You are on page 1of 92

N° 08
08 OCTOBER
OCTOBER 2015
2015
The
TheNew
NewInnovation
Innovation Paradigm for the
Paradigm for theDigital
DigitalAge:
Age:
Faster,
Faster, Cheaper and
and Open
Open

DIGITAL #DTR8
TRANSFORMATION
INSTITUTE #DTR7
N° 08 OCTOBER 2015
The New Innovation Paradigm for the Digital Age:
Faster, Cheaper and Open
Capgemini Consulting’s Editorial Board

Cyril Garcia Fernando Alvarez


Chief Executive Officer Chief Digital Officer
cyril.garcia@capgemini.com fernando.alvarez@capgemini.com
@Cyr_Garcia @Digital_Alvarez

Didier Bonnet Jerome Buvat


Senior Vice President Head of Digital
didier.bonnet@capgemini.com, Transformation Institute
@didiebon jerome.buvat@capgemini.com,
@jeromebuvat

DIGITAL
TRANSFORMATION
INSTITUTE

dti.in@capgemini.com
The Digital Transformation
Institute

@capgeminiconsul www.capgemini-consulting.com

www.linkedin.com/company/capgemini-consulting #DTR8
#excitinginnovation
Contents
New Innovation Models for the Digital Age: Editorial 06

The Digital Innovation Radar Screen

The New Innovation Wave: Machine Learning and AI 12


Michael A Osborne, University of Oxford

Rise of the Machine: Forging Ahead with Robots


Jim Lawton, Rethink Robots 20

Digital Innovations – Our Top Picks 28

Promoting and Embedding Innovation

Frugal Innovation: Innovating More with Less


Navi Radjou 34
Kick-starting Innovation Through Startups 44
Jon Nordmark, Iterate Studio

Innovating Through Open Data


52
Gavin Starks, Open Data Institute

The Innovation Oscars: Lessons from the Pioneers

Innovating at SAP – the Delicate Balance between


Incremental and Radical Innovation 60
Claus von Riegen, SAP

Unlocking Innovation through Intrapreneurship 66


Pablo Rodriguez, Telefónica

Bringing Ideas to Life – the Core Principles of


Innovation Centers 74
James Patterson, Capital One

The Innovation Game: Why and How Businesses are Investing 80


in Innovation Centers, by Capgemini Consulting and Altimeter Group
New Innovation Models for the Digital Age – Editorial

New Innovation Models for the Digital Age


Introduction By Capgemini Consulting’s Editorial Board

O
ne word characterizes our This fertile environment is In response, companies are
digital era: innovation. fuelled by technology innovation investing more in research. R&D
Creating a startup has never that continues to evolve at an spend is reaching historical highs:
been easier and cheaper. In our exponential pace (see Figure 1). in 2014, $1.6 trillion was spent on
interview with Jon Nordmark, CEO Take supercomputers – in 20 R&D globally. However, simply
of startup curator Iterate Studio, he years, the speed of the fastest throwing money at the issue is not
argues that “the cost of developing supercomputer has increased by always the right answer, and it is
a digital startup has fallen from an astonishing factor of 419,100i. certainly not sustainable. Despite
approximately $5 million in 2000 Personal computers are now 99.9% these significant investments,
to $5,000 as of 2013.” And this has cheaper than in 1980ii. Technology’s results are often falling short. In
led to an explosion in the number inexorable march will continue certain sectors, more than 85%
of startups – a Cambrian age of to be a highly significant business of new products failiv and 90% of
digital – with Jon Nordmark’s disruptor for many years to comeiii. companies consider that they are
team having identified more too slow to market and often over
than 130,000 active tech startups budgetv.
across the world. And this figure is
growing every day.
Figure 1: The Many Dimensions of Moore’s Law

1,000,000,000,000,000
Supercomputer Speed
(FLOPS)
1,000,000,000,000

1,000,000,000
Logarithmic Scale

Supercomputer Energy Efficiency


(FLOPS/watt)
1,000,000
Residential Internet Download Speed
(kilobytes/second)
1,000
Microprocessor Transistors/Chip

1
Hard Drive Cost Efficiency
(gigabytes/dollar)
0.001

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Year
Source: “The second machine age” – Andrew McAfee and Erik Brynjolfsson, 2014

6 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
DIGITAL TRANSFORMATION REVIEW

In this edition of the Digital The Digital Innovation company that makes two of the
Transformation Review, we Radar Screen most popular industrial robots –
examine how organizations can Baxter and Sawyer. We spoke to
create a sustainable and successful Adding intelligence to Machines. Jim Lawton, Chief Product and
innovation strategy, drawing on our We open the Review with Michael Marketing Officer of Rethink
global panel of industry executives Osborne, an associate professor Robotics to understand Rethink’s
and academics (see Figure 2). We at the University of Oxford, and views of the future evolution of
focus on four key themes: an established expert on machine collaborative robots.
■ Which digital innovations should learning. Professor Osborne explains
why this digital innovation wave is Digital Innovations – Our Top Picks.
be on organizations’ radar screens?
very different from previous ones, Did you know that there is a shoe
■ How should companies promote that grows to adapt to the increasing
with technologies now increasingly
innovation and embed it into shoe-size of an adolescent? Or that
substituting for human brain labor
their culture? there is a company that promises
or human cognitive work.
■ What lessons can we draw from to reduce your power bill through
organizations that are stand-out When Bots Strike. Among the very smart sensors and software, which
innovators? first companies to have made robotics does not charge you for doing so?
■ What is the role and impact of a household name is Rethink Robotics, Large companies, startups and
innovation centers, including the the makers of Roomba, the robotic individuals are increasingly pushing
Capgemini Consulting-Altimeter vacuum cleaner. While household the limits of digital innovation. We
Group report, “The Innovation robots may be a while away, capture a select set of innovations
Game: Why and How Businesses collaborative robots are becoming across products, services and
are Investing in Innovation increasingly common on the industrial business models to inspire you
Centers”. shopfloor. And Rethink is the to drive your own organization’s
innovation efforts.

Figure 2: Guest Contributors to the Digital Transformation Review No 08

Jim Lawton,
Boston, USA
Michael Osborne,
Jon Nordmark, Oxford, UK
Denver, USA Gavin Starks,
London, UK
Navi Radjou,
San Francisco, USA James Patterson,
Washington, USA
Claus von Riegen,
Mannheim, Germany
Pablo Rodriguez,
Barcelona, Spain

D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 7
New Innovation Models for the Digital Age – Editorial

Promoting and Embedding Innovating Through Data: How that often kicks in and opposes
Innovation Open Data Can Help Drive innovations. This is because the
Innovation. Open data is data organization is currently set up to
Frugal Living: How ‘Jugaad’ that anyone can access, use and protect and optimize the current
Innovation Can Help You. share. And leveraging open data business model. He outlines how
Innovation need not always be for innovation is precisely what SAP does things very differently.
expensive or long-drawn out, says a variety of startups and large
Navi Radjou, a Fellow at Judge organizations alike are doing. At the Innovating from Inside: The
Business School, University of forefront of enabling this innovation Telefónica Way. For many
Cambridge and an innovation is the Open Data Institute (ODI). The large organizations, the answers to
advisor based in Silicon Valley. organization works to catalyze innovation challenges are already
Navi Radjou, co-author of the open data to create economic, present inside the company. However,
books Frugal Innovation and environmental, and social value. identifying and supporting those
Jugaad Innovation, argues that The institute convenes experts to employees that hold the key to
the mainstream innovation model collaborate, incubate, nurture and innovation is a bridge too far for many
adopted by most large organizations mentor new ideas, and promote organizations. We spoke with Pablo
is broken. The answer, Navi believes, innovation. We spoke with Gavin Rodriguez, Director of Innovation
is frugal innovation, or Jugaad. Starks, CEO of the ODI. at Telefónica to understand how
Telefónica solves this challenge.
Starting Up: Working with The Innovation Oscars:
Startup Curators to Accelerate Networked Innovation: How
Innovation. It is a daunting task Lessons from the Pioneers Capital One Innovates using a
to create, in large organizations, the Network of Innovation Centers.
We look at three companies from Startups usually thrive in recognized
innovation culture that characterizes
three different sectors, and analyze tech clusters across the world, such
startups. To address this issue, we
their approaches to innovation – as Silicon Valley, London, Israel and
spoke to Jon Nordmark, co-founder
SAP, Telefónica and BBVA. Boston. For large organizations,
of Iterate Studio. This is a company
that discovers and curates startups’ getting innovation right is often a
Innovating the Business Model: question of being in the right spot,
disruptive technologies for large
SAP’s Self-Disruption Approach. and getting the right talent in place.
companies. Iterate Studio works with
One of the biggest challenges for One approach to doing so is setting
thousands of startups and helps large
large organizations is overcoming up a network of innovation centers,
enterprises conduct rapid proof-of-
reticence to change. Claus von which is just what Capital One, the
concept experiments to quantify the
Riegen, Vice President and Head financial services company did. We
impact on their business.
of Business Model Innovation at spoke to James Patterson, Head of
SAP, outlines how organizations Capital One Labs.
have a “corporate immune system”

8 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
DIGITAL TRANSFORMATION REVIEW

The Innovation Game: how they are doing so. Analyzing As we noted at the beginning of our
Why and How Businesses over 300 innovation centers across introduction, massive investment in
200 large organizations globally, we innovation does not necessarily lead
are Investing in Innovation found that innovation is no longer to massive value. In fact, innovation
Centers confined to the top few tech hubs. often remains a frustrating and
In fact, a number of cities across the dispiriting pursuit in many large
We close this eighth edition of the globe are emerging as innovation companies. We hope this edition
Digital Transformation Review destinations. We also draw on the of the Digital Transformation
with a joint-research study from views of innovation heads at a range Review is a helpful guide to making
Capgemini Consulting and Altimeter of large organizations to understand innovation a satisfying endeavor at
Group on why businesses are what it takes to get an innovation your organization. Please do contact
investing in innovation centers and center right. us if you would like to discuss any of
these issues further.

i Inside HPC, How to Measure a Supercomputer’s Speed?, 7th August 2015


ii Bloomberg, “Six things technology has made insanely cheap”, 5th February 2015
iii HBR Press, Leading Digital, October 2014
iv Nielsen, “How to flip 85% misses to 85% hits: Lessons from the Nielsen Breakthrough Innovation Project”, June 2014
v Oracle, “Understanding the Best Approaches and Tools to Manage the Complexity of Innovation”, 2013

For more information, please contact:


Fernando Alvarez (fernando.alvarez@capgemini.com, @Digital_Alvarez)
Didier Bonnet (didier.bonnet@capgemini.com, @didiebon)
Jerome Buvat (jerome.buvat@capgemini.com, @jeromebuvat)
The Digital Transformation Institute (dti.in@capgemini.com)

D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 9
The Digital Innovation
Radar Screen
The New Innovation Wave: Machine Learning and AI

The New Innovation Wave:


Machine Learning and AI

Michael A Osborne
Associate professor at the
University of Oxford

M
ichael A Osborne is an associate professor at the University of
Oxford. He co-leads the Machine Learning Research Group, a
sub-group of the Robotics Research Group in the Department of
Engineering Science. Professor Osborne designs intelligent algorithms
capable of making sense of complex data through the usage of techniques
such as Machine Learning and Computational Statistics. His work in data
analytics has been successfully applied in fields as diverse as astrostatistics,
labor economics, and sensor networks. Professor Osborne is also the co-
author of the widely publicized research “The Future of Employment: How
susceptible are jobs to computerisation?” with fellow Oxford academic
Carl Benedikt Frey. They concluded in the paper that about 47% of total US
employment was at risk of being automatable. Capgemini Consulting spoke
with Professor Osborne to understand Machine Learning and its impact on the
business world.

12 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
DIGITAL TRANSFORMATION REVIEW

Your latest research with actually affected unemployment Can you give us your definition
Professor Carl Benedikt much; the unemployment rate of machine learning and
Frey and Citi on innovation was about 5% at the beginning of artificial intelligence?
shows that throughout history the 20th century and was still 5%
Machine learning is a subset of
powerful interests have at the end of the 20th century.
artificial intelligence (AI) and
hindered innovation. Is history
can be defined as the study of
repeating itself?
algorithms that can learn and act.
History might be repeating itself.
Technological progress has always
Roman Emperor It’s about the reproduction of some
of the most quintessential human
created significant disruptions Tiberius, had [an characteristics. The boundaries
that powerful interests tried to inventor] sentenced between all these different fields
combat to maintain the status
quo. In Ancient Rome, the great
to death, fearing are not very clear. However, you
might associate computer vision,
author, Pliny the Elder, records the loss of jobs and language processing and speech
the story of an inventor who creative destruction. recognition as other subsets of
discovered a way to manufacture artificial intelligence.
glass that was unbreakable.
Is the current digital innovation
Hoping to receive a reward, the
wave different from the
inventor presented his invention
previous innovation waves?
to Roman Emperor Tiberius.
Unfortunately for the inventor, Yes, in the past technology In the past
Tiberius had him sentenced to has largely just substituted the technology
death, fearing the loss of jobs and human muscle, whereas now has largely just
creative destruction due to the technologies can increasingly
new technology. substitute human brain labor substituted the
or human cognitive work. If human muscle,
The various innovation waves machines can substitute for whereas now
in history have led to dramatic cognitive labor, as they have done
upheavals in society but we in the past for physical labor, it’s technologies
have never seen large-scale not very clear to what extent there can increasingly
technological unemployment. For might be any demand remaining substitute human
example, at the beginning of the for human labor. Another thing
20th century in the U.S., about that is different this time is the cognitive work.
40% of our employment was accelerating rate of technological
engaged in agriculture, whereas change. It is undeniable that we
at the end of the 20th century, it really are making quite dramatic
was less than 2%. There was quite leaps forwards in designing
a seismic change in the makeup of intelligent algorithms that might
employment due to technology. be able to substitute for human
However, none of these changes workers.

