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© 2011 IBM Corporation
This report is solely for the use of Client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the Client organization without prior written approval from IBM. This material was used by IBM during an oral presentation; it is not a complete record of the discussion.
Embedding Innovation to Drive Growth
July 2012
© 2011 IBM Corporation2
Outline
Understanding the Growth - Global
Innovation as an Enabler of Growth
Enabling Innovation
IBM’s Approach to Innovation
Appendix
© 2011 IBM Corporation3
-60%
-40%
-20%
0%
20%
40%
60%
-60% -40% -20% 0% 20% 40% 60%
10 year CAGR (%)
10 y
ear
ann
ual
ize
d T
SR
(%
)Revenue & Total Shareholder Return* Growth S&P Global 1200, 2001 to 2010
Successful organizations grow faster than their competitors and convert their growth into value, outperforming their peers
Median CAGR: 7.3%Median TSR : 5.5%
“Successful Growers”(No of Companies Qualified :339 Companies)
“Unsuccessful Growers”((No of Companies Qualified :193 Companies)
“Shrinkers”((No of Companies Qualified :345 Companies)
“Prudent Managers”((No of Companies Qualified : 204 Companies)
* Total Investment Return (TSR) is calculated by Datastream as follows for all industries:(Market Price Year End + Dividends Per Share + Special Dividend -Quarter 1 + Special Dividend-Quarter 2 + Special Dividend-Quarter 3 + Special Dividend-Quarter 4) / Last Year's Market Price-Year End - 1) *100.
© 2011 IBM Corporation4
When it comes to growth, an organization’s neighborhood does not necessarily dictate its destiny
Industry
Strong performers outgrow their industry by wide margins: Top performers in the slow-growth financial markets and insurance industry outpaced median growth rates for the high-growth Education and Pharma/Life Sciences industries.Amongst the top 10 sub sectors, Steel has emerged as the highest growth sector while Industrial Machinery has lowest median growth rate
Geography
Strong performers outgrow their geography by wide margins: Top growers in the slow-growth Japanese market outperformed the median growth rates in other high-growth Asian markets
Company size
Revenue growth is not a function of company size: Size is not a constraint. Larger companies can grow revenue as fast as smaller companies. TSR tends to diminish as company size increases, but successful growers overcome this tendency, and grow both revenue and TSR irrespective of company size
Resilience
Successful growers may not report growth of revenue each year above median but have the resilience to bounce back and deliver superior growth over a longer period: No one succeeds all the time. What distinguishes successful growers is not perfection, but the courage and conviction to recover from imperfections
© 2011 IBM Corporation5
S&P 500 in 1957 (year 1 for the index) S&P 500 in 2010 (year 54 for the index)
Of the 500 S&P companies in 1957, only 14% remain on the 2010 S&P 500 list
The ability to manage fundamental change is key to growth - history shows that failure rates are extremely high
Source: S&P Guide 2010 and S&P Library for 1957 data
Innovation as an Enabler of Growth
© 2011 IBM Corporation6
Acquisitions
Acquisitions have historically failed to
create value
Gains are elusive at best
Takeovers have destroyed more than $200 billion in shareholder value in the US over the past 20 years*
Innovation
Innovation is the best opportunity for
sustainable growth
Gains are more profitable and longer lasting- Sustainable
advantage- Differentiation- Pricing power
Organic
Organic methods provide necessary but
incremental growth
Gains are often hard-won and therefore not always profitable
Successes are easily copied making gains short-lived
Already more than accounted for in stock valuations
Companies must meet growth expectations …but that is easier said than done
*Source: The National Bureau of Economic Research
Innovation as an Enabler of Growth
© 2011 IBM Corporation7
“new ideas” refers to the issue of novelty or originality, whether it be ideas extrapolated from other circumstances, industries or contexts
“add value” refers to the necessity for innovation to benefit people, whether they be customers, shareholders, employees or society as a whole; innovation that does not add value is generally futile
Change that does not add value is not considered innovation within IBM’s definition
For IBM, innovation is not: Change that does not benefit anyone: this often constitutes
change for the sake of change which can be costly and can dilute value
Adopting leading practice: this is often good for business but is generally directed toward avoiding loss of value to more sophisticated competitors, instead of capturing new value
Value creation that does not comprise the application of new ideas: this can be good for the business, but falls within a context of incremental, ‘business as usual’
Innovation is “new ideas that add value”
Incrementalism is innovation’s worst enemy”- Nicholas Negroponte,
MIT Media Lab
Innovation is not ‘incrementalism’ and must create value
Source: IBM Research
Innovation as an Enabler of Growth
© 2011 IBM Corporation8
Being perceived as an innovation leader does not always translate into leadership in shareholder returns
Bloomberg Businessweek 25 Most Innovative CompaniesBusiness Executive Rank, 2010
Source: Bloomberg Businessweek, BCG Research and Reuters. Businessweek, 2010. Financial Statement data for each company for 2006-2009 from Businessweek.com
* Revenue and operating margin growth is annualized based on 2006-2009 fiscal year earnings before interest and taxes, as a percent of revenues as they were originally stated.
