•Strategy •Budgets •Projects •People 16

Governance – an ideal design

Your governance system • Typically composed of functional heads who are able to allocate resources to projects that are worthy of exploration • Agrees on areas of interest and establishes screening and selection criteria (in advance) • Monitors the opportunity portfolio

• Oversees integration of promising new opportunities into the business units • Establishes innovation fund to overcome disincentives for business unit commercialization of new products

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Cash Flow Considerations: Seed Stage Executive Committee

Positioning

Growth Board Investment

Stepping

Seed Funding

Stones Platform

Positioning Platform

Core

Scouting

Returns from previous projects or BU contributions

Project

Scouting DDP Looks Promising

Further Funding From Growth Board

DDP Early Exit

Loss to Growth Board Fund 19 19

Cash Flow Considerations: Development Stage Executive Committee

Positioning

Growth Board Investment

Stepping

Checkpoint Funding

Stones Platform

Positioning Platform

Core

Scouting

Returns from previous projects or BU contributions

Project

Scouting DDP Looks Promising

Further Funding From Growth Board

DDP Early Exit

Loss to Growth Board Fund 20 20

Cash Flow Considerations: Launch Stage Business Unit

Positioning Platform

E E

Launch Investment

Stones Project

Positioning Platform

Core

Stepping

Scouting

Scouting

Business Unit Pays back investment to growth fund, keeps remaining proceeds

Successful launch

Profits credited to BU Management

Abandon

Loss to Innovation Growth Board 21 21

Resource Allocation

Third big question: What criteria will you use to allocate resources?

The role of screening scorecards

Screens can be used to create a scorecard for opportunities Dimension

Exceptional if.

Acceptable if..

Unfavorable if.

Strategic Intent

This opportunity takes us exactly where we want to go in terms of our strategy 9

This opportunity is not incon-sistent with our strategy, but offers no engine to drive it 3

This opportunity, even if we succeed, is inconsistent with our strategy 1

Builds competitive advantage

The idea builds both short term revenue streams and long-term competitive advantage 9

The idea has either long or short term benefits, but not both 3

The idea provides only short-term benefits and may interfere with a long-term opportunity 1

Builds knowledge capabilities

The opportunity will help us enhance our capabilities significantly 9

The opportunity will let us build new capabilities, but only in very limited areas 3

The opportunity will not lead us to extend our capabilities in any meaningful way 1

Use of existing assets

The opportunity requires no investment in new assets 9

The opportunity does require some investment but takes advantage of assets in place 3

The opportunity will require entirely new investment in assets 1

Score Totals

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Keltex: An Actual Example of going from strategy to screening

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Strategy Statement

Keltex is going to triple its profits by 2010 by providing innovative products and services that improve the lifetime value of a building to its owners.

Simultaneously, Keltex’s products and services are cost-competitive and its processes characterized by globally aligned operational excellence.

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Three-Step Strategy Process Strategy Retreat Keltex 2010 - Strategic intent, strategic priorities

3-5 ”Gap groups” Assessment of strategic priorities & actions to close existing performance gaps

Communication and implementation Impact on yearly planning and everyday action

Continuous Refinement of Keltex 2010 Strategy Definition of growth strategy elements and specification of Keltex Business Model Feb

Mar

Apr

May

June

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Strategic Initiatives (note not many) Implementation of segmentation solutions

The implementation of strategic and global customer management will be intensified.

Simultaneously, a business model for managing core customers in an efficient way will be developed.

Road map for innovative services and solutions

Growth requires us to maximize our reachable market by ensuring appropriate product coverage (to cover relevant customer segments in the geographical areas that make the growth possible).

The solutions (products, services and information) that we produce will be based on modularized platforms that allow regional flexibility.

Operational excellence

Explore adjacency growth

Define and develop core capabilities

Regional initiatives

Keltex will develop its cost competitiveness by globally aligned operational excellence, i.e. we will remove overlapping functions, clarify roles and responsibilities in the organization, and invest in creating global processes for quality management, end-to-end logistics, sourcing and a global IT infrastructure.

