Teleconference Innovation Networks: Progress Report 2006 Navi Radjou Vice President Forrester...

TeleconferenceInnovation Networks: Progress Report 2006 Navi Radjou

Vice President

Forrester Research

July 12, 2006. Call in at 12:55 p.m. Eastern Time

2Entire contents © 2006 Forrester Research, Inc. All rights reserved.

Theme

Early adopters across industries and regions are profiting from

“Global Innovation Networks” — a new business model

that allows firms to innovate faster, cheaper, and better.


Agenda

• Topic Overview: Global Innovation Networks

• What benefits do early adopters receive?

• What challenges do early adopters face?

• How can R&D, marketing, and IT help operationalize global Innovation Networks?

• Q&A


Agenda





• Q&A


Back in June 2004:


The innovation imperative

Customers Competition Compliance

• Generation Y

• Aging population

• Atkins dieters

• Shorter product life-cycles

• BRIC countries (Brazil, Russia, India, China)

• Europe’s WEEE

• Sarbanes-Oxley, BASEL II

Innovation market drivers:


Brazil, Russia, India, and China

Over the next 50 years,

Brazil, Russia, India, and China could become a much larger force in the world economy.

© 2006, Forrester Research, Inc. Reproduction Prohibited

Firms must cast a wider net to source innovations

June 2006, Trends “Innovation Networks: Global Progress Report 2006”


Old model New model

A new approach to innovation

T

S


The “what” — global Innovation Networks

• Global Innovation Networks is a new market structure (ecosystem) in which:

» Firms seamlessly weave internally and externally available invention and innovation services to optimize the profitability of their products, services, and business models.


Global Innovation Networks

BrokerInventor Transformer Financier

T S


The “Who” — Roles In A Global Innovation NetworkJune 2006, Trends “Innovation Networks: Global Progress Report 2006”


Agenda





• Q&A


Fast forward to 2006:


20+ Fortune 500 firms have deployed and benefited from global Innovation Networks

• 3M

• IBM

• AMD

• Best Buy

• Caterpillar

• BP

• Reuters

• Whirlpool

• SAP

• Boeing

• Cargill

• Esselte

• BASF

• Procter & Gamble

• Norwich Union

• Bharti Airtel (Tele-Ventures)

• Eli Lilly

• BT

• Apple

• General Electric

• Dell


P&G

Global Innovation Networks in action: Procter & Gamble


How does Procter & Gamble benefit from Innovation Networks?

• Boosted new product hit rate to more than 90%, up from 70% in 2001.

• Profitability per R&D employee has skyrocketed.

• Since 2000:

» Sales revenues have grown 40%.

» Profits have doubled.

» Market cap has doubled.


Global Innovation Network in action: BT

• Opened labs in emerging markets like Malaysia.

• Innovation brokers in India, China, Japan, UK, and Silicon Valley to source local technologies.

• Licensing IP to external go-to-market partners(e.g., “ARMS” software to Infosys).

• Partnering with global VC firms to spin off promising technologies as startups.


How does BT benefit from Innovation Networks?

• Externally sourced inventions generated nearly £500 million in new product and service revenues since 2002.

• IP licensing generates dozens of millions of pounds each year.

• Starting in 2006, revenues generated from licensing and commercializing its own inventions — using external transformers — will cover a significant proportion of BT’s annual R&D spend.


Global Innovation Network in action: Norwich Union

Progressive

Norwich Union

1998: Progressive invents “Pay-As-You-Drive” (PAYD) model.

2002: Progressive licenses PAYD to Norwich Union (UK).

2003–2004: Norwich pilots PAYD in UK — with IBM, Orange.

2005: Norwich launches branded PAYD in UK.


How does Norwich Union benefit from Innovation Networks?

• PAYD, launched in 2005, won thousands of new clients, increasing Norwich’s UK market share(there were 100,000 new subscribers by the end of 2006).

• Its annual profit increased 23% in 2005.