** Stock returns are annualized, 12/31/06 to 12/31/09, and account for price appreciation and dividends.*** Shareholder Equity CAGR based on 2006-2009 fiscal years. Tata Group and Virgin Group removed
due to lack of financial data
Bloomberg Businessweek 25 Most Innovative CompaniesRe-ranked by Shareholder Equity Growth, 2010
Rank CompanyRevenue Growth*
MarginGrowth* TSR **
1 Apple 30% 62% 35.43%
2 Google 30% 28% 10.42%
3 Microsoft 10% 3% 2.48%
4 IBM 25 11% 12.40%
5 Toyota Motor 5% NA -23.06%
6 Amazon.com 32% 38% 50.60%
7 LG Electronics 8% 180% 31.43%
8 BYD 52% 57% 113.25%
9 General Electric -1% -15% -22.28%
10 Sony 7% NA -27.67%
11 Samsung Electronics 9% 1% 10.57%
12 Intel 0% -7% 2.97%
13 Ford Motor -10% NA -9.72%
14 Research in Motion 64% 68% 23.42%
15 Volkswagen 3% -1% -2.49%
16 Hewlett-Packard 8% 10% 8.50%
17 Tata Group Not Listed Not Listed Not Listed
18 BMW 4% -42% -8.36%
19 Coca-Cola 9% 8% 8.69%
20 Nintendo 63% 48% 21.08%
21 Wal-Mart 5% 5% 6.95%
22 Hyundai 5% 26% 23.36%
23 Nokia 3% -39% -13.99%24 Virgin Group Not Listed Not Listed Not Listed
25 Procter & Gamble 5% 7% 0.43%
Rank Company TSR***8 BYD 113.25%
6 Amazon.com 50.50%
1 Apple 35.43%
7 LG Electronics 31.43%
14 Research in Motion 23.42%
22 Hyundai 23.36%
20 Nintendo 21.08%
4 IBM 12.40%
11 Samsung Electronics 10.57%
2 Google 10.42%
19 Coca-Cola 8.69%
16 Hewlett-Packard 8.50%
21 Wal-Mart 6.95%
12 Intel 2.97%
3 Microsoft 2.48%
25 Procter & Gamble 0.43%
15 Volkswagen -2.49%
18 BMW -8.36%
13 Ford Motor -9.72%
23 Nokia -13.99%
9 General Electric -22.28%
5 Toyota Motor -23.06%
10 Sony -27.67%17 Tata Group Not Listed24 Virgin Group Not Listed
Top 5 BW
Innovation should translate into “Value” for customers and shareholders
Innovation as an Enabler of Growth : Bloomberg Businessweek Survey
© 2011 IBM Corporation9
Companies pursue three main types of innovation
Product, service and/or market innovation
Innovation around specific products, services, markets, segments or other go-to-market activities
Operational innovation
Innovation that improves the effectiveness and efficiency of core processes and functions
Business model innovation
Innovation in the structure and/or financial model of the business
“Innovation occurs at the intersection of invention and
insight. It’s about application of
inventions to solve problems”
- Sam J. Palmisano, Former IBM CEO and Co-Chair of the National
Innovation Initiative
Innovation is “new ideas that
add value”
Innovation as an Enabler of Growth : Types of Innovation
© 2011 IBM Corporation10
Dell redefined the PC value chain and industry model by using a direct to customer sales model
Customization of the PC could be done on the web and the same would be delivered to the customer custom made
A few examples of innovation across industries
Product, service and/or market innovation
Operational innovation
Business model innovation
P2P Free VoIP Application iPhone
Direct to Customer Model
Cross - docking Shared Services & Establishing COEs
Movement to shared services of end-to-end processes that cut horizontally across functional areas
Examples such as reporting, risk analysis, components of underwriting and claims etc.