Keltex will continuously explore growth opportunities in adjacent areas such as the facility quality business and elements relating to owning, managing and developing facilities.

Keltex will implement a major upgrade in its sales capability.

We will considerably strengthen our market position in Asia.

We will secure a fast and efficient turnaround in the US market.

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Linking the strategic initiatives to a set of screening statements

Dimension

Exceptional if…

Acceptable if…

Unfavourable if…

9

3

1

1. Gives the customer an edge

Measurable, significant positive impact on customer’s bottom line

Appreciated by customer, but impact is modest

Neutral for customer

2. Is innovative

Brings significantly better new features or processes to the market; disruptive

Involves improvements to features or processes, but not dramatic ones

No change to features or processes

3. Increases our cost competitiveness – overheads

Creates a 30% or better improvement in overhead costs

Creates a 5-29% improvement in overhead costs

Less than 5% impact on overhead costs

4. Increases our cost competitiveness

Creates a > 25% cost savings in module or component costs

Creates a 10-24% cost savings in module or component cost

No cost savings

5. Enhances global alignment

Creates a product, process or service that can be introduced globally

Creates a product, process or service for multiple locations, but not globally

Purely local product, produces or service

6. Exploits a Keltex capability

Both exploits and enhances a key Keltex E skill / capability

Benefits from Keltex capabilities

Keltex capabilities make no difference

7. Brand Image

Brand image exceptionally positive, preferred choice

Brand image positive

Neutral to negative brand image

8. Drives our growth program

Gives access to both near-term and long-term growth potential

Gives access to near-term growth potential

Not a growth driver for Keltex

9. Margins and Profitability

Significantly positive impact on Keltex margins and profitability

Positive impact on margins and profitability, but not significant

Neutral or negative effect on profits

10. Effect on addressable markets

Significantly expands Keltex addressable market

Allows Keltex to better exploit existing market

Does nothing to expand Keltex markets

11. Customer loyalty / retention

Extremely positive effect on loyalty and retention

Could improve loyalty and retention

No impact on loyalty or retention

12. Resources required

Can be accomplished with no or few additional resources

Requires some additional resources, but they are obtainable

Project requires significant new resource infusion

13. Takes Keltex into new opportunity areas

Opens exciting new opportunity spaces for Keltex

Allows Keltex to enhance existing activities

Benefits apply only to existing activities

14. Risks

No risks to doing this

Some risks, but they can be controlled

Highly risky project

Score Totals

30

Fourth big question: Where will you locate the venturing unit?

Archetype 1: Assign the project to a line manager

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Archetype 2:

Create a separate unit within an operating division 33

Archetype 3: Have the unit report to R&D

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IBM Example: EBO

Archetype 5: Create a new venture division

Archetype 6: Report to CEO

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Archetype 7: The permissionless organization Agile, integrated, teams

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Fifth big question: Timing and activity

Pick a few promising projects & plan using the DDG method

Next Steps

30 day plan

Strategy scorecard

Portfolio review

Staffing & training

Location plan

6 month milestone s

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Balance core with growth!

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Decades of thought leadership insights

Rita McGrath & Ron Boire

and operating experience combine to provide comprehensive solutions for your realworld strategic challenges

Rita McGrath is a best-selling author, a sought-

Ron Boire has held C-level roles as CEO of

after speaker, and a longtime professor at

Barnes & Noble, Sears Canada, and Brookstone,

Columbia Business School. She is widely

as well as senior leadership positions at Sony,

recognized as a premier expert on leading

Toys R Us, Sears Holdings and Best Buy. Ron has

innovation and growth during times of

guest lectured at Columbia Business School,

uncertainty. Rita has received the #1

Harvard Business School and MIT. He has

achievement award for strategy from the

appeared as an industry expert at numerous

prestigious Thinkers50 and has been

conferences such as the Consumer Electronics

consistently named one of the world’s Top 10

Show and been an expert guest on CNBC, Fox

management thinkers in its bi-annual ranking.

Business, The Wall Street Journal among other

As a consultant to CEOs, her work has had a

business media outlets.

lasting impact on the strategy and growth programs of Fortune 500 companies worldwide.

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