D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 13
Making Machines Learn

Artificial Intelligence and Machine Learning

What is machine learning? How big is machine learning? How hot is machine learning?

$300

A subset of artificial Research on AI constitutes Venture capitalists have


intelligence (AI). approximately 10% of all invested over $300 million
Study of algorithms that computer science in AI startups in 2014, a
can learn and act. research today1. twentyfold increase from
20102.
It aims to reproduce some
of the most quintessential
human characteristics.

Working with machines

“We need to equip the At the same time,


next generation of organizations need to protect
workers with the themselves from deskilling –
necessary skills that they loss of human skills due to
will need for an economy intrusion of automation in
that is increasingly occupations.
automated”.
- Michael A Osborne

No heavy investments needed – a wealth of open-source, state-of-the-art


algorithms already available, it costs very little to reproduce an amazing
algorithm and it benefits everyone.

1
Machine Intelligence Research Institute, “How Big is the Field of Artificial Intelligence?”
2
Bloomberg QuickTake, “Artificial Intelligence”, July 2015
DIGITAL TRANSFORMATION REVIEW

Could you give us some speech recognition and has us one step closer to artificial
examples of current applications successfully replaced traditional intelligence. Deep learning is a
of artificial intelligence and algorithms for speech recognition set of techniques, inspired by
machine learning in business or at an increasingly large scale. biological neural networks, for
non-business environments? Historically, people were trying teaching machines to find patterns
to induce speech recognition and classify massive amounts
A great example of this is the retail
by recognizing speech features of data. It tackles crisp and
business, where ‘recommendation
like words and phrases. But well-defined problems, such as
engines’ are being used
recently, algorithm designers classifying images as to whether
extensively. Take Amazon as
have turned to massive data they contain a car or a book, for
example. It recommends products
that has become available for example. It’s worth noting that
to millions of customers on the
characterizing human speech. deep learning is still not well-
basis of historic data. Algorithms
If this trend continues, we are understood, or provably robust,
can process data, characterize
likely to continue to move from and that it is likely unsuitable for
the spending patterns of millions
the 95% accuracy rate that we’re safety-critical applications.
of customers, identify latent
able to achieve on our mobile
trends and patterns, and identify
devices today to nearly 99%. What are the most promising
clusters and communities for
This would probably make these opportunities for both AI and
recommendation.
speech recognition techniques machine learning?
Self-driving cars are another completely widespread. In our recent paper, “The Future
application where machine of Employment”, Frey and I
learning is really playing quite have identified occupations
a pivotal role. Cars today have
sensors, onboard computing and
Machine learning is that we thought were the most
susceptible to automation. These
safety systems, and use intelligent a subset of artificial are the kind of jobs that would
algorithms to render themselves intelligence (AI) and be most easily automated within
autonomous. These algorithms
observe how you drive using
can be defined as the the near future using machine
learning techniques. The model
the onboard sensors and quietly study of algorithms predicts that most workers in
learn to travel from the current to that can learn and transportation and logistics
desired positions on the basis of
this data.
act. occupations, together with the
bulk of office and administrative
support workers, and labor in
Speech recognition is one key You mentioned ‘deep learning’. production occupations, are at
application of machine learning. Can you shed some light on this risk. I think that in all these kinds
Voice recognition software, such concept? of areas, there will be an ever-
as Apple’s Siri, has been driven “Deep learning” is the new big increasing degree of automation
by advances in machine learning. trend in machine learning. It using machine learning
Deep learning is becoming a promises general, powerful, and algorithms.
mainstream technology for fast machine learning, moving

D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 15
The New Innovation Wave: Machine Learning and AI

Are there sectors where you see Can individual companies invest
a lot of potential for machine in artificial intelligence?
More or less learning?
The wonderful thing is that
anything that does The retail sector, for example, you don’t necessarily need to
not require one of offers tremendous opportunities. be developing novel artificial
We have seen restaurants intelligence techniques and
the three bottlenecks deploying tablets on tables. machine learning algorithms to
– i.e. creativity, These tablets can be used to take benefit from the state-of-the-
social intelligence orders from customers. They art. It’s relatively low cost, an
can also recommend customers individual corporation can just
and the requirement a set of dessert options tailored hire a data scientist or a machine
to manipulate to what customers might want learning PhD. There is this wealth
complex objects based on what they have ordered of open-source state-of-the-
previously. A customer might art algorithms already out that
in an unstructured even have a profile that’s built could be immediately deployed to
environment – up over multiple desserts in the applications. So, the bottleneck is
will be potentially same restaurant or even a family really not investment, it’s talent.
of restaurants using the same The challenge is just attracting
automatable. software. So, you might get to people with the right skills.
the point at which this tablet can
instantly know, as soon as you
More or less anything that does walk through a door, what your
not require one of the three
bottlenecks — i.e. creativity, social
usual order is, and expedite the There is this wealth
ordering of it.
intelligence and the requirement of open-source
to manipulate complex objects Even in the traditional mall, the state-of-the-art
in an unstructured environment
— will be potentially automatable
customer movement around the
store can be closely monitored,
algorithms already
in the near future. When self- indicating customer interest in out that could
driving cars become a reality, products. The change here is that be immediately
there is going to be an enormous
economic impact for taxi and
these intelligent algorithms can
become more personalized and
deployed to
truck drivers. In the near term, gather a lot more data about us as applications.
self-driving technologies are individuals. Therefore, they can
going to have an impact in the make recommendations to us that
automation of professions, such are more directly targeted at what
as forklift drivers, agricultural we want and what the store might
vehicle drivers, or mining vehicle actually want to promote.
drivers.

16 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
DIGITAL TRANSFORMATION REVIEW

What are the risks for a handed over to an algorithm.


company investing in AI or As a result, when something
machine learning? unforeseen happens, when there Automation of
If you rush too fast and hard
is a kind of an unexpected event, labor might result
the algorithm becomes useless,
into automation, there are skills
and humans take over, they won’t in the loss of
that will be irrevocably lost
to organizations. In his book,
necessarily have the same degree softer skills that
“The Glass Cage: Automation
of understanding and skills that weren’t necessarily
they might have had before the
and Us”, Nicholas Carr explains
automation. We can argue that quantifiable but are
how automation can separate
us from reality and deskill us.
there have been catastrophes yet essential.
because of a human skill being
One example that is particularly
lost owing to the intrusion of What would you recommend
evocative is that of an airline pilot.
automation in that occupation. I to CEOs of large organizations
Carr plausibly makes the case
think this is a real risk for many regarding machine learning and
that pilots’ increasing reliance on
businesses; automation of labor artificial intelligence?
automated flying reduces their
might result in the loss of softer We really need to develop in-house
own ability to actually fly a plane
skills that weren’t necessarily expertise in these techniques
in any direct way. The case of
quantifiable but are yet essential. because, fundamentally, the
airplane navigators is also very
interesting – those who have not increasing availability of data
lost their jobs have been deskilled; across a wide range of different
more and more of their job is being industries is going to be

Occupations vs. Automation


Carl Benedikt Frey and Michael About 47% of total US
A. Osborne studied 702 detailed 47% employment was found to be at
occupations to estimate the risk of computerization
probability of computerization

21% of US employment Creativity is a hindrance to As a result, 86% of US


and 24% of UK employment is automation – creative skills workers in the highly creative
highly creative, involved in areas cannot be readily replaced by category are at low or no risk
such as development of machines of automation; the equivalent
novel ideas number for the UK is 87%

Source: Nesta, “Creativity vs. Robots: The Creative Economy and the Future of Employment”, April 2015; Carl Benedikt Frey and Michael A. Osborne, “The Future of Employment: How Susceptible are Jobs to Computerisation?”, September 2013
The New Innovation Wave: Machine Learning and AI

transformational. If your business Is there an argument to slow


is not in the forefront of using down the progress of machine
this data, there certainly will be Value is delivered to learning?
another business. The potential us as customers or I don’t think there is. An important
value that could be realized is
going to develop into a real as consumers. Let’s thing to note is that all these
technologies will be delivering
competitive advantage. I think make sure that all enormous value to society. We
companies need to be doing a lot this wealth that is have seen in the last 10 years the
more to recruit and hold on to
talent such as data scientists and created is distributed delivery of amazing technologies.
Even the smartphone in your
machine learning experts. in a fair way pocket, for example, has a range
What are some of the ethics
throughout society of apps that would have been
issues that we will face with at large. unthinkable even 10 years ago. My
point is that value is delivered to
machine learning or AI?
us as customers or as consumers.
The big problem here — and one that How can governments and Let’s make sure that all this wealth
the machine learning community is regulators try to mitigate the that is created is distributed in a
spending a lot of time on — is privacy. adverse effects of machine fair way throughout society at
learning? large. Moreover, the wonderful
Our objective is to have systems thing about the technology is
that could be verifiably shown I feel the most imminent concern that it has very low marginal cost
to not intrude upon someone’s is the effect of machine learning of reproduction. So, at the point
private space. Ideally, you would technologies upon employment. that you develop an amazing new
have an algorithm that would People have rightly recommended speech recognition algorithm,
process, for example, medical that these technological events it costs very little to deploy that
health records without ever would necessitate the change algorithm on everybody’s mobile
returning to the users of that of education. I think we need phone. Everybody benefits
algorithm any personal details. to equip the next generation from the introduction of those
These algorithms look at this of workers with the necessary techniques as customers and
dataset and return aggregate skills that they will need for an as consumers. The problem is
statistics useful to researchers economy that is increasingly that some people necessarily
without ever returning to automated. Governments do will be put out of work by these
those people, the details of any have a role in investing in the technologies. I think there is
individual patient. This relies technological research. There a challenge to make sure that
upon the robustness of the are profound challenges here in there are jobs created to replace
algorithm. getting governments to select those that are eliminated by new
the right type of technological technologies.
development.

18 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
CREATING A CULTURE OF INNOVATION

“I believe relying on one or two


programs to create an innovation
culture can only have limited results.
“Innovation can’t be done in an It has to be a combination of efforts
isolated way, on an island. The only led from the top.”
way innovation can take up firm - Pablo Rodriguez
ground is when it has CEO-level
support. There needs to be a requirement
coming from the CEO that business
units must work together seamlessly.”
- Jon Nordmark

“At Capital One, innovation is


not just for one team, but for the whole
“I think changing the culture of the company company. We have a strong culture of
is absolutely critical. Our research shows long-term investments in innovation […]
that it takes approximately 8–10 years for a our businesses and the Labs share the same
company to make the complete transition, understanding of what innovation truly
“Financial
““F
which is a longFin
inan
anci
an cial
ci
journey.al Se
SBut,
e companies like means.”
Renault have proven that if you can patiently – James Patterson
Botsman
execute the strategy over 10 years,elyou can
become a leader in the space.”
– Navi Radjou

“The intrapreneurship program is the right


channel for out-of-the-box ideas: innovations
that would not be considered part of our current
product portfolio development.”
- Claus von Riegen
Rise of the Machine: Forging Ahead with Robots

Rise of the Machine:


Forging Ahead with Robots

Jim Lawton
Chief Product and Marketing
Officer, Rethink Robotics

R ethink Robotics was co-founded by Rodney Brooks, the inventor of the


popular robotic vacuum cleaner Roomba. Rethink is focused on developing
robots that provide manufacturers with the benefits of automation, but
without the need to enclose the robots in cages and tied to only one job. The
company has, to-date, launched two collaborative robots called Baxter and Sawyer.
Jim Lawton is the Chief Product and Marketing Officer of Rethink Robotics. Prior
to Rethink Robotics, he was an executive at Dun & Bradstreet. Previously, Jim
Lawton had served as Vice President of Marketing for Open Ratings (acquired by
D&B), where he transformed a 5-year-old internet company into an aggressive SaaS
provider. Capgemini Consulting spoke to Jim to understand his view of where robots
are headed and their impact.