Revenue Model Peer to Peer Lending
CEP Bank
Toyota Production System
Gillette innovated the pricing model by giving away razors and making money on the blades
Goods trucked to a distribution center from suppliers are immediately transferred to trucks bound for stores—without ever being placed into storage.
TPS is comprised of two pillars, Just-in-Time and jidoka
VoIP product/service by Skype allows to offer cheap, customizable telephonic services over the Internet
The user interface is built around the device's multi-touch screen, including a virtual keyboard rather than a physical one
To transfer fund to non-bank account holder, go online, type in your cell phone number, their cell phone number and the $ amount
Peer-to-Peer Lending dis-intermediated established banks to promote lending between individuals
Innovation as an Enabler of Growth : Innovation Examples
© 2011 IBM Corporation11
Customer Intimacy & Market Penetration
Increase customer loyalty Improve price realization Gain wallet share Attract new customers Refresh products/services Increase geographic depth
Product & Service Innovation
Enter new product categories
Build services around products
Innovate faster/better
Diversification
Extend into new products and new markets simultaneously
New Markets &Channels
Extend into new customer segments
Enter new geographic/ global markets
Enter new channels
Pro
du
cts
Markets
Traditional
Tra
dit
ion
al
New
Ne
w
Product / service / market innovation
Operational innovation
Business model innovation
Product / service / go-to-market innovation brings to life new ways to solve the customer's problem
Innovation as an Enabler of Growth : Product, Service / Go-to-market Innovation
© 2011 IBM Corporation12
Product / service / market innovation
Operational innovation
Business model innovation
OperationsInnovation
Focuses on innovation applied to core
business operations, business processes and supporting Information Technology to improve
effectiveness, efficiency, and quality.
Core operations Go-to-Market /
Customer facing processes
Procurement / Suppliers / Logistics
Product / Service Development
General / Administrative (G&A) processes
Collaboration and Partnering Collaboration has become an essential underpinning of innovation for
business/enterprise and operations improvements World class collaboration is no longer informal, unstructured, or localized,
but rather aggressively driven by a strategy, encouraged by corporate culture, enabled by a technology-based infrastructure, is cross functional, and extends beyond the organization
For example, P&G has focused supply chain efforts on developing deeper relationships with major retailers and distributors, and they have begun initiatives to consolidate manufacturing in order to increase flexibility
Intersection of Business Insight and Technology Dramatic and differentiating innovation occurs not when technology is
simply applied as an enabler or support mechanism, but rather when technological capabilities and business/enterprise opportunities are highly integrated early in the envisioning stage of improvement lifecycles
Operational improvements, which have the potential to truly differentiate an organization, result from creating an operational environment that is not only efficient, but also has the ability to “sense and respond” to ongoing dynamic business/enterprise drivers, and to also provide key data mining capabilities to identify ongoing improvement opportunities
Operational innovations drive growth, boost profitability, set new standards and redefine how an enterprise competes….
