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Innovating in Turbulent Times
John GreggNavigate Consulting
jUNE, 2015
Focus on the right innovations .... ........And do innovation right
INNOVATE in these uncertain times??
If your company is typical, in these times you will get risk averse and focus on defendingyour core business, aiming to survive the slowdown rather than lead out of it
. . . and you too could become one of 50% of all companies whose competitive positionwill weaken as a result.
Instead you should go on the offensive and look to innovate…just do so differently• Focus efforts on the most critical projects and shut down the rest—make a few
big bets and put the rest of the good stuff on ‘slow burn’• Find new ways to serve recession-minded consumers—use different types of
innovation, informed by new consumer insights• Take advantage of low cost innovation resources— move quickly to get new ideas
into the market• Share your secrets— invite others to innovate with you to share cost and risk
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What does that mean?
Use open innovation to tap into new resources
Follow these steps and you will drive higher returns, leap-frog thecompetition and inspire your employees, partners and suppliers
Focus on the right innovations ....
Re-think your innovation goals andstrategyUse different metrics and criteria toprioritize projectsTake fast (often dramatic) action torealign resources
........And do innovation right
Uncover new insights into cautious consumers
Think beyond the products to create value forCustomersSpeed time to market through quick andinexpensiveconcept testing
INN
OV
ATIO
N
Ma
rkets
/Cu
sto
me
rs
4
TRANSFORMATIONALBreakthrough Innovation
ADJACENTExpansion
via Platforms
Core productsand existingassets
Create marketsand audiences
Enter new
marketsandaudiences
Servedmarketsand audiences
Product New businessesextensions, and structuresenhancements
Offers and Assets
1. CORERetention
Increased/ new usage
Increased/ new usersNew pricing
New channels
Copyright©2009 MonitorCompanyGroup, L.P. — Confidential
OrganicGrowth fromthe CORE
2. ADJACENT
Scale upGeographic expansion
Value chain movesDiversification
Technology orcapability acquisition
Cross-Bu opportunities
3. TRANSFORMATIONALNew needs/
existingcapabilitiesExistingneeds/new capabilities
New needs/new capabilities
Focusing on the “right” innovationsRe-think your innovation goals and strategy
Create a revised innovation portfolio that focuses on the core business while selectively
pursuing a critical few adjacent and transformational growth opportunities
INN
OV
ATIO
N
Time tomarket
Cash cost andcost cadence
5
Degreeof risk
Time tofirst dollar
Partnershipsenabled
Optionscreated
Capabilitiesbuilt
Focusing on the “right” innovationsUse different project metrics and criteria
Refine existing metrics and criteriato align to the need for greater speed,lower short-term spend, and more near-term market impact…but also buildcapabilities and partnerships to createfuture options.
Measure different things to drivedifferent behaviours
Budgets are real and need to be
respected . . . it’s OK to go a bit sloweror to defer some functionality until later; itis NOT OK to quit innovatingEstablish metrics which achieve short-termgoals and create options for thefuture…and then ruthlessly measureyour projects against these objectives
“Will this help us create momentumcoming out of the slow growth cycle?”