20 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
DIGITAL TRANSFORMATION REVIEW

What are the drivers behind the What has really been at the heart screen acting as a face. Sawyer is
rise of collaborative robots? of the creation of this new kind smaller, designed to fit a compact
of collaborative robot is to think environment. It weighs 42 pounds
Agility and flexibility are the two
differently about what could be from the waist up, has slightly longer
key factors that have been driving
done with robots. The opportunity arms, and a heavier payload.
the emergence of collaborative
is massive – we believe that 90%
robots. Manufacturers increasingly
of the tasks in factories today are
need to maintain the flexibility
not automated.
and the agility that they get with
manual labor, and robots haven’t
The opportunity is
been up to that task so far. Today, I
Can you tell us more about massive – we believe
your collaborative robots –
may be standing in front of a sheet
Baxter and Sawyer – and their
that 90% of the tasks
metal press brake, and, tomorrow,
I will be putting circuit boards
unique features? in factories today are
into an in-circuit tester. This is Baxter, our first robot, weighs 165 not automated.
the kind of agility and flexibility pounds from the waist up and is
that manufacturers need and that typically mounted on a pedestal
has been missing. Most industrial or a table. He is humanoid in form
robots at automotive factories, for with a torso, two arms and a display
example, perform welding and are
Baxter and Sawyer
typically placed in cages. These
robots take a couple of hundred
hours or more to program and are
then dismantled at the end of the
product line. Units like that are
difficult to deploy for a particular
task and lack flexibility.

Agility and
flexibility are
the two key
factors that
have been
driving the
emergence of
collaborative robots.
Source: Rethink Robotics

D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 21
Rise of the Machine: Forging Ahead with Robots

and you are moving it in free space,


it feels as if it’s weightless. So, you
If the robot bumps can position, orient, and move it in Not only will our
into something or any way that you want. You grab its robots learn the job
arm, you guide it to where the part
something is in a is, you tell it to close its hands, move and complete the
slightly different it into the CNC machine, release task, but they are
position, it’s able to its hand, pull back, close the door, using their algorithm
and push the button. You show the
accommodate for that robot exactly how to perform a task to optimize the task
ambiguity. in the same way that you would assigned and make
show a human how to do so. And, that job better.
Both the robots have 7 degrees the robot thinks in the context of
of freedom, allowing them to get the task. It’s not thinking in the
What is the secret behind the
into various kinds of fixtures in a context of position and movement,
competitive pricing of Baxter
multitude of different ways. This going from point to point in space.
and Sawyer?
becomes very important when If the robot bumps into something or
you are trying to avoid obstacles. something is in a slightly different The traditional approach for
position, it’s able to accommodate automation has been to build
Both Baxter and Sawyer have for that ambiguity because it’s not robots that are extraordinarily
learning features. For typical robots, focused on executing commands. precise and fast. Deploying precise
you write some form of script or It’s focused on performing a task. components into robots at a
use a coding language within a hardware level is very expensive.
developing environment, and you There is increasing logic and
sit down with a computer and you intelligence that’s coming into these Software, on the other hand – when
tell it where to go. With Baxter and robots. Sawyer and Baxter automate coupled with cheaper components
Sawyer, it’s much more like an on- physical tasks, but there is also an – can deliver competitive results.
the-job training. They learn the automation of cognitive tasks. Not We are trying to solve the problem
task by having somebody show only will they learn the job and of precision and cost with both
them how to do it. complete the task, but they are hardware and software. We have
using their algorithm to optimize chosen components that, when
When you grab the cuff of either the task assigned and make that coupled with the software, get the
Baxter or Sawyer, they go into what job better. Collaborative robots also job done at a competitive rate from
we call Zero-G mode. The robots’ gain experience from those jobs, a cost perspective – between $20K
motors are compensating for all of and then change not only their and $30K. This enables the robot to
the weight of the arm dynamically operations but also provide insights go after these 90% of the tasks that
as it moves through a position. to other robots. are currently unautomated.
When you are holding onto the wrist

22 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
DIGITAL TRANSFORMATION REVIEW

What is the ROI of Baxter or With this new generation


Sawyer? of robots, can we expect the
We have chosen Typically, ROI takes 12 to 18 months.
emergence of smaller local
components that, Let me give you an example. I’ve got
factories closer to end users?
when coupled with the a tier 1 automotive manufacturer. Most of the companies that are able
Traditionally they have people to take advantage of traditional
software, get the job standing in front of a machine, automation today tend to be fairly
done at a competitive basically tending to the machine. large with high volume operations.
rate from a cost So, you have four people manning If you are one of the small/
this machine, 20 out of 24 hours a medium-sized businesses, you
perspective – between day, and they are each paid $45K cannot afford to use that kind of
$20K and $30K. a year. This means that you are automation. Small companies have
basically spending $180K-a-year been largely left along the side of
to tend to this machine. The robot, the road when it comes to getting
on the other hand, does it with the benefits that automation can
$25K. The robots can run 24 hours provide. If we fast-forward into the
a day instead of 20, it doesn’t need future, with an increasing number
vacations, it doesn’t take breaks, of collaborative robots around,
and it always does the same thing smaller companies will be able to
repeatedly with accurate results. take advantage of them.

D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 23
Rethink Robotics

Collaborative Robots are Revolutionizing How we Think Robotics

Traditional robots usually: Collaborative robots A massive opportunity for


• Take 200 hours or more automate physical and cognitive collaborative robots – 90% of
to program tasks, learn on-the-job, tasks in factories are currently
• Perform predefined tasks and also optimize the unautomated
• Are dismantled at the end task assigned
of the product line

Enter Rethink Robotics’ Collaborative Robots – Baxter and Sawyer

Flexible Accommodate Ambiguity


Baxter, a humanoid bot that can They think in the
handle tasks from line loading, to context of the task,
packaging and material handling. so they can“feel” their way
Sawyer is designed to automate
€½‘oʽ²bµ and accommodate
a certain level of ambiguity while
precision tasks such as machine performing the task.
tending and circuit board testing. Easy to Manipulate
They learn a task by having
somebody show them how to do it.

Collaborative Robots Make a Compelling Business Case

Traditional robots = Collaborative robots = Baxter and Sawyer typically take


expensive hardware to software + cheaper hardware 12 to 18 months
deliver precision and speed Baxter and Sawyer available to break even
for $20 to $30K
DIGITAL TRANSFORMATION REVIEW

This next level of automation also money in initiatives such as


allows manufacturers to set up their Industry 4.0. However, China has
operations in a much wider variety If the next major driver also launched its own initiative
of places because they don’t have of success is having called “Made in China 2025”
to chase low-cost labor around to become the world leader in
the globe. If you go back 50 years, smarter, more capable manufacturing of all products
manufacturing and design were robots, that’s not a including high and low volume,
happening near each other. Design battle that developed low and high quality. As an
could learn from manufacturing, example within the robotics
and manufacturing could learn countries want to lose. industry, at the end of 2014, there
from design. Innovation was were 400 robot manufacturers in
happening much more rapidly. We Do we have some evidence that China. At the end of Q1, 90 days
did the worst thing we could do by the automation is helping U.S. later, Q1 2015, there were 700
moving manufacturing off to places or European manufacturers to robot manufacturers.
where labor costs were low and thus bring production onshore?
created a big divide between the There are quite a few examples The key question is whether
two. Now, with collaborative robots, of companies that have started to developed countries are moving
we are able to bring innovation relocate some of their operations to as fast as China. If the next major
and manufacturing back together the United States – such as General driver of success is having smarter,
again. I think it’s going to allow Electric, Ford or Caterpillar – with more capable robots, that’s not
manufacturing supply chains to the help of automation. They a battle that developed countries
operate in much different ways can hit the ROI and they can do want to lose.
than they have been operating over it in a way that doesn’t sacrifice
the last 20–30 years. flexibility.

What is clear is that we will see I do think that in


With collaborative
much more competition between the next five years,
China and developed nations.
robots, we are able However, the rules of the game
you are going to
to bring innovation are changing – success will not be see robots that
and manufacturing
driven by low-cost labor anymore, are deployed with
but by technology. That’s a game
back together again. that a lot of countries can play
learning systems
in. Developed countries are now that are artificial
investing massive amounts of intelligence derived.

D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 25
Rise of the Machine: Forging Ahead with Robots

How intelligent could a robot Inside the home, how do you The key thing for robots in the
become and by when? see the evolution of robots? home will be to be able to process
input of both vocal and gesture
Traditional robots had a big I see robots evolving within the
to a better job at deciphering. For
heyday 30 years ago. Then, the home into two broad categories.
example, the Echo device designed
innovations really flattened out
by Amazon is capable of providing
over the last 30 years and it has The first category is using robots
information, answering questions,
been much more incremental. I for things that I don’t want to do
playing music and reading the
think with the combination of or can’t do anymore. For example,
news instantly. We are going to
physical and cognitive automation from an elder care perspective,
start to see Amazon voice services
and a lot of artificial intelligence, if I no longer have the physical
that get embedded into all of these
we are going to see another big ability to perform certain tasks,
systems.
burst over the next 10 or 20 years. the robot can take over from me. I
think we are going to start to see
It’s just another place where we are
I think initially we are going to collaborative robots in not only
going to see that the technology is
see robots apply greater levels of every manufacturer, but every
coming out to reach the human as
logic. The complexity of the kinds home and in a lot of service-type
opposed to the human having to
of problems they are going to solve opportunities as well.
change the way they do things.
is definitely increasing, but we are
currently overstating how quickly a Another broad category is
major transformation is possible. I companion robots. These are
don’t see robots with consciousness robots that will be your buddy and
any time in the next many tens interact with you in a way that’s
of years, but I do think that in the more like a human. I want a robot
next five years, you are going to that I can interact with and can
see robots that are deployed with provide me with this sociological-
learning systems that are artificial type support and provide with
intelligence derived. some level of companionship.

We will also increasingly see robots


that learn from each other. Currently,
all robots have their brains within
Currently, all robots
themselves. In the future, some have their brains within
of the brain will be located in the themselves. In the
cloud, which will enable robots to
share insights and reduce costs. We
future, some of the brain
can build at the system level a more will be located in the
efficient operation by not having to cloud, which will enable
double up on so much CPU power
inside every robot.
robots to share insights
and reduce costs.

26 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
THE INNOVATION CHALLENGE

“Technological progress has always created significant


disruptions that powerful interests tried to combat to
maintain the status quo. In Ancient Rome, the great
author, Pliny the Elder, records the story of an inventor “Creating excellence at small scale is
who discovered a way to manufacture glass that was relatively straightforward. Doing so at
unbreakable. Hoping to receive a reward, the inventor scale is extremely hard. And that’s where
presented his invention to Roman Emperor Tiberius. most innovation centers struggle”
Unfortunately for the inventor, Tiberius had him - James Patterson
sentenced to death, fearing the loss of jobs and creative
destruction due to the new technology.”
- Michael A Osborne

“Mainstream innovation is rigid


and lacks the agility to respond to big
changes in the marketplace such as new
competition. […] The innovation engine
“The challenge is to convince people that at large incumbents has to become
something simpler with fewer features can be more nimble and flexible.”
innovative. The difficulty is to shift the R&D – Navi Radjou
mindset from pushing more technology to really
understanding customer needs and focus on
delivering value to customers by creating
a simpler solution.”
– Navi Radjou
“The world’s leading companies spend over
$650 billion on R&D every year. In an
economic environment that is not very
growth-oriented, it is very hard for companies
to sustain that level of investment.”
– Navi Radjou
Digital Innovations – Our Top Picks

Digital Innovations – Our Top Picks

C
reative ideas and innovations can transform the lives of thousands of people, solve critical social
problems, and transform companies and markets. Here, we have selected a range of product and
business model innovations that offer creative solutions to a range of contemporary issues, from
social to consumer applications. This list is offered merely as a conversation starter – share your personal
innovation favorites using the hashtags #excitinginnovation and #DTR8.

Innovation in Products

Beating Iodine Deficiency


Through ‘Bindis’
Deficiency in iodine is the world’s
most predominant cause of brain
damage and can also lead to other
health issues. In India, approximately
350 million people are at risk of
iodine deficiency, according to a
study from the Indian Journal of
Medical Research. The “Life Saving
Dot” aims to use bindis - a forehead
decoration worn in South Asia - to
deliver an essential micronutrient
to women who might not be getting
enough iodine. The unique aspect
of this innovation is that it fits into
an established cultural tradition.
“There are patch systems for many
medicines now, so the bindis are
a really cool idea,” says Michael
Zimmermann, a nutrition researcher
at the Swiss Federal Institute of
Technology in Zurich. The iodine-
Image Source: Grey
packed bindis have already reached
more than 30,000 women in 100 Source: NPR, “How Little Red Dots Could Help Women And Babies Stay
villages in India. Healthy”, June 2015

28 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
DIGITAL TRANSFORMATION REVIEW

Shoes that Magically Expand to


Fit Growing Feet
The Shoe That Grows
When Kenton Lee was travelling in
Kenya, he was surprised to see the
number of children either barefoot
or cramped into too-small shoes.
This drove him to come up with an
idea for “The Shoe That Grows”.
The shoe uses adjustable buckles
and a strap on the toe to expand by
as much as five sizes, which is ideal
for children aged between 5 and 9
and 10 to 15. Kenton Lee is working Source: www.theshoethatgrows.org
with an organization called Because
International, which aims to send
the shoes to orphanages in African
nations.