Innovation as an Enabler of Growth : Operational Innovation
© 2011 IBM Corporation13
…But enterprises that have a greater focus on Business Model Innovation tend to outperform their peers over time
0%
20%
40%
60%
80%
100%
-1%
0%
1%
2%
3%
4%
5%
6%
Focus of innovation effortsUnder-performers and out-performers compared to peers
Median operating margin growth in excess of peers by businesses engaged in type of innovation, 5 year CAGR
CEOs report that out-performing businesses tend to have a greater focus
on business model innovation
Shareholder value can be enhanced significantly for out-performing firms engaged
in business model innovation
Prod / svc / mkt
Operational
Business model
Product / service / market innovation
Operational innovation
Business model innovation
Source: IBM CEO Study
Under-performers
Out-performers
By focusing on business model innovation, companies are more likely to become out-performers
More than two thirds of the CEO’s interviewed have indicated towards having a strong BMI focus
Products/services /markets
Operations Business model
Innovation as an Enabler of Growth : Business Model Innovation
© 2011 IBM Corporation14
Business Model Innovation is focused around 3 areas, with Enterprise Model Innovation gaining more focus with the CEO’s
Bu
sin
ess
Mo
del
In
no
vati
on
IndustryModel Innovation
RevenueModel Innovation
EnterpriseModel Innovation
Changing the way your industry works or
changing your value chain
Changing your value proposition or the way you price for products
or services
Changing what you do and where you
collaborate
Changed the value chain in the home furnishings
It pushed final construction back to the customer to facilitate ‘ready to sell’ packaging
Movie rental costs and late return fees were high
Moved from rental to a subscription revenue basis
illycaffé has partnered with various other companies along its value chain, such as manufacturers of coffeemakers and others, to improve the overall coffee-drinking experience
Innovation as an Enabler of Growth : Business Model Innovation
© 2011 IBM Corporation15
Innovation models (Archetypes) are a unique mix of cultural and operational traits that represent how the companies innovate
Inn
ova
tio
n A
rch
etyp
es
Marketplace of Ideas
An IBM research study of 174 organizations across 24 countries and a broad set of industries, identified four unique innovation models (or archetypes) that represent how companies innovate
The Visionary Leader
Innovation through Rigor
Innovation through Collaboration
Enabling Innovation : Innovation Archetypes
Source: IBM Innovation Archetype research and analysis
A company’s innovation culture and archetype needs to be fully understood to embed innovation
© 2011 IBM Corporation16
The nature of an organization, its innovation archetype, will determine how innovation structures are embedded
Employees are charged with creating new ideas, shopping them around to gain support, and implementing them rapidly to test feasibility and market acceptance. It is an environment that is somewhat chaotic by design
Innovation strategy is built into the business strategy
Vision of the organization and innovation vision are intertwined
Well-stated innovation goals for individuals
Formal project management Environment that
allow experimentation Employees recruited for
creativity and passion Decentralized internal
collaborative approach for idea stage gating
Decentralized virtual team responsible for idea development and execution
Formal structural unit for driving innovation culture
Marketplace of ideas
Arc
het
ype
Ch
arac
teri
stic
s
Arc
het
ype
Ove
rvie
w
This archetype revolves around a senior executive who understands the future better than customers may, motivates employees to zealously pursue that vision, and keeps generating ideas that are unexpected and profound
Innovation strategy is around the entire business and prescriptive for employees
Innovation vision driven through top leadership
Fast implementation of select innovation ideas
Portfolio maps and strategic plans to link executive vision to daily activities
Few inter-dependencies with outside parties
Adept at the teamwork necessary to execute leaders’ plans
Centralized decision making for innovation stage gating
Centralized monolithic structure for executing innovation vision
Companies create processes designed to produce results systematically. Strategically, they pay relatively high levels of attention to the landscape in which the innovation is to take effect. Tactically, they focus on project execution, seeking efficient and fast implementation
Innovation strategy is around specific focus areas of innovation
Innovation vision is practical, tactical and pragmatic
Fewer innovation ideas, with strong formal vetting process
Strong focus on cross-functional teams for execution
Diffused product lines; little control for a small set of visionary individuals
Small groups dedicated to problem-solving
Strong team culture Robust process around
innovation lifecycle Established R&D at business
unit level Strong idea execution
capabilities
Companies that team with outside firms to evaluate a wide range of opportunities, rapidly select the ones to trial, and frequently implement the idea through these partners
Innovation strategy is explicit around the ecosystem partners
Innovation vision is somewhat well defined to ecosystem partners who work towards a common goal
Robust stage gating and implementation mechanism
Frequent pilots and trials, involving partners and customers
Understanding of customer needs and partner participation
Employee are empowered to make deals with outside vendors
Organization structured around innovation ecosystem (e.g. vendor joint innovation labs, open innovation, etc)
Visionary leader
Innovation through rigor
Innovation through collaboration
Source: IBM Innovation Archetype research and analysis
Enabling Innovation : Innovation Framework implications across Archetypes
© 2011 IBM Corporation17
Envisioning itself as “The Innovation Company of the 21st Century” IBM made innovation pervasive . . .
© 2011 IBM Corporation18
. . . By developing a philosophy and operating approach . . .