Share riskCurb talent shrinkage

Address emerging markets

Reduce new product and

service failures

Increase market responsiveness

• Costly efforts

• Disruptive innovations

• E.g., new drugs

• Western firms’ talent shortage

• Leverage BRIC skills

• Address BRIC consumers

• Leverage feedback from customers (embedded in Innovation Networks)

• Competitor threats

• New market demands

Global Innovation Networks: market benefits


Agenda





• Q&A


CEOs Face Internal, External Hurdles In Implementing Innovation Networks



CEOs Face Internal, External Hurdles In Implementing Innovation Networks


Senior execs must help firms shift from vertically integrated value chains to global Innovation Networks

R&D Mktg Sales IT Ops

Inventor Transformer

TBrokerFinancier

$

Company A

Company B Company C Company D Company E


Agenda





• Q&A


How can R&D help operationalize global Innovation Networks?

Best Practice: Caterpillar’s CTO office

• > 80% of market cap is tied to intangible assets (patents, trademarks, and copyrights).

• Invests $1 billion annually in R&D and has generated 7,000 patents (e.g., GPS, sensors).

• Formed Intellectual Asset Commercialization (IAC) team — with representation from R&D, business units, and legal — to maximize Cat intellectual asset portfolio’s value.

• By redefining IP as “Intellectual Partnering,” the CTO office maximizes Cat’s profit from its intellectual assets by systematically trading them like financial assets.


How can IT help operationalize global Innovation Networks?

Esat SezerCIO, Whirlpool

Scott GriffinCIO, Boeing

Robert A. WillettCIO, Best BuyCEO, Best Buy

International


Collaborative global IT infrastructure: Whirlpool

• Global ERP/supply chain/CRM backbone

• SAP NetWeaver platform allows regional units to adapt business processes to meet local demand.

• Global Intranet system enables “knowledge reusability” across countries.

• CIO: “I am the (global) business.”


Secure global ITinfrastructure: Boeing


Flexible/adaptive global IT infrastructure: Best Buy

Inventor

Sand Hill VC Partners

Financier

$

BrokerTransformer

T


How Can Marketing Help Operationalize Global Innovation Networks?May 2006, Best Practices “The Essentials Of Consumer-Driven Innovation”


Whirlpool drives customer-focused innovation

• End consumer input drives incremental innovation.

• Co-develops product lines with retail B2B clients(e.g., Lowe’s).

• Lead user engagement: Male users who built their dream garages inspired new Gladiator product line.

• Working with development economists at RTI International and University of North Carolina to create new business models to cost-effectively serve the “bottom of the pyramid” (emerging markets).


Summary

• Globalized innovation is an ever-expanding trend that poses both opportunities and challenges for corporations.

• Global Innovation Networks is essential for a successfully integrated global enterprise.

• R&D, IT, and marketing can operationalize global Innovation Networks by deploying a secure, collaborative, and adaptive IT infrastructure.


Q&A


Selected Research

• June 14, 2006, Trends “Innovation Networks: Global Progress Report 2006”

• October 2006, “How Consultants Will Deliver On Innovation”

• June 17, 2004, Forrester Big Idea “Innovation Networks”

• June 1, 2006, Topic Overview “Innovation Networks”

• March 20, 2006, Best Practices “Transforming R&D Culture”

• June 24, 2005, Trends “The Seeds Of The Next Big Thing”

• June 24, 2004, Best Practices, “Networked Innovation Drives Manufacturers’ Profit”

• August 3, 2005, Best Practices “Memo To CEOs And CIOs: IT Innovation Capacity — Not IT Spend — Is What Matters”

• December 6, 2004, Trends “Fortune 500 CEOs Embrace Innovation Networks”

• March 16, 2005, Forrester Big Idea “Consumer-Focused Innovation”

• March 24, 2005, Best Practices “IBM Transforms Its Supply Chain To Drive Growth”


Navi Radjou

+1 617/613-6119

[email protected]

Thank you

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