Steadying the Shaking Hand


Globally, over 10 million people
suffer from tremors or Parkinson’s
disease, which can make an essential
task such as eating a challenge.
The Liftware Spoon is designed
to work around the movement
disorder in an innovative fashion.
It employs complex algorithms
to detect how the hand is shaking
and makes dynamic adjustments,
through motors in the spoon, to
stay balanced. In a clinical trial, the
Liftware spoon cancelled out over
70% of a user’s tremors. Liftware
was recently acquired by Google.

Source: www.liftware.com

D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 29
Digital Innovations – Our Top Picks

Snap a Feature to Your


Smartphone – Project Ara
Most smartphones come with a set
of features that are usually upgraded
over a period of a year or two through
software updates. However, while the
softwarechanges,thehardwareremains
the same. Google wants to change that
with Project Ara. The project aims to
develop an open hardware platform
for creating modular smartphones.
The platform will include a basic frame
and the user can pick the modules that
they want, such as display, battery,
camera and so on. The phone would
then allow users to swap out modules
for upgraded versions, or to replace Source: www.projectara.com
defective modules without changing
the whole phone.

Innovation in Business Model

Making Your Bulb Pay its Bills -


Enlighted
Enlighted is a startup that builds
devices that can detect heat, light, and
motion and ties these devices with a
software solution to control lighting
(and soon, heating and cooling).
The company innovated its business
model by not requiring any up-
front payment from companies that
implement the solution. Customers
only have to pay as much as Enlighted
saves them. Enlighted assumes the
risk, with the customer not having
to commit to any money-down
financing or leasing, thereby enabling
Source: www.enlightedinc.com
them to realize instant savings.

30 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
DIGITAL TRANSFORMATION REVIEW

Freemium for B2B - Zenefits


Zenefits, a San Francisco-based
startup in the business of HR
software provision, has a highly
innovative payment model. The
company allows small- and medium-
sized enterprises to manage all their
all HR services on a single platform,
offering its software free of charge.
However, if its clients buy health
insurance for their employees
through Zenefits’ software, it receives
a payment from the insurance
companies. At May 2015, the
company had over 10,000 customers
and it recently raised money at a
valuation of $4.5 Bn. Source: Wall Street Journal, “Zenefits Is Tagged With a $4.5 Billion Valuation
After Just Two Years”, May 2015

Push-Button Shipping – From


the Doorstep - Shyp
Shipping something in the US can
be a cumbersome process. Shyp
offers a smartphone-driven solution
to fix that. The company allows
individuals to take a picture of the
package that is to be shipped, and
within 20 minutes, a Shyp ‘hero’ will
come by to the customer’s location,
take the product, pack it, and then
dispatch it using the best courier
option. Shyp charges its customers a
Source: From the Doorstep - Shyp: App Store (iOS)
flat $5 rate plus any courier charges
at actual.

D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 31
Promoting and Embedding
Innovation
‘Frugal Innovation’: Innovating More with Less

Frugal Innovation:
Innovating More
with Less

Navi Radjou
Innovation and leadership
advisor; Fellow at Judge
Business School, University of
Cambridge

N
avi Radjou is a Fellow at Judge Business School, University of
Cambridge and an innovation advisor based in Silicon Valley. He has
served as a member of the World Economic Forum’s Global Agenda
Council on Design Innovation and is a regular columnist for Harvard Business
Review. In 2013, Navi Radjou received the prestigious “Thinkers50 Innovation
Award”, which is given to a management thinker who is reshaping the way
we think about and practise innovation. Navi Radjou is the co-author of
a new book – Frugal Innovation – and co-author of the bestseller ‘Jugaad
Innovation’. Capgemini Consulting spoke with Navi Radjou to understand
how enterprises can apply principles of frugal innovation to innovate more
with fewer resources and yet deliver greater customer and social value.

34 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
DIGITAL TRANSFORMATION REVIEW

Declining Returns on R&D a situation where companies get


is Forcing Companies to lesser returns even if they spend
Rethink their Innovation
more on R&D. Companies
Strategy Secondly, mainstream innovation
cannot handle all
is rigid and lacks the agility innovation on their
You have argued that the to respond to big changes in own. They need to
mainstream innovation model
adopted by most companies
the marketplace such as new
competition. Five years ago,
look for partners
is broken. Can you elaborate automakers never thought that outside to augment
why? Google could become a carmaker. their capabilities.
The traditional model is broken Today, Google is building
because of a number of reasons. driverless cars. The innovation
engine at large incumbents has to
become more nimble and flexible.

Mainstream
innovation is rigid
and lacks the agility
to respond to big
changes in the
marketplace.
Firstly, it is extremely expensive.
The world’s leading companies
spend over $650 billion on R&D
every year. In an economic
environment that is not very
growth-oriented, it is very hard
for companies to sustain that
level of investment. There are also
obvious concerns over generating
the right return on this investment.
Studies suggest that more than
85% of new product launches in
the consumer products industry
fail in the market. It is leading to

D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 35
The third kind of shortfall in the Many of them struggle with poor is made entirely of clay. It does
existing innovation practices is that infrastructure, access to capital not require any electricity, and it
they are relatively closed and not and natural resources. And yet is 100% biodegradable. It uses the
open enough to collaborate with we noticed that there are many principal of evaporation to cool
external partners. Organizations entrepreneurs – especially in India the inside of this so-called fridge,
believe that they possess, in-house, and Africa – who are able to use and costs approximately €20–25.
all the resources they need to deal their limited means to innovate It can keep fruits and vegetable
with demand. However, companies and create economic and social fresh for several days. It is a
cannot handle all innovation on value for the communities. They great solution for people living
their own. They need to look for are frugal innovators. We covered in remote areas who do not get
partners outside to augment their this subject in detail in our first reliable electricity supply.
capabilities. book – Jugaad Innovation –
which came out in 2012. Jugaad
Refrigeration without
Frugal Innovation to Drive the is a Hindi word that means
Electricity
Next Wave of Growth ‘makeshift’ or ‘make-do’, which is
basically the ability to improvise
Can you introduce us to the an effective solution in a difficult
concept of frugal innovation? situation.

Frugal innovation is about


creating high-quality solutions
that are simple, effective, and Frugal innovation
affordable with limited resources.
It may not address all of customer
is about creating
needs, may be 80-90% of them, high-quality
but it is cost effective, yet of good solutions that are
quality and sustainable for the
environment.
simple, effective,
and affordable with
How did you come up with the limited resources.
idea of frugal innovation?
We introduced the concept in
Can you give us some examples
2009. My co-authors and I, at Another one is in the area of
of these entrepreneurs in India
Cambridge University in England, solar energy. Harish Hande is an
who came up with interesting
were doing research on how Indian entrepreneur who founded
Jugaad innovations?
Western companies could crack SELCO, which installs small solar
the emerging markets, which Our book offers a couple of very lanterns in some of the most
were fast becoming engines of interesting examples. First is remote parts of India with the
global growth. Emerging markets Mansukh Prajapati, a potter in belief that even poor people can
have a lot of resource constraints. India who developed a fridge that afford solar energy. SELCO wants

36 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
to democratize access to solar Is the idea of frugal innovation
lighting and he has been doing only relevant for emerging
it for 20 years. SELCO employs markets or does it apply to A recent study
young locals in the villages to developed nations as well? showed that 55% of
charge the solar lanterns in the
morning. They then distribute the
I believe there is a universal global consumers
appeal to the concept. Our
lanterns in the village houses and
first book offered Western
want to pay even
shops in the evening, so they can
multinationals best practices they more for products
use it at night for reading and—if
you are a shopper, you can use it
can learn from emerging market that are socially and
entrepreneurs, and companies
to sell your goods at night. In the
who were able to innovate
environmentally
morning, they collect the lamps
more with fewer resources. We responsible.
back along with micropayment
then spent the last three years
for the amount of light they used
studying frugal innovation in
the evening before. With this
the Western context. From our Today, consumers would rather
inclusive approach, SELCO was
findings, we published a new opt for a relatively frugal solution
able to scale out its frugal solution
book called Frugal Innovation. that addresses their basic needs
to over 200,000 households in
This book argues that, since 2008, and represents more value(s) as
rural areas, in some of the most
there is a big shift in the Western well. Frugality is a lifestyle that
remote villages in India, while
world – consumers have become connects the need for saving
creating many jobs in local
increasingly value conscious, money while doing the right thing
communities.
looking for products and services for the society and environment.
that deliver more value for less. This need is growing especially
Secondly, consumers in the West among young people in the
I believe there is a prefer to buy products and services Western world. These trends have
from companies that are socially been forcing Western companies to
universal appeal to and environmentally responsible. rethink their innovation approach
the concept of frugal A recent study showed that 55% to serve frugal customers in their
innovation. of global consumers want to pay home markets.
even more for products that are
socially and environmentally
responsible. And this number has
been growing. More interestingly,
nearly 70% of future employees
want to work for companies
that have this kind of social and
environmental credentials.

D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 37
‘Frugal Innovation’: Innovating More with Less

Principles of Frugal Innovation today if a company needs truck good enough solution, and then
– Working within Constraints capacity, it can approach the iterate i.e. incrementally improve
marketplace called FLOOW2. This the solution as the customers’
to Create More Value for is a B2B marketplace that enables needs evolve. This practice is very
Customers and Society companies to share idle physical frugal in terms of resources as
assets, trucks, factory equipment, well as time.
What are the key principles medical devices etc. In most cases,
underpinning Jugaad or frugal the system has more resources The third key principle is
innovation? than you think when you look regarding s u s t a i n a b i l i t y.
The first principle is that you at it from a single person or a It’s not about Corporate Social
use what is abundant to create company perspective. Responsibility (CSR) but how to
what is scarce. For instance, make your entire company more
you use clay, a widely available sustainable. We have examples of
and cheap material, to create Instead of operating companies like Unilever (its CEO,
Paul Polman, wrote the foreword
something like a fridge that does
not use electricity. You employ
with the sense for our book), which is planning
local people and turn them into of scarcity and to double its revenues by 2020
your distributors instead of hiring thinking only about while simultaneously halving the
environmental impact. This is not
employees. So, the question is
‘how do you create more impact
resources under just for one product or service.
using fewer resou rces’, the their sole ownership, They are reinventing their core
answer: you don’t create new [companies] must business model and entire value
chain to produce more, and better,
things, you just piggy back and
leverage what you already have.
look at what’s with less.
Reusing is indeed a sustainable available in the
alternative to “reinventing the whole ecosystem
wheel”.
that they can access. I believe that
What does it mean for
companies and what is Which other principles gradually we will see
abundance for companies? reinforce frugal innovation? companies sharing
Abundance lies in the ecosystem. Using what is abundant to create their fleet, their
Companies must take a systemic what is scarce is our first principle. factories as well as
The second principle is to engage
approach – instead of operating
with the sense of scarcity and and iterate. Instead of wasting
their clients. This
thinking only about resources time and money trying to create is the B2B version
under their sole ownership, they a perfect solution in an insular of the sharing
R&D lab, companies must directly
must look at what’s available
in the whole ecosystem that engage customers, identify their
economy, and it is
they can access. For example, basic needs, quickly produce a just taking off.

38 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
Innovating More with Less

The Traditional Innovation Approach is Broken

Expensive and Not Declining Returns Rigid and Not Open


Sustainable Enough
Leading companies Over 85% of new Organizations need
spend over $650 consumer products external partners to
billion on R&D launches fail in market augment their innovation
every year capabilities

What is Frugal Innovation?