IBM Philosophy
Innovation is at the intersection of technological invention and business insight leading to the creation of differentiated products and services for our clients
IBMers at all levels are responsible and accountable for innovation
We innovate in everything we do (through markets, offerings, business / enterprise models, operations, and enablers)
Idea Generation, Development and Funding
Ideas are generated, filtered, tested, and refined at the individual, team, and unit levels
Development of these ideas is either funded by IBM organizations or in collaboration with external partners
The outputs are innovative products, services, technologies, and new business models that create competitive advantage
© 2011 IBM Corporation19
. . . Seeing every IBMer as an innovator . . .
Ginni Rommetty champions and advocates IBM innovation
There is no single executive reporting to the CEO with innovation accountability
Innovation is part of every business unit’s strategic focus and every employee’s responsibility We are lowering the center of gravity – shifting our resources and decisions closer to the client
Employees
Innovation Accountability
Innovation Responsibility
Lower center
of gravity
All levels
Ginni RomettyIBM CEO
Global Services
Innovation Accountability and Responsibility in IBM
Enterprise-wideSales & DistributionCorporate Technology
and Manufacturing Integrated Supply Chain
SoftwareSystems and
Technology Group
CorporateStrategyMarketingFinanceHuman ResourcesCommunicationsLegal
Employees Employees
© 2011 IBM Corporation20
And establishing innovative programs for idea generation and innovation management that are models for our client work
Institute for Business Value
RESEARCH SERVICES & “FIRST OF A KIND”
Global Technology Outlook
ThinkPlaceThinkPlace
© 2011 IBM Corporation21
In summary, innovation creates value by operating at the intersection of invention and opportunity and can be managed
Innovation as an Enabler of Growth
• Successful innovation creates sustainable growth for organizations
• There are core capabilities and processes that are common to all successful innovators
• Successful innovators have clear archetypes that represent how they innovate …
1. Marketplace of Ideas
2. Visionary Leadership
3. Innovation through Rigor
4. Innovation through Collaboration
• … and regardless of how they innovate, they all focus on:
1. Senior Management involvement in innovation
2. High client satisfaction & use of client ideas
3. Ways to leverage internal — and external — ideas
4. Use of staged processes to track innovations and pilot before launch
5. Effective use of cross functional teams
© 2011 IBM Corporation22
Outline
Understanding the Growth
Innovation as an Enabler of Growth
Enabling Innovation
Starting the Innovation Journey
Appendix
© 2011 IBM Corporation23
Innovation Enablers Elements that enable execution
of the overall innovation process
Innovation Management & Governance Structures, processes, policies,
frameworks and tools used to manage innovation
Innovation Agenda Overall direction, life-stage, mix, characteristics
and value proposition around innovation
Business Strategy Overall objectives of the business as
defined by corporate vision, mission etc.Strategy
InnovationAgenda
Innovation Management & Governance
Innovation Enablers
There are structures (activities, processes, enablers, linkages, etc.) that promote effective innovation within an organization
Innovation Enablers Elements that enable execution
of the overall innovation process
Innovation Management & Governance Structures, processes, policies,
frameworks and tools used to manage innovation
Innovation Agenda Overall direction, life-stage, mix, characteristics
and value proposition around innovation
Enabling Innovation : Innovation Framework
© 2011 IBM Corporation24
Business Strategy
Portfolio Management
Innovation Organization Management
Risk/Benefit Evaluation
Project Management
Innovation Management & Governance
Knowledge Management
Business Value
Analysis
Incentives and Rewards
Communi-cations
Innovation Agenda
Innovation Strategy Vision
Innovation Mix
Innovation Model
Definition
Value Proposition
Innovation Enablers
Talent Culture Internal Collaboration
External Collaboration
Tools & Frameworks Infrastructure
Element Objectives
Selecting the desired innovation lifecycle stage (i.e. pioneer, leader, disruptor, consolidator, follower)
Establishing the organization’s overall direction regarding Innovation and ensuring alignment with defined business strategy