the pipeline by disproportionatelyinvesting in the great bets andcreating options to keep the “good”bets alive . . . kill everything else
Do more with less by pruning
andfocusing
Too often companies cut the wrong
projects because of their uncertainty,while also letting incremental but “safer”projects die a slow deathFocus resources to provide thenecessary near- to mid-term impactduring a downturn, while keepinginitiatives that will create momentum outof a recession
Innovation Pipeline
Increase investment toquickly bring concept tomarket; find ways to build aglobal platform
Launch
Keep in pipeline,and bring in newexternal partners
to manage risk
Stop resourcingdue to length of
development andpoor fit with current
customer needs
License toexternal partner
Illustrative
Focusing on the “right” innovationsTake fast (often dramatic) action to realign resources
Raise the bar for performance in
are required to quickly generate theuser insights that traditional marketresearch techniques overlook
Gain Insights into Broader Customer Context
Understand what consumers…
say do use
Leverage new insights toStay relevant
Needs, priorities and trade-offsshift for customers (often movingto themes of “saving” and “value”and “more for less”), changing theequation for success
New types of insights are neededto re-focus offering and business models;traditional market research missesimportant nuances and isn’t timelyenough
Using different techniques…
ask observe make
Doing innovation “right”Uncover insights into cautious customers
The “two-speed” Australian economy has changed
the customer equation—new methods
Rapid market validationTo predict offering success, quickly testconcepts to de-risk investment and uncertainty
Early conceptvisualizationThe process of creating concept visualizations helpsrefine concepts and the finished product helpscommunicate with teams and partners
Doing innovation “right”Speed time to market through rapid concept testing
Accelerate the leap to implementationby adopting visualization and early prototyping, helping projectteams sell the concept internally, cheaply testing it with prospective customers/partners, and ramping upthe implementationteam
resources, design an approachto creating porous boundaries to buildnew leverage and share risk and cost
Build the options, flexibility, andleverageto innovate in an uncertainworld
BENEFITS TO OPEN INNOVATION
More Efficient Operations
Avoid riskier go-it alone strategies in favorof partnering to co-develop morechallenging capabilities. Look throughoutoperations of the organization to discoverways to collaborate with business partners:suppliers, contract operations, technology providers,channels, customers . . . even competitors
GreaterCustomerValue
BetterIdeas
Lower Risk
Doing innovation “right”Use open innovation to tap into new resources
In a world of increasingly scarce
INN
OV
ATIO
N
11Copyright© 2009 Monitor Company Group, L.P. — Confidential
So what should you do?
••
•
•
Map all of your innovation investmentsConstruct a strategy to innovate through the “slow down”
Define project metrics and criteria
Strategically rebalance innovation resources
••
•
•
Uncover insights into the cautious customerThink beyond products to quickly connect with customers
Create quick and inexpensive concept visualizations
Leverage“open innovation” to tap into new resources
Focusing on the “right” innovationsRealigning your innovation portfolio
Doing innovation “right”Streamlining your execution of innovation
We can help5 ways Navigate can help
Protect the GoodHelp you audit your portfolio, prioritise your initiatives in order of those that are mostlikely to make a solid contribution to your business in the short, medium and long term.
Free up CashIdentify and capture budget to invest in smart innovations by killing or mothballing lowvalue initiatives
Invent new sources of businessDevelop breakthrough, big bet innovations geared to success in the current slowdown
Accelerate the likelihood of successOptimise remaining innovation initiativesby adjusting nature of the offer, time tomarket, management of risk, and capabilities.
Spread the risk to maximise returnTarget highest-value areas for 'open innovation' and build partnerships to share risk andcost of whole portfolio
1
2
3
4
5
• For priority projects, quickly generate new user discoveries,• Synthesize discoveries into compelling business concepts• Rapidly prototype and test using concept illustrations
Copyright© 2009 Monitor Company Group, L.P. — Confidential
1
2
3
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We can helpOur approach
Launch and extend(~ 6 weeks)
• Diagnose patterns of innovation in your company and industry• Map current innovation activity to identify where and how much
you are investing• Define metrics to prioritize current and potential projects
• Refine your innovation strategy, including opportunity
areas and level of ambition• Prioritize a portfolio of projects aligned with that strategy
• Define launch plans for priority concepts• Identify partners to enhance value of concept, speed time to