High-quality solutions that are simple, effective, Connects the need for saving money while being
affordable and created with limited resources thoughtful for the society and environment

Key Principles Underpinning Frugal Innovation

Use what is Abundant to Engage and Iterate Sustainability Open Innovation


Create what is Scarce
Identify customers’ Reuse, recycle but also Becoming more open
For instance, pooling basic needs, quickly up-cycle – creating and willing to share
excess truck capacity produce a good enough more social value clients with the external
and enabling access to solution, and then ecosystem
it through a B2B iterate
marketplace

Frugal Innovation in Practice

Renault Kwid – an entry-level SNCF, the French railway Mansukh Prajapati, an


car for the Indian market, company, combining services Indian entrepreneur, invented
designed in India, with 97% of with Zipcar and others to MittiCool, a fridge made
its components sourced from provide “door-to-door” mobility. 100% of clay, 100%
local suppliers. biodegradable, consumes no
Entry range cars accounted for electricity and costs roughly
42% of Renault sales volumes in €20–25.
2014.
‘Frugal Innovation’: Innovating More with Less

In the process, companies reuse, themselves: “if I am not using 50% fewer parts than a typical
recycle but also up-cycle – my assets all the time, they are Renault with a minimalist design
creating more social value as well. sitting idle, I am basically wasting that met high-quality and safety
money. So, why don’t I share them standards. To capitalize on the
That brings us to the fourth with other people?” I believe that demand, Renault developed an
interesting principle, which is gradually we will see companies entirely new entry-level product
about collaborating extensively sharing their fleet, their factories line under the Dacia brand. These
with other companies – including as well as their clients. This is entry-level vehicles now represent
your rivals – the notion of open the B2B version of the sharing circa 40% of Renault’s total sales.
innovation and “coopetition”. economy, and it is just taking off.
The second chapter, being written
Can you elaborate on the in 2015, is the launch of Kwid –
concept of open innovation? an entry-level car produced for
Take, for example, the French
Renault is a very the Indian market. The concept of
Railway Company, SNCF. Their good example of a the car was developed to a large
extent by Indian designers in
focus was on offering the best company that has Renault-Nissan’s design centers
possible train services, but
customer demands have evolved.
been at the forefront in India and very much relies
People want an end-to-end of frugal innovation. on open innovation and local
supplier network. Ninety-seven
mobility solution that takes them
Frugal Innovation can percent of the components in Kwid
from point A to B, irrespective of
Make Corporations More come through local suppliers.
the modes of transport they may
They involved the suppliers very
have to use – cabs, trains and Competitive early on – right from the design
car-sharing etc. SNCF realized
phase. So, the whole ecosystem
this and has just launched a Can you explain how
was involved from the beginning
service aimed at this customer large organizations have
until the end, and that is what
need. They’re combining their implemented the concept of
allowed Renault to pull it off.
services with partners – such as frugal innovation?
Overall, Kwid is a very cost-
Zipcar and others – to provide a
Renault is a very good example effective solution as it cost them
“door-to-door” mobility service.
of a company that has been at the only half as much to take the
They are willing to share their
forefront of frugal innovation. car from design to dealers. Most
client with other brands and
In 1999, Louis Schweitzer, the Western carmakers cannot copy
companies. They understand that,
previous CEO of Renault, set an what Renault is doing because
by pooling resources together,
audacious goal of building a they try to take the existing cars
they can serve the customer
€6,000 car and gave his engineers that are being sold in Europe or
better and more comprehensively.
the freedom to handle the how US and ‘de-feature’ them for local
Another example is Mars, the
part. That was the first chapter in markets in India and China. That
chocolate maker. Mars is sharing
the Renault story that led them to approach does not work. They
its fleet of trucks in Germany
launch in 2005 the Logan – a no- must learn to build a frugal car
with other companies. They asked
frills yet spacious car that used from scratch.

40 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
DIGITAL TRANSFORMATION REVIEW

Do you have a view on an say nearly 90% of the companies approach that produces only low-
approximate percentage are already using frugal cost output and not necessarily
of companies using frugal innovation in some way. The US, a good quality product. The
innovation? however, is lagging way behind challenge is to convince people
Europe and Asia in adopting that something simpler with
If you look at the Fortune 500
frugal innovation. fewer features can be innovative.
companies, I would say roughly 5%
Actually, it is innovative because
have adopted frugal innovation
Overcoming Obstacles to it brings more value to customers.
in a very aggressive way as
Frugal Innovation So, the difficulty is to shift the
they have realized its strategic
R&D mindset from pushing
importance. Approximately 20%
What are the main obstacles to more technology to really
are experimenting with it and
frugal innovation? understanding customer needs
the remaining 75%, I think, have
and focus on delivering value to
very little awareness. If we look There are a few obstacles of customers by creating a simpler
at Europe only, I would say there course. The first one is mindset. solution.
is an equal split across the three Frugal innovation is viewed as an
categories. While in Asia, I would

D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 41
The second challenge is around patiently execute the strategy
marketing. How do you market a over 10 years, you can become a
The challenge is to frugal solution as aspirational? leader in the space. I believe more
convince people that I believe Renault is doing an companies have to realize that
amazing job in India in terms frugal innovation is not just about
something simpler of marketing Kwid. They are low cost. It is about combining
with fewer features not talking about affordability. four attributes – affordability,
can be innovative. They are positioning the car quality, sustainability, and
as something aspirational, like simplicity. It is about improving
Actually, it is the car gives you more freedom people’s quality of life while
innovative because and comfort. It is well designed preserving our precious planet.
it brings more value and makes you feel good. Most
companies know how to market
to customers. an expensive product and create a
need for it but they do not know
how to create a need for frugal I believe more
solutions. companies have
How important is it to change
to realize that
the culture of a company for frugal innovation
ensuring success with frugal is not just about
innovation?
low cost. It is
I think changing the culture about combining
of the company is absolutely
critical. In Renault today, nobody four attributes –
is challenging frugal innovation affordability, quality,
because it has proven to be sustainability, and
successful in Europe and now
in India. So, companies need to simplicity.
evolve from “doing frugal” to
“thinking frugal” and then finally
to “being frugal”. Our research
shows that it takes approximately
8–10 years for a company to make
the complete transition, which is
a long journey. But, if you look
at companies like Renault, I think
they have proven that if you can

42 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
Kick-starting Innovation Through Startups

Kick-starting Innovation
Through Startups

Jon Nordmark
Co-founder of Iterate Studio

J on Nordmark is co-founder of Iterate Studio – a company that discovers and


curates disruptive technologies from startups for large companies. Iterate
Studio works with thousands of startups and helps large enterprises conduct
rapid proof-of-concept experiments to quantify the impact on their business. Jon is
also Chairman of eBags.com and sits on the boards of Colorado Innovation Network,
and one of Eastern Europe’s premier Tech Accelerators. Prior to Iterate, Jon was the
founder and 10-year CEO of eBags – an online bags and travel accessories portal
which hosts 36 million shoppers each year. Between eBags and Iterate, Jon was
an advisor and investor in dozens of startups – many of which were graduates of
TechStars (Boulder, Colorado) and Founder Institute (Silicon Valley, California).
Capgemini Consulting spoke with Jon to understand how large enterprises can
harness the innovation potential of startups.
44 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
DIGITAL TRANSFORMATION REVIEW

How did you come up with the work. Unlike accelerators, we focus
idea of Iterate Studio? on proof-of-concept tests. We find
A few years ago, I was working
the startups with the most potential We create ‘digital
in Eastern Europe with Brian
through a discovery process – often recipes’ [by combining
they will have 10 customers already,
Sathianathan – one of Iterate
maybe even 100. Once we’ve found point solutions from
Studio’s other co-founders – at
a startup accelerator. We would
a startup with intriguing claims or different startups.]
success stories, we try to get them
review about 300 business ideas
tested rapidly in an environment we Sometimes startup solutions
every six months and accept
trust – often in a small enterprise can be too niche compared to
approximately 10 countries into
where we can be sure experiments the scale of large enterprises.
the program.
are properly operated. Our hands-on How do you work around this
oversight helps us determine if the
After seeing all these really challenge?
business claims made by the startup
interesting companies, we thought
are valid or not. We are unbiased and Often, startups produce what we
there needed to be a service that
agnostic as far as how we endorse call “point solutions,” because
helps large companies discover and
technologies, whereas an accelerator each strong startup tends to be
validate new digital technologies
– like a VC – is always going to be really good at one little thing.
from all over the world. At the
biased to the companies that come However, if you can combine a
same time, intriguing startups
through their program. We don’t care few of these, you can create a
coming out of accelerators would
where a startup is from, how much simple, powerful enterprise-level
get a quick validation within
money it has raised, who funded it, solution that is very difficult to do
large-scale environments. After
who its founder is; we only care if as a single startup or enterprise.
proof-of-concept tests have been
the technology provides a positive We create “digital recipes”.
run by a third party, individual
business impact.
startups are valued a lot more than
when they were just an interesting Can you explain the testing
idea or theory. process in more detail?
We thought there When a large organization subscribes
What is your unique needed to be a to Iterate’s services, the first thing
proposition compared with
startup accelerators and
service that helps we do is put an innovative legal
agreement in place. That legal
incubators? large companies agreement provides the large
Iterate is not a startup accelerator. We discover and organization with the right to test
are not interested in helping anyone validate new digital any startup that Iterate Studio has
decided to endorse. On the startup
draft a business plan or giving advice technologies from side, if we decide to endorse a
regarding how a company should
all over the world.

D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 45
Kick-starting Innovation Through Startups

startup for our large company weeks, we usually know whether technology. The methodology is a
subscribers, we sign an agreement the business impact is positive, bit different for tests in physical
with the startup that gives Iterate an neutral, or negative. If the test environments, but the philosophy
umbrella experimentation license. worked, we’ve found a great match is the same.
We can pass that “experimentation for the enterprise. It also gives us
license” on to any large enterprise great confidence in recommending What is the percentage of
that we are formally working with. the startup technology to other innovations that make it from
The beauty of these agreements is clients. If we see the test works for proof-of-concept?
that the large company removes one website, we know that there is
Our success rate is above 80%
that time-consuming process of a high likelihood that it will work
for testing online technologies.
writing and signing an individual in sites that are similar. We really
We also have a high success rate
contract with every single startup believe that the best
on finding technologies that
they work with. On the other side, thing to do is to test and
will satisfy challenges presented
for startups, it helps them scale their try things rather than
by enterprises – from stopping
solution faster than the old way. talk too much about
suicides to removing standard
So, we are trying to remove all the
POS systems from retail checkouts
paperwork and make it seamless to
to creating mashups of video
get a quick pilot test in place.
technologies. We have a broad
reach across the emerging technology
Once the administrative stuff is out of
ecosystem, plus spend a lot of time
the way, we get ready to test run the
trying to find the right startup
startup’s solution. If it is a digital
technology that could
test for the Web or mobile,
solve a company’s
we turn on an A/B
problem – hence the
split test platform.
high success rate.
Within a day to two

46 D I G I TAA L T R A N S F O R M A T I O N R E V I E W N°
N 08
DIGITAL TRANSFORMATION REVIEW

Much of that has just evaporated


with the advent of the cloud.
Our success rate Now those systems are readily Our new website
is above 80% for available through SaaS services, – Iterate.ai – has
off the shelf. Access to speed has
testing online increased. Automation has also indexed more than
technologies. removed a lot of technical work. 130,000 startups.
All these things in combination
have significantly brought
Startups in the Digital Age the cost down in the last ten How Startup Communities can
years. Lower costs combined Help Large Enterprises Innovate
Do you think innovation in with explosion of angel and
today’s age is very different crowdfunding networks has also Often we see innovation
from 10 or 15 years ago? Is the helped create a global baby boom departments that are quite
nature of innovation changing? of digital startups and a potpourri isolated in big organizations.
Yes, it is vastly different. Research of opportunity for agile enterprise How do you foster a culture
has shown that the cost of executives. of innovation throughout the
developing a digital startup has organization?
fallen from approximately $5 Innovation can’t be done in an
million in 2000 to approximately isolated way, on an island. The
$5,000 as of 2013. There are a only way innovation can take up
number of factors behind this. The cost of firm ground is when it has CEO-
When I started eBags in the 90s, developing a digital level support. There needs to be a
we had to buy, provision, and
supervise tons of hardware. And startup has fallen requirement coming from the CEO
that business units must work
then, we had to write all our from approximately together seamlessly. Take the case
software from ground up, in fairly $5 million in 2000 of Jeff Bezos. He is a big supporter
difficult languages. We had to hire
people with the specialized skills to approximately of innovation and he talks about
innovation all the time. But,
to configure those servers and $5000 as of 2013. he does not just talk about it –
write that code. We built our own Amazon committed $15.4 billion
fulfillment systems, our own A/B to R&D in 2014, ran 1976 website
test platform, our own Content tests in 2013, and they tend to
Management System, our own acquire 2 to 6 startups each year.
product review system. So, 10 years It is outspoken and loud.
ago, it was heavy commitment
to labor and hardware expenses.

D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 47
Kick-starting Innovation through Startups

Digital Startups are Blossoming Companies need startup curators, to help them…
The cost of developing
a digital startup has fallen from • Discover new digital technologies from
approximately $5 million in 2000 to all over the world
approximately $5,000 as of 2013.
There are somewhere between 100,000 and • Validate business claims made by the startups
400,000 digital startups around the world. in an unbiased and technology-agnostic way.

How Companies can Compete with Tech Giants – by Leveraging the Combined Potential of Startups

Google, Apple, Facebook and


Amazon together spend over $35 “We are trying to organize this
billion on R&D annually, up disorganized
“We create
79% from 2013 startup
‘digital
community,
recipes’
Large organizations can compete so they can
[by combining
with such heavy investments by be engaged
point solutions from different
tapping into the distributed startup and embraced
startups].”
community. a lot easier by large
enterprises.”