Defining the desired mix of innovation (i.e. business model, products and services, segments and markets, operations, channels)
Defining the fundamental innovation model characteristics (i.e. formal vs. adaptive; specialized vs. disseminated; open to external ideas vs. closed; integrated in LOB vs. segregated in separate organization)
Determining and communicating the value proposition desired from innovation
Innovation Strategy
Vision
Innovation Mix
Innovation Model
Definition
Value Proposition
Innovation Agenda sets the overall direction for innovation and maintains alignment with business strategy
Enabling Innovation : Innovation Framework
© 2011 IBM Corporation25
Element Objectives
Tracking, monitoring and analyzing the portfolio of innovation projects from inception to completion
Managing resources within the innovation organization
Developing criteria and benchmarks to evaluate risks associated with the innovation portfolio
Managing and reporting on individual projects against timeline and budget
Collecting, organizing, storing and distributing corporate innovation knowledge
Developing, tracking and reporting individual and organizational KPIs to asses the business value of innovation
Creating mechanisms to reward individual and team performance
Systematic internal and external communications around innovation
Portfolio Management
Innovation Organization Management
Risk/Benefit Evaluation
Project Management
Business Value
Analysis
Knowledge Management
Incentives and Rewards
Communi-cations
Business Strategy
Portfolio Management
Innovation Organization Management
Risk/Benefit Evaluation
Project Management
Innovation Management & Governance
Knowledge Management
Business Value
Analysis
Incentives and Rewards
Communi-cations
Innovation Agenda
Innovation Strategy Vision
Innovation Mix
Innovation Model
Definition
Value Proposition
Innovation Enablers
Talent Culture Internal Collaboration
External Collaboration
Tools & Frameworks Infrastructure
Innovation Management and Governance aligns the structure, process, framework and tool to manage innovation
Enabling Innovation : Innovation Framework
© 2011 IBM Corporation26
Element Objectives
People assets assigned to innovation, and through the company
Organization personality and innovation archetype as defined by assumptions, values, norms, behaviors
Amount of collaboration (both horizontally and vertically) within the organization across various LOBs and divisions
Amount of collaboration between the organization and other external businesses, institutions and/or people
Methods and tools to support the various phases of the innovation cycle
Systems, environments and internal IT processes in place to support development and testing of innovations
Talent
Culture
Internal Collaboration
External Collaboration
Infrastructure
Tools & Frameworks
Business Strategy
Portfolio Management
Innovation Organization Management
Risk/Benefit Evaluation
Project Management
Innovation Management & Governance
Knowledge Management
Business Value
Analysis
Incentives and Rewards
Communi-cations
Innovation Agenda
Innovation Strategy Vision
Innovation Mix
Innovation Model
Definition
Value Proposition
Innovation Enablers
Talent Culture Internal Collaboration
External Collaboration
Tools & Frameworks Infrastructure
Innovation Enablers provide the necessary support for execution of the overall innovation process
Enabling Innovation : Innovation Framework
© 2011 IBM Corporation27
This Innovation Framework is supported by the Innovation Cycle which is a formal approach to developing innovation initiatives
Assessment of the organization and innovation experience
Sensing & Envisioning of inputs into the innovation process
Ideation around identified areas
Evaluationof ideas identified
Development of selected ideas
Realization of ideas through execution
Sensing and EnvisioningObtain inputs into, and scope the innovation effort through activities which may include trends analysis, scenario envisioning, area identification and selection
IdeationLeverage various techniques and tools to conceive ideas around the innovation areas
EvaluationPrioritize and select a set of high value ideas for each defined innovation area for future investment and development
Assessment of experienceIdentify and assess innovation capabilities, structures, processes, assets, tools, methods and innovation archetype (less comprehensive after first completed)
RealizationExecute, release or implement the idea
DevelopmentRefine selected ideas through additional research, compliance assessment, clear business model articulation, full business case development, etc.