market and share launch costs
Develop concepts(~ 4 weeks)
Define the Strategy(~ 2 weeks)
Diagnose the Situation(~ 2 weeks)
We can helpWe develop and install open innovation systems for our clients
Broad Reaching andTransactional Focused and Collaborative
ExternalChallenges
Postingchallenges andrewards to abroad audience,directly orthrough a marketmaker
Open PartnerPlatforms
Buildingplatforms thatnaturally attractdiverse partnerswho see value indeveloping on topof your offering
R&D /
Technology
Scanning,for new IP thatcan be licensedto target newopportunities
Consortium /
Incubator
Joining open ortopic specificconsortiums togain technologyand marketinsight and findopportunities forjoint R&D
Value Chain
Network
Forming linkagesacross valuechain membersto collectivelyidentify andtargetopportunities
Partnership /
Alliances / JVs
Creating strategicpartnershipswithin an industryor into adjacentspaces to unlocknew opportunities
INN
OV
ATIO
N
15Copyright© 2009 Monitor Company Group, L.P. — Confidential
Background: the case for commitment
Innovation is no longer an option…• After countless drives for operational efficiency and cost cutting, innovation is one of the
strongest remaining drivers of shareholder value
Innovation rewards those who fight their base instincts…
• In a strong economy, a commitment to innovation—including financial investment, executivesupport, and organisational alignment—can exist as a matter of course. As the marketsoftens, uncertainty and slashed budgets make small, short-term wins feel more gratifyingand bigger bets more daunting. Suddenly, an innovation agenda seems much riskier…
Innovation cannot be suspended and rehabilitated at will…• Proper innovation is a competence to be nurtured in your organization. Stopping any team
working on hard future challenges often means it will disband and you will lose topinnovators; this will be extremely hard to reverse when growth returns
Here, we outline three principles to help you stay the course on innovation
A universal instinctive reaction to tough times is to circle thewagons, spend as little as possible, and protect the core . . .If you consciously choose to go the opposite way you cantake advantage of your competitors’weaknesses duringthese periods
• Savvy companies maintain innovation investments
during a downturn, even selectively increase spending,to maximise opportunities to come out of any recessionwith boldness and drama that build growth momentum
• Down-turns are short-term by definition, making
cutbacks risky and short-sighted in the face of abroader corporate strategy
• Pulling long-term strategic investments for short-term
cash flow will ultimately destroy shareholder value
An Australian study of 1,000businesses over 30 years found thatcompanies spending more oninnovation during economicdownturns saw their returns oncapital increase 23.8% during therecovery, vs. 0.6% for those whodecreased spending.
“A difficult economicenvironment argues for theneed to innovate more, notto pull back.”
– Ken Chenault, CEO
AmericanExpressSource: Fortune, March 3, 2008
Principle 1:Downturns are an ideal time to go on OFFENSE
Even a few bold innovations can send a powerful signal that the vital signs ofyour firm are healthy while your competitors appear catatonic
Principle 2:Innovation is also one of the best forms of DEFENSE
• A down cycle may be a time to weed out efforts that aren’t working, but good innovators
always channel a bit of those savings to invest in bold innovation efforts on longer-termbets
• Opportunistic innovation can make a considerable competitive difference in the face ofother companies’ cuts and amid failing players that were supposed to be small and nimble
• The corollary is true too: blanket cuts will give competitors the room they need toleapfrog ahead of you — forcing you to play defense and catch up when the market turns
One of the principal reasons to innovate at all is because it is inspiring to employees,partners, and suppliers
• To maintain unambiguous commitment and fight the natural
tendency to waver when times get tough is itself a sign ofextraordinary leadership
• Innovation cannot be suspended and rehabilitated at will —failure to keep expectations high and failure to constantly
demand innovation no matter what conditions prevail signals thatyou’re really not that committed to innovation in the first place,undermining your declared faith in your team and its competence
• Even one or two bold innovation initiatives, launched at the time
of a market turnaround, can do a lot to help internal audiencesfeel like winners… this helps offset the negative effects of anyearlier head count losses or reduced compensation
• When you do succeed with innovation, the internal pride that comes
with a strong rebound will power your forward momentum, therebyattracting new talent and partners
Principle 3:Staying committed to innovation epitomises leadership…
Thank-you
Feel free to contact us at www.navigateconsulting.com.au