Bringing Startups and Enterprises Together

A startup identified by
Iterate helped companies
Iterate works closely speed up their website Iterate’s new
performance by up to website — Iterate.ai
with 45 startups,
semi-closely with 100 35%. — has indexed
and is aware of more than
hundreds more. 130,000 startups.
DIGITAL TRANSFORMATION REVIEW

How can companies compete


with giant companies who
spend billions of dollars in
R&D?
The most effective way is through
the startup community and I’m
saying this from my experience.
Companies should take their own
route when it comes to innovation
including the startup community.
Tap into it. On Iterate.ai, a new
innovation service our company
just launched in alpha, we have If you embrace
indexed more than 130,000 this distributed
digital startups around the world.
The investment going into those
startup community,
startups – money, time, effort, you are embracing
and knowledge – is in the billions an R&D effort on Take the case of
a Silicon Valley
of dollars. Equaling or exceeding
the $10 billion R&D budgets
the level of GAFA. based startup that
operated by each of the GAFA we work with – which
companies (Google, Amazon, Finding Right Startup Partners for has $3 million in funding.
Facebook, Apple). It is just that Large Enterprises It is a big-data-based dynamic
the global community of startups couponing company that helps
Can you give us some examples retailers and travel sites deliver
needs to be organized, tested,
of great startup solutions offers in real-time on websites.
and deployed quickly, as if they
you’ve found for large We have a 100% success rate
are initially created within an
companies? with them. Across the 14 tests
in-house lab. If you embrace this
distributed startup community, We are working on everything we’ve run for them, their solution
you are embracing an R&D effort from IoT initiatives to POS and has delivered an impressive 19%
on the level of GAFA. The startup supply chain projects. But some increase in conversion rate on it’s
community can be your digital online experiments we’ve done addressed audience.
lab or greatly enhance it. What we quickly demonstrate successes.
are trying to do is organize this
disorganized startup community,
so they can be engaged and
embraced a lot easier by large
enterprises.

D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 49
Kick-starting Innovation Through Startups

One of our Boston-based startups, Another bootstrapped Indian aware of hundreds more. Our new
which has raised nearly $50 million, startup that we endorse created website – Iterate.ai – has indexed
increases the speed of websites and a malware-removing software. more than 130,000 startups, and
mobile sites by 35% on average. The startup blocks e-poaching, we can dive into that database
This translates to about a 16% where malware secretly takes in search of digital solutions. We
revenue per visit increase. In May over a shopper’s browser, trying are also beginning to use Iterate.
2015, our tests helped the startup to move shoppers to competitive ai to automatically pair enterprise
replace its primary competitor – a websites. We are finding that challenges with startup solutions.
$10 billion incumbent – in three 6% to 11% of shoppers seem to For any executive trying to work
large enterprises. Now, many more have malware infections, causing on the cutting edge or even remain
tests are lined up based on those almost 4% to 8% of their total relevant in today’s fast moving
results. websites revenues to be lost. digital ecosystem, it is critical to
Last month, we determined this be aware of the startup landscape,
malware blocker would deliver a to be able to connect dots on the
One of our Boston- $6 million revenue lift for one of fly, and to do it in a scalable way.
our enterprise clients. This startup Those are services we are trying to
based startups, had a solution to that problem provide for all the companies we
which has raised and a technology that could be work with.
nearly $50 million, plugged-in in minutes, and many
of our clients want to test this new
increases the speed brand-protection technology.
of websites and Iterate Studio
mobile sites by How many entrepreneurs and
works closely with
startups do you work with?
35% on average. approximately 45
Over the years, we have been
exposed to thousands of startups, startups, semi-closely
but Iterate Studio now works
closely with approximately 45
with another 100,
startups. We work semi-closely and we are aware of
with another 100, and we are hundreds more.

50
SUCCESSFUL INNOVATION APPROACHES

“To thrive in the digital age, organizations


need to evolve from hierarchical and
process-centered structures to being
talent-driven. They must empower people
“I think it is important not to just think about to propose and defend innovative ideas,
product innovation; you always need to rethink and give them autonomy to execute these ideas.”
your business model. Eventually it is the - Pablo Rodriguez
business model that will determine whether
you are commercially successful.”
– Claus von Riegen

“If you embrace the distributed startup


community, you are embracing an R&D
“Innovation ultimately is a effort on the level of GAFA. The startup
delicate balancing act between community can be your digital lab or greatly
improving the legacy and driving enhance it. What we are trying to do is
radical innovations.” organize this disorganized startup community,
- Claus von Riegen so they can be engaged and embraced a lot
easier by large enterprises.”
- Jon Nordmark

“There are a number of parameters


[for measuring the success of innovation]. “Large organizations should think about releasing
The most important one is the satisfaction their data and rely on third parties to innovate on
of my internal customers.” their behalf rather than trying to innovate
– Claus von Riegen internally. Large organizations have a pivotal role
to play in the innovation ecosystem by publishing their
data as open data. Today, having an open innovation
“The key is to bring the right people strategy without open data makes no sense.”
along for the journey at the right time - Gavin Starks
– not too soon, not too late – and having
the right integrated teams that include
the business working on ideas together.”
– James Patterson
Innovating Through Open Data

Innovating Through
Open Data

Gavin Starks
CEO of the Open Data
Institute (ODI)

G
avin Starks is the CEO of the Open Data Institute (ODI). Founded by
inventor of the Web Sir Tim Berners-Lee and Sir Nigel Shadbolt, the
ODI is an independent non-profit, non-partisan organization partly
funded by the UK Government working to unlock the value in open data.
The Institute supports and promotes open data in business, governments and
society, and convenes experts to collaborate and nurture innovation through
open data. Capgemini Consulting spoke with Gavin to understand the role of
open data and how it can drive innovation. Gavin is also a musician and a
Fellow of the Royal Society of Arts.

52
DIGITAL TRANSFORMATION REVIEW

Understanding Open Data and TransportAPI consolidates


timetables, routes, live running and
Can you define the concept of Open data touches performance history information
‘open data’? on every part of our for a wide range of transport types,
including cars, buses, trains and
It is important to look at the lives. We now have an bicycles. They have already gathered
overall data spectrum in order
to understand what we define as
increasing amount of 70% of UK’s transport data from
‘open data’. Open data is data that open data produced by open sources – for example, data on
360,000 British bus stops and 2,500
anyone can access, use, and share. the private sector. rail stations. It’s a perfect example
The key difference between open
of an emerging supply chain, where
data, shared data or closed data
What kinds of open data are transport providers publish their
is the licensing conditions that
available? data, TransportAPI picks it up, cleans
accompany them. We define open
Open data touches on every part it, and turns it into a better format,
data as data that is licensed openly.
of our lives. The current data combines it with other data, and
At one end of the spectrum, you available ranges from transport provides it as their API. Businesses
have national security information timetables and routes, weather can use TransportAPI’s transport
that is rightly closed. Then we have data, pollution levels, to geospatial data for a range of commercial
shared information which refers data, company and land registries purposes, from advertising to
to data that is shared between or government accounts. We now journey planning. It has already
different organizations. Datasets in have an increasing amount of fostered a network of over 1,100
this category could be your health open data produced by the private developers and organizations that
records that are shared between sector. work with the data to create apps
doctors and health services. And and other services. Their business
lastly you have open data which Open Data in Practice model is based on the number of hits
encompasses information such as that the app receives every month.
bus schedules and prices. What are some of the most
exciting innovations you have
seen that have been built on
open data? Large organizations
should think about
Open data is data Let me give three examples from
releasing their data
our startup community.
that anyone can and rely on third
access, use, An interesting example is that of
TransportAPI – a startup that seeks parties to innovate
and share. to create a single, comprehensive on their behalf
source of UK transport information.
Transport data is scattered rather than trying to
across lots of different providers innovate internally.

D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 53
Innovating Through Open Data

Another interesting startup is Open to valuable real-time and historical farmers, enabling them to increase
Utility. They have created a platform open data generated amongst productivity sustainably. This
for energy trading – an “ebay” for thousands of projects and their initiative is part of Syngenta’s Good
electricity. The peer-to-peer trading connected devices. This enables Growth Plan commitment to help
service lets renewable generators other individuals and businesses improve the fertility of 10 million
set the price for their electricity and to use the data to experiment, hectares of farmland.
make it available to local commercial innovate, and incorporate it into
energy consumers to buy. This their own products and services.
marketplace was made possible
thanks to the availability of energy What is the role of private Today, having an open
data as open data. Their business organizations in open data? innovation strategy
model is based on a transaction fee.
Large organizations should think without open data
Finally, OpenSensors.io offers
about releasing their data and
rely on third parties to innovate
makes no sense.
real-time data access, data
on their behalf rather than trying
security and storage, analytics Arup – an engineering organization
to innovate internally. Large
and machine learning via its with 11,000 employees – is also a
organizations have a pivotal
IoT platform. OpenSensors.io’s strong advocate of open data. They
role to play in the innovation
real-time messaging engine can conduct large scale infrastructure
ecosystem by publishing their data
process millions of messages projects around the world. In the
as open data. Today, having an
a second from any internet- course of such projects, they obtain
open innovation strategy without
connected device, such as a sensor huge amounts of information
open data makes no sense.
or camera. Businesses can use about the environment, from soil
the platform for many purposes quality, designs and plans of cities
Can you give us some examples
– from automating networks of to underground infrastructure
of private organizations
car parks through license plate such as water cables. The company
opening up their data?
recognition cameras and motion releases most of this data as open
sensors to optimizing office spaces Syngenta is a good example. They data and they are collaborating
by configuring devices such as have released data collected on with startups to build great insights
thermostats, lights and locks to 3,600 farms in 41 countries across and innovative solutions.
respond to the preferences of the Europe, Africa, Latin America and
people working in them. Anyone Asia Pacific, representing about 200 Syngenta and Arup are not
using the Opensensors.io platform crop-climate combinations. It is isolated examples. Pharmaceutical
to publish data can use it for free, the first time information at a crop companies, for instance, are
providing their device publishes level, including resource efficiency, starting to share information
their work as open data. Paid plans has been made public in this way as open data and are working
are offered for private users. As a by a commercial organization. together to solve big questions,
result, the platform provides access The data will be very valuable to such as the next antibiotic.

54 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
DIGITAL TRANSFORMATION REVIEW

At the ODI, we have worked


extensively with the World Bank on
[Syngenta] have international development in places Our key challenge
released data such as Burkina Faso, helping them is to make
to map where schools are located
collected on 3,600 and their proximity to services, organizations realize
farms in 41 countries transport and sanitation. Open that open data is
across Europe, data is being used across the world actually core to
to help better target responses to
Africa, Latin America disasters and wars. In Ukraine, for their business, to
and Asia Pacific, example, journalists collaborated to innovation and not
representing about crowdsource locations of shelling to peripheral.
then geotag pictures of the damage.
200 crop-climate The local government joined in and
combinations. started using the data to prioritize
Are more organizations aware
and mobilize the reconstruction
How about public of open data?
process. In the aftermath of the
organizations? Haiti earthquake, OpenStreetMap We have over 250 members of
Even if large amounts of open collated open mapping data and the Open Data Institute from
data have already been published, crowdsourced data about the the commercial world. We have
public organizations need to physical damage caused, later trained over 2,000 people in the
be encouraged to release more becoming the default map for rescue last 18 months including executive
open data, that is most needed by organizations. leadership teams, policymakers,
society. Geospatial data, address procurement officers, and lawyers.
data, meteorological data or land We have reached over 900,000
valuations data all hold immense people in the last two years since
potential if released as open data. In Denmark, in 2002, we started, but it is still a drop in
For instance, in Denmark, in 2002, the Government made the ocean from where the potential
is. Our key challenge is to make
the Government made the national
address file available for free; since
the national address organizations realize that open
then it has calculated a 30 to 1 file available for data is core to their business, to
ratio of direct financial benefits to free; since then it has innovation and not peripheral. The
major barrier for organizations
cost. Governments need to be more
aware of the significant social,
calculated a 30 to 1 to open up their data is cultural.
environmental and economic ratio of direct financial This is valid for big and small
benefits of open data. benefits to cost. organizations, universities, the
public sector, local authorities and
central government.

D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 55
Innovating through Open Data

Open Data is Widening its Footprint and Value

Open Data helped


The web of data uncover £200
will soon dwarf the
web of documents. million per year in Startups are increasingly
potential NHS1 savings. innovating with Open
The UK has published £ Data in – healthcare,
property, energy and
more than 15,000 Open Data research
has helped tube agriculture.
government datasets stations plan service
as Open Data. delivery and staffing.
1
NHS - UK National Health Service

Exciting Innovation Spawned by Open Data is Augmenting Social and Customer Value

OpenSensors.io
TransportAPI – – offers real-time
seeks to create a single, Open Utility – a data access, data
comprehensive source platform for energy security and storage,
of UK transport trading between analytics and
information. people. machine learning via
its IoT platform.

Organizations are Warming up to Open Data’s Potential

Arup – an engineering Pharmaceutical


Syngenta – organization that conducts companies are
released crops large-scale infrastructure starting to share
data from 3,600 projects around the world, information as open
farms in releases most of the data it data and working
41 countries. collects on environment, together to solve big
questions, such as
design and plan of the next
cities. antibiotic.
DIGITAL TRANSFORMATION REVIEW

How do you convince large What kind of innovation would


organizations that open data you like to see emerging from
is a key building block for open data? ‘If we start sharing
innovation?
I would like open data to help solve our information, we
We start with data literacy; we hold some of the major challenges our will benefit too’ – this
executive workshops and train society is facing. For example, in
different parts of the organization, agriculture, how do we distribute
cultural shift is needed
such as the legal team or the the food we are producing more to innovate in the
CTO office. We then network the effectively or how do we double twenty-first century.
organization with startups or production and have the inputs in
other large companies, which are farming for livestock, so that we
generating significant benefits by can meet growth and demand.
releasing or leveraging open data.
Most companies understand the Ultimately, I would like to see a
importance and value of open data change in company mindsets in
but they are overwhelmed by the regard to open data. ‘If we start
volume of data they possess and sharing our information, we will
are not sure how to start. benefit too’ – this cultural shift is
needed to innovate in the twenty-
first century.