2
3
4
1
6
5
INNOVATION CYCLE
The Innovation Cycle is a formal timeline and engine to drive and
capture innovative ideas and initiatives
IBM’s Innovation framework coupled with the Innovation Cycle creates a strong tool to embed innovation
Enabling Innovation : Innovation Cycle
© 2011 IBM Corporation28
The marketplace of ideas: case studies
15% of employee’s time is devoted to generation or development of new ideas Promotes a culture of ‘small company within a big company" by creating small autonomous business
units and product divisions Internal venture capital is available to support new ideas ‘Innovator’ (a collaborative tool) supports communication between internal and external teams, and
tracking of ideas
Follows three horizons approach (i.e. 70/20/10) for managing innovation portfolio (70% of time for regular job, 20% of time for job related innovation, 10% of time is open for any ideas)
Employees’ contribution to innovation is linked to their performance results Formal communication platforms are in place to enable internal collaboration (e.g. Google Projects,
Google Ideas, Google Caribou, Moma inside Google) Product requirements are kept as simple as possible so that features may evolve as users provide
feedback
Everyone from vice presidents to clerks are encouraged to come up with new ideas. All ideas are taken seriously, considered and often acted upon
Enables people to make their own decisions about store operations, including product mix and in-store displays
Corporate office sets execution guidelines around ‘what to do’. Employees makes decisions around ‘how to do’
Employees are given autonomy, including the ability to allow customers to taste products
Appendix : Innovation Archetype Examples
© 2011 IBM Corporation29
Visionary leader: case studies
Fung Hon-chu, who led Hong Kong’s Li & Fung Company, developed the “global sourcing solutions” business model whereby his company coordinated the design and production process for orders placed by American and European companies
Li & Fung relies on its partners to help solve problems, not just fulfill orders Business units are given substantial autonomy in operating their divisions Group’s leadership nurtures entrepreneurial behavior in the divisions so that division staff can be
creative in meeting customer needs
CEO formally defines the innovation vision to drive innovation across organization Every new product launch is driven by strategic decisions made by centralized team. Strategic
decisions carve a new path for new product launch Formal teams are in place for development and execution, but these teams are scattered and not
aware of end to end development and execution activities Follows a formal process to drive innovation during idea development and execution phases
It is CEO’s goal to first give direction, and then let sr. management team take control of the situation there after.
Managers are free to make decisions independently for growth and feel the same degree of ownership and values that any other manager in the Virgin group would feel
Radical innovation is governed through VML. BU’s are expected to execute the CEO’s vision and has autonomy in execution
Sr. leadership collective innovative thoughts and ideas are applied directly into business
Appendix : Innovation Archetype Examples
© 2011 IBM Corporation30
Innovation through rigor: case studies
Over 50% of its employees are engaged in research and development Decisions are made with input from several sources in the company Formal product R&D function is to deliver timely solutions for anticipated and actual customer needs
by developing innovations in technologies, products, solutions and services It has set up over 20 joint innovation centers with top operators to transform leading technologies
into a competitive edge for customers and achieve business success
The firm succeeds through a mix of senior executive prioritization and team processes The company invests about 10 percent of its revenues in R&D – a very high figure for the industry –
and it devotes 15 percent of its R&D team to looking at needs and lifestyles more than 10 years from now
Output is rapidly prototyped and tested for usability The teams strive to break down stale cultural norms, and encourage junior members to challenge
senior staff
Chief Technology Office brings together the strongest forces within the company Innovation strategy incorporates elements such as technology strategy, resource optimization for
research and development, shaping the innovation process, and patent and standardization strategy, whereby consistent and rigorous application holds the key to success
Like technology planning, active patent management is also conducted in a strategic manner at Siemens
Structured consolidation of the innovative ability of numerous Siemens employees from diverse disciplines and regions to be achieved through so-called Innovation Jams
Appendix : Innovation Archetype Examples
© 2011 IBM Corporation31
Innovation through collaboration: case studies
Collaboration with stores for innovation - Zara is in tune with its customers, who help it give shape to the ideas, trends and tastes developing in the world
A non-stop flow of information from stores conveys shoppers’ desires and demands, inspiring its 200-person strong creative team
Recipe of centralization and integration - vertically integrated business model that spans design, just-in-time production, marketing and sales, giving it more flexibility than its rivals to respond to changeable fashion trends
Technology-based local supply chain enables store managers to restock quickly and in smaller batches
More than 50 percent of product initiatives at Procter & Gamble involve significant collaboration with outside innovators
P&G's Connect+Develop open innovation strategy has established more than 1000 active agreements with innovation partners
The current structure is a network model that has P&G globally linked to external innovation assets to accelerate innovation through identifying ready to go ideas and effectively leveraging people outside of P&G’s base
Bharti created a highly specialized Telco business model by focusing only on its key differentiators – marketing, sales and distribution and partnering for everything else
The company deployed the technology and operates state-of-the art networks using the services of its partners like Ericsson, Nokia and Siemens
Bharti entered into a 10-year agreement with IBM to transform its processes and take on the management of its IT Infrastructure. The agreement construct makes innovation all pervasive in the entire Bharti organization
Appendix : Innovation Archetype Examples