D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 57
The Innovation Oscars:
Lessons from the Pioneers
Innovating at SAP – the Delicate Balance between Incremental and Radical Innovation

Innovating at SAP – the


Delicate Balance between
Incremental and Radical
Innovation
Claus von Riegen
Vice President and Head of
Business Model Innovation (BMI)
at SAP

C
laus von Riegen is Vice President and Head of Business Model Innovation
(BMI) at SAP. He chairs the BMI Service Center that designs and implements
new business models across the organization. Previously, Claus von Riegen
held various management positions in product development where he most
recently was responsible for SAP’s industry standards and open source strategy.
Capgemini Consulting spoke with him to understand how a large organization
such as SAP manages innovation.

60 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
DIGITAL TRANSFORMATION REVIEW

Can you describe SAP’s a good example of a successful,


innovation approach? radical technology and business
The majority of today’s economic
innovation we introduced a few Many new
transactions go through an SAP
years ago. technologies and
system at some point, so we have an
What is the role of business products can’t really
important responsibility to ensure
that this infrastructure runs in a
model innovation at SAP? take off without a
seamless and consistent manner Product innovation on its own is truly new business
and is not disrupted. Therefore, not sufficient, so we are placing model.
we continuously implement increasing emphasis on business
incremental innovations to model innovation. Actually, we
improve the efficiency and value have realized that many new Independent from the standard
of this infrastructure. technologies and products can’t development organization, we
really take off without a truly have our innovation center
new business model. Same is true network. It focuses on mid-
with our customers - there is, for to long-term research and
Innovation example, a clear trend towards a innovation. These innovation
digital transformation. Currently, centers are very open to the outside
ultimately is a we see CIOs being challenged by world and tap into the ecosystem
delicate balancing their boards. If CIOs don’t embrace of startups and academics.
act between the transformation, they’ll just be
“keeping the lights on”.
improving the
legacy and driving Can you explain how you
radical innovations. govern innovation throughout
the group?
However, this is not sufficient We have SAP Labs pretty much
in itself, and we always have to on all continents. These labs focus
keep thinking of new types of mostly on incremental innovation
products, customers, markets – their mission is to concentrate
and revenue streams. Innovation on the standard portfolio and the
ultimately is a delicate balancing new versions of our products by
act between improving the legacy co-innovating with our customers
and driving radical innovations. and partners.
SAP HANA, which currently has
more than 6,000 customers, is

D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 61
Innovating at SAP – the Delicate Balance between Incremental and Radical Innovation

Why did you decide to have Is the business model


a separate innovation center innovation service center a
network? It’s really important fully dedicated team or do you
We started our innovation to keep incremental have people from across the
organization who dedicate part
center network a few years and radical of their time?
ago. Innovation was obviously
happening at SAP in the past,
innovation separate. Our team is mostly virtual – we rely
but it wasn’t structured that way. extensively on local organizations
What we have seen over the and teams and work with them
Your team looks at business
years is that it’s really important virtually on innovative business
model innovation specifically.
to keep incremental and radical models. When we created the
Can you give us some
innovation separate. The team, we thought about whether
background into its creation?
investment horizon is completely we should create a large central
different and you need different We created this team around 2.5 organization. It may have worked
resources, different partners years ago. One of the reasons we quite well at the start, but domain
and a different environment. started it was because people with expertise is lost over time because
The application of SAP HANA great ideas ran into what you a lot of innovation also occurs
in healthcare, especially in might call corporate boundaries. at the local level. Obviously, the
the treatment of cancer, is a There were many challenges: challenge now is to make sure
good example of a long-term the types of legal contracts we that our virtual team members
play that would have not been accept, the types of revenues we are able to dedicate enough time
considered part of our standard want to generate, the types of to our work because they all have
portfolio in the past. People in the licensing agreements we have their day jobs.
innovation center network should in place, among others. What
feel that they have a long-term we saw was that even when a
horizon to develop breakthrough great idea emerges, the corporate
innovations and not feel like they ‘immune system’ tries to prevent The organization is
have to move to a different project innovation from happening. currently set up to protect
every six months. The reason for that is clear. The and optimize the current
organization is currently set up to
If you want to be successful protect and optimize the current business model. So that’s
in both core and disruptive business model. So that’s why we why we created this team
innovation, you have to keep
them separate organizationally.
created this team with an explicit with an explicit mandate
mandate to amend or sometimes
even disrupt our current business to amend or sometimes
model. even disrupt our current
business model.

62 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
SAP
SAP is a leading cloud
SAP’s customers include vendor with 82 million
74% of the world’s 98% of the 100 most subscribers and a market
transaction revenue leader for mobile business
valued brands and 87%
touches an SAP system apps with over 130 million
of Forbes Global 2000
mobile users

Innovating at SAP

HANA is a good example of a successful SAP’s innovation footprint


radical innovation – now has over 6,000
customers, 850,000 active users and 21 research locations
2,100 startups developing on HANA platform 14 SAP Labs around the globe – focus
on a standard portfolio and the new
versions of products by co-innovating
with customers and partners

Partner network with over 13,000


SAP partner companies around the
world

Sapphire Ventures, operates


independently from SAP, invested in
over 150 startups globally since 1996,
with US$ 1.4 bn capital under
management

Source: sap.com, “Corporate Fact Sheet”, Accessed September 2015


Innovating at SAP – the Delicate Balance between Incremental and Radical Innovation

The intrapreneurship program How do you measure the outcome


is the right channel for out-of- of your innovation initiatives?
the-box ideas: innovations that
There are a number of parameters.
Disrupt yourself
would not be considered part
The most important one is the before being
of our current product portfolio
development. We have recently
satisfaction of my internal disrupted by others.
selected five winners out of more
customers, that is, the teams and
their sponsors who want to drive
But to make this
than 400 cases that were assessed
new business models. That’s the happen, you have
as part of the first wave of the
program. The people behind these
first and foremost KPI. I need to create a separate
ideas can now go into a fellowship
satisfied customers and success
stories so that we can get more
team with the
that runs over three months, and
traction with other parts of the explicit mandate to
dedicate up to 100% of their time
to further validate their idea. We
business. disrupt the business
believe it needs to be these people, Another key parameter is the
and make it a
who are behind the idea and number of cases that we support in priority.
really believe in its value, who the team. We need to demonstrate
then also need to validate it and that SAP overall becomes more Second, you need to understand
demonstrate its potential in front innovative and agile. The last when to adapt your business
of customers. KPI that we use is the commercial model. You need to be constantly
success of the innovations we on the lookout for any leading
How do you establish a link
have delivered. Sometimes we indicators or trends in the market
between the innovation teams
only see the revenue opportunity that could indicate that you have
and the rest of the organization?
materialize after a period of two to revamp your business model.
It’s been one of my key priorities to three years. In such cases, it
for the past 2.5 years. After we can be challenging for me and my Third, disrupt yourself before
established my team in early team to be measured by such KPIs. being disrupted by others. But to
2013, we have always focused on But still, this is something that we make this happen, you have to
building bridges with the rest of track. create a separate team with the
the organization. We now work explicit mandate to disrupt the
very closely with our sales teams, What would be your advice for business and make it a priority.
our support and services units, other large organizations? Otherwise, this team will be
the development organization First, I think it is important fought against and be killed in the
and obviously our partner not to just think about product corporate battlefield.
organization. By creating strong innovation; you always need
connections with the business to rethink your business model.
early on, we have realized that we Eventually it is the business model
can create more value faster. that will determine whether you
are commercially successful.

64
DIGITAL TRANSFORMATION REVIEW

How can your team work around However, with the arrival of What are the other channels of
the ‘immune system’ that tries to our team – the business model innovation within SAP?
thwart innovation? innovation service center – we
Innovation is not solely steered
can make a case, and try to find
Let me give you an example. A centrally – anyone can voice new
a middle ground. We might
number of teams have proposed ideas. But it creates the obvious
see whether we could start in
that SAP leverage the value challenge of prioritization
markets where we can comply
of the data that flows through as we are a large group of over
with data protection and privacy
our applications and networks. 75,000 employees. We have an
regulations. We can then launch
The idea is that SAP should environment that we created last
some pilots and, if customers
move into the data business and year called the intrapreneurship
accept and trust the security
eventually anonymize, aggregate program. The idea is to leverage
and usefulness of our solution,
and analyze data. And through all the great ideas about new
we can consider rolling it out in
such an aggregation, we can then products and value propositions
other markets. The business model
provide services to our customers directly from our employees. We
innovation center effectively
that weren’t possible before. For have a set of coaches who help
provides an environment that
example, as a chief procurement employees formulate their ideas
lets in-house entrepreneurs
officer you would then be able and jury members who assess and
experiment with new types of
to manage your spend based on evaluate these ideas to eventually
business models until their market
benchmarks you get across your pick those which we as a company
readiness is proven.
industry. Now, if you raise this want to invest into.
idea, the first thing that many
people will ask – which is part of
the corporate immune system –
is: ‘how can we comply with all By creating strong
the data protection and privacy
regulations?’ Others would say,
connections with the
‘good luck, but we will never business early on,
support you, and the SAP board we have realized that
has no interest to move into
the data business’. And the idea
we can create more
would soon be shelved. value faster.

D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 65
Unlocking Innovation through Intrapreneurship

Unlocking Innovation
through Intrapreneurship

Pablo Rodriguez
Director of Innovation at
Telefónica and Head of
Telefónica’s Barcelona R&D lab

P
ablo Rodriguez is Director of Innovation at Telefónica and Head of
Telefónica’s Barcelona R&D lab. He also serves as adjunct Professor
at the Department of Computer Science at Columbia University (New
York) where he teaches Social Networks and Distributed Systems. Capgemini
Consulting spoke with Pablo Rodriguez to understand how companies can look
to ‘intrapreneurship’ as a tool to foster innovation. In 2014, Telefónica invested
nearly €7 billion in research, development and innovation programs and it is the
world’s second largest operator in terms of investments in R&D.

66 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
DIGITAL TRANSFORMATION REVIEW

Innovation in the Digital Age They must empower people to with partners, and being agile
propose and defend innovative enough to include everybody’s
Do you feel the need for ideas, and give them autonomy to contribution represents a big shift
a different approach to execute these ideas. in innovation in this digital age.
innovation compared to, say, a
decade ago? The ‘Intrapreneurial’
Perhaps the most important To thrive in Approach to Innovation
element that needs a rethink is
the diversity of talent. Diverse
the digital age, How is Telefónica fostering
teams are better able to spawn organizations need innovation throughout the
innovative ideas. Realizing this, to evolve from organization?
we are adopting an entirely
different way of setting up our
hierarchical and Our innovation team – Telefónica
I+D – coordinates the global
innovation teams. For instance, process-centered strategy for digital innovation
our innovation lab in Barcelona structures to being across the group. We set it up in
has nearly 300 people from varied
backgrounds, such as technology,
talent-driven. 1988 with a mission to make the
group more competitive through
psychology, design, political technological innovation. We
science and big data. have about 650 employees as part
Beyond talent, how have you
of this group, with a majority of
evolved your approach to
them being university graduates,
innovation?
representing 18 nationalities.
Our innovation We have become much more
open. We derive our insights
From its inception, the group has
been instrumental in churning out
lab in Barcelona and inspirations to innovate innovative products. For instance,
has nearly 300 from many external forums, it contributed to our public phone
people from varied such as startup ecosystems,
universities and collaboration
booths in 1990, internet access
services in 1996, connected cars
backgrounds, such with other industries. Telefónica in 2000 and interactive digital TV
as technology, is the founding partner of the in 2004.
psychology, design, European Commission’s Startup
Europe Partnership initiative, We have been a pioneer in adopting
political science and which aims to connect Europe’s the Lean Startup approach for
big data. best startups to corporates. We’re our internal entrepreneurship,
also part of the European Digital or ‘intrapreneurship’ initiatives,
Forum, a think-tank dedicated to where we promote our
To thrive in the digital age, empowering tech entrepreneurs own employees to become
organizations need to evolve from and growing Europe’s digital entrepreneurs. It allows us to
hierarchical and process-centered economy. I believe that opening create opportunities that are
structures to being talent-driven. up innovation, working more not necessarily ‘low-hanging

D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 67
Unlocking Innovation through Intrapreneurship

fruit’ and grow them to become How does your How much time can they
sustainable businesses. Our ‘intrapreneurship’ initiative dedicate to “intrapreneurship”
intrapreneurs have helped work? How does it nurture activities at the different stages
us launch initiatives in some innovation projects from from ideation to design and
revolutionary areas, such as inception to reality? implementation?
software-defined networking,
We seek to promote employees We run the intrapreneurship
machine learning, cyber security
who have a start-up ‘mentality’ program several times per year
and privacy.
and a determination to create depending on our need to fuel
new things. Any employee can new projects into the innovation
participate in the program by funnel. Each time we start the
proposing ideas at any time of program, we select ideas from
I believe that the year. We pick up the ideas intrapreneurs and we let them
that demonstrate the potential work in their project full time
opening up to create future business for for three months. During this
innovation, working Telefónica over the next one to time, we implement a safety
more with partners, five years. We also encourage net mechanism that encourages
multi-disciplinary teams to come people to participate in the
and being agile together and form a ‘start-up’ that program: once the three months’
enough to include can take their idea from concept period is finished we allow them
everybody’s to reality. The teams then need to return to their original position
to mature their ideas into sound if their idea doesn’t succeed. But
contribution project proposals before they can if they succeed they will continue
represents a big shift secure resources. working full time in the project
in innovation in this during its whole life.
digital age. How do intrapreneurs secure
Our intrapreneurs resources for their projects and
what happens to successful
This approach is in stark contrast have helped us ideas?
to the more conventional
approach. That demanded
launch initiatives in Once an innovator’s idea has
elaborate business plans and some revolutionary been refined to a certain level,
years of investment, yet often areas, such as a venture-capital setup decides
the end result was a product or
service that didn’t meet customer
software-defined whether to invest in it. If funded,
the project is executed by first
expectations. networking, machine testing its attractiveness among
learning, cyber a set of customers. For this,
security and privacy. innovators run two to six ‘test-

68 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
DIGITAL TRANSFORMATION REVIEW

and-learn’ cycles. Each cycle Can you give us an example of


involves designing and building a successful intrapreneurship
a prototype, followed by testing
it in selected markets by working
project launched in the market? We have been
with local sales and marketing One of the intrapreneurship able to accelerate
teams, and measuring the success. projects that we launched in the
Internet-of-Things (IoT) space is
innovation cycles
The key output of these cycles is
the learnings from the market. called “Thinking Things”. It is a by up to two-and-
At the beginning, projects work simple product for enterprises to a-half times while
with minimal resources and then help build their own IoT solution.
The ‘Things’ in Thinking Things
using only half the
investment increases as projects
validate their key hypotheses. are modular devices such as budget required for
sensors, actuators and a core usual projects.
These projects start generating module that helps these sensors
meaningful insights in one-and- connect to any telecom network.
a-half months or less. We have Like Lego bricks, customers can
been able to accelerate innovation attach these devices to their
cycles by up to two-and-a-half machines or systems to remotely
times while using only half the monitor their performance and
budget required for usual projects. take specific actions. For example,
Some of the projects go on to temperature status when it crosses
become Telefónica’s operating a threshold, or reacting to an SMS
businesses or internal startups. for switching on irrigation in a
Those are the ones that are field.
defining new roadmaps for digital
innovation at Telefónica.

D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 69
Unlocking Innovation through Intrapreneurship

Can you tell us more about committee composed of very


Telefónica’s external forums for senior leaders and board members
innovation, in particular – the
Open Future_ initiative?
I believe relying on that meet several times a year to
monitor and guide innovation
one or two programs projects across the group. Third,
Telefónica has been very active in
integrating with the entrepreneurial
to create an we organize major events, such
ecosystem through accelerators, innovation culture as TEFcon, which is an annual
conference to bring together more
venture capital funds and the Open can only have than 350 engineers, developers
Future_ program. Open Future_
is our global entrepreneurship
limited results. It has and designers involved in
and open innovation network, to be a combination innovation projects from most
of our group companies. Fourth,
involving 62 public and private of efforts led from some of our young millennial
partners, entrepreneurs, startups and
investors. Our aim is to encourage
the top. employees are also intrapreneurs
and they actively participate in
entrepreneurship in local talent,
forums, such as One Young World,
promote the growth of that talent
to spark a discussion on how a
with tools to accelerate their Creating a Culture of young workforce can change a
business, and provide necessary Innovation corporate using intrapreneurship.
investment to those projects with the
All these elements have helped us
greatest potential, thereby helping Beyond intrapreneurship, percolate a culture of innovation
them scale up. what are the other initiatives through the organization. It made
that you launched to create a people feel that they are part of
culture of innovation? accelerating our transformation
I believe relying on one or two into a digital company.
We have, along programs to create an innovation
with our partners, culture can only have limited
committed to invest results. It has to be a combination
of efforts led from the top. First,
€300 million in we have defined our way of We have been
the [OpenFuture_] working at the group level with
largely focusing on
program. three key attitudes: discover,
predicting human
disrupt and deliver. These
Open Future_ operates in 17
attitudes also embrace a spirit of behavior, IoT and
innovation that all employees are
countries and is very closely encouraged to embrace. Second, privacy of identity.
connected with the key technology we have set up an innovation
hubs and countries where we
operate. We have, along with our
partners, committed to invest
€300 million in the program.

70 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
Unlocking Innovation through Intrapreneurship

Invested nearly €¸F€‡‡€‘ b½²bÇ is ’s


in research, development and global entrepreneurship and
innovation programs in 2014 innovation network

3‘²‡Y¯µµbO‘Y‡8²ubµ½ Committed to €¾ÏÏŠ€‡‡€‘


‘b²8½‘² in terms of investment along with its 62 partners,
investments in R&D invested in ‘Èb²ppÏO‘Š8€bµ

,b‡bn‘€O8€µ*bYbo€u,}²bbbËеbO½µ‘n‘È8½€‘n‘²½}b €u€½8‡Ðub

b‘È8½€‘ €Èb²µ€½Ë‘n,8‡b½ +½8²½Âb½}‘Y‘‡‘u€bµ


Founding partner of European Barcelona innovation lab: 300 Internalizing startup methodologies
Commission’s Startup Europe researchers from very diverse such as – Lean Startup,
Partnership initiative, aims to backgrounds – technology, Failing Fast,
connect Europe’s best startups psychology, design, and hacking. Test-and-learn etc.
to corporates.

,b‡bn‘€O8€µ-µ€u½²8²bb²µ}€½‘‘µ½b²‘È8½€‘
Intrapreneurship helps 8OOb‡b²8½b innovation cycles Set up in 1988, ¥ coordinates
by up to Á¢¹½€Šbµcompared to usual projects, group’s global digital innovation strategy
at nearly }8‡n½}bFÂYub½ Has nearly ¹pÏbŠ‡‘Ëbbµfrom ˜gO‘½²€bµ

‘È8½€‘+²‘½€u½²b µ€bµµbµ
• I+D launched the “TU Go” app – allows users to make calls from any device and over WiFi

• Thinking Things – allows enterprises create their own Internet of Things (IoT) solutions using simple blocks of
sensors and connecting devices
Unlocking Innovation through Intrapreneurship

What are the key innovation products launched to the market. TU Go users communicate more,
themes that you are currently As I’ve mentioned before, we have have longer calls and are more
working on? reduced our financial needs by loyal to Telefónica. After its initial
half which, in the long term, will success in the UK, we launched it
We have been largely focusing on
mean to double our success rate. in Argentina last year.
predicting human behavior, IoT
and privacy of identity. Predicting
Through our Open Future_
human behavior is opening up
program, we have invested in
new opportunities by analyzing
massive amounts of data, such We have reduced more than 550 companies and
created new digital employment
as helping launch big societal our financial needs for more than 5,000 people.
initiatives. We funded one of our
innovation projects in the area
by half which, in We have also been a part of
of ‘Smart Tourism’. The project the long term, will successful funding rounds for
Sigfox, which raised $115 million,
analyzes mobile network data mean to double our and Cyanogen, which raised $80
to better distribute economic
benefits of tourism among
success rate. million.
residents while helping tourists
enjoy a high-quality experience. One example is the “over the top”
In the realm of privacy of identity, television solution of Telefónica
we have partnered with MIT, that has been developed internally
and the Open Data Institute run within the innovation program. It We have partnered
by Tim Berners-Lee and Mozilla
Foundation, to launch the Data
started with the work of only three
engineers and ended up with a
with MIT, and the
Transparency Lab. It seeks to solution that, at the end of 2014, has Open Data Institute
advance transparency of online been deployed in 4 countries and run by Tim Berners-
personal data. has more than 400 million users. Lee and Mozilla
What level of success have Recently, we became the first Foundation, to
you seen with your innovation telco in the world to launch a launch the Data
browser-based calling product
initiatives? using WebRTC technology. This
Transparency Lab.
product – TU Go – is the result of
We have had a good track record
our in-house innovation program.
of innovation successes during
TU Go is an app that allows people
these years. The main difference
to always stay connected and use
from the past is how efficient
voice calling and texting features
we have been in using our
through any mobile device, such as
innovations funds that has led
tablets and laptops, not just their
to a high number of successful
mobile phone. We have found that

72 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 73
Bringing Ideas to Life – the Core Principles of Innovation Centers

Bringing Ideas to Life –


the Core Principles of
Innovation Centers

James Patterson
Managing Vice President and
Head of Capital One Labs

J ames Patterson is Managing Vice President and Head of Capital One Labs, the
experimental product and technology arm of Capital One. Capital One Labs is a
network of innovation centers located in San Francisco, New York and Washington
D.C. Over the past four years, the network has involved over 100 entrepreneurs in
reimagining the way 65 million people interact with their money. Established as a credit
card company, Capital One is now a Fortune 500 company and one of the top 10 banks in
the US. James Patterson is also involved in driving digital transformation efforts across the
organization, with Capital One a recognized digital leader. 75% of its customer interactions
are digital and it conducts over 80,000 Big Data experiments a year.
Capgemini Consulting spoke with James Patterson to understand more about the core
building blocks of innovation centers in large enterprises.

74 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
DIGITAL TRANSFORMATION REVIEW

What was the rationale behind How do you work with the
the creation of Capital One’s business?
innovation centers – Capital We concentrate on Business teams reach out to us
One Labs? less predictable – whenever they have an insight or
Capital One Labs was set up nearly yet potentially far- an idea that they feel we can help
four years ago. We’re a group of just them grow. And vice versa, if we
over a hundred product managers,
reaching – returns. are working on something that can
designers, design thinkers, engineers Capital One Labs is a be a potential breakthrough for the
and data scientists across three offices. natural extension of business, we involve them at the
We serve as the experimental product right time. The key is to bring the
and technology arm of the company
who we already are right people along for the journey
and our priority is to accelerate Capital as a company. at the right time – not too soon,
One’s product and business agenda. not too late – and having the right
Many innovation centers fail to
We conduct experiments and test new integrated teams that include the
make an impact because they are
products and concepts that we know business working on ideas together.
disconnected from the rest of the
will be important for our business, but
business. How are you tackling How is Capital One Labs placed
don’t yet deliver revenues or returns
this issue at Capital One? within the broader Capital One
on investment. We focus on areas that
are disruptive or radically different Capital One Labs is a natural organization?
from our current offerings. We take a extension of who we already are as We are in the technology and digital
24-month horizon and spot potential a company. There is no disconnect division that falls under the Chief
disruptors that will have an impact on between our team and the rest of Enterprise Services Officer, who
the areas where the business wants to the business because we share the runs all of enterprise technology and
grow in that timeframe. The business same culture of entrepreneurship. operations. Being in a centralized
focuses on near-term improvements Capital One is the largest founder- division versus being within any
with relatively predictable, short- led bank in the country and is one line of business (LOB) gives us
term results, while we concentrate on operating at this scale – over 65 a unique advantage. It allows us to
less predictable – yet potentially far- million customers. At Capital One, take an enterprise view and focus
reaching – returns. innovation is not just for one team, on holistic consumer experiences
but for the whole company. We that may not fall neatly into any
have a strong culture of long-term single LOB.
We’re a group of investments in innovation and as a
startup in the 1990s we transformed
just over a hundred the industry by becoming the first
product managers, bank to create mass customization The key is to bring
designers, design of credit cards with a personalized the right people along
APR. So our businesses and the
thinkers, engineers Labs share the same understanding
for the journey at the
and data scientists of what innovation truly means. right time – not too
across three offices. soon, not too late.
D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 75
Bringing Ideas to Life – the Core Principles of Innovation Centers

What are the key challenges Are Capital One Labs helping
you are facing in running create an innovation culture
Creating excellence Capital One Labs? within the company?
at small scale I think the biggest challenge is As you bring new ideas into the
is relatively to scale something that’s really company, you have to model what
compelling. Taking something it means by doing as opposed to
straightforward. from a prototype or market pilot talking. The highest calling we
Doing so at scale is to scale is extraordinarily hard to have is to demonstrate the power
extremely hard. And do. That’s primarily because you of an idea or an insight through
are involving a totally different actually bringing that into reality
that’s where most and expanded cast of characters rather than just talking about
innovation centers to get to scale compared to just it. I think our ‘learn by doing’
struggle. getting to pilot. It’s not good approach versus what you might
enough to just have an idea and call a ‘learn by PowerPoint’
What is your level of to get it in the hands of a few philosophy is getting a lot of
investment in Capital One hundred people. I keep myself traction across our business.
Labs? accountable to making sure that Building a true ‘maker’ culture has
the ideas that go to pilot actually been our most important impact
I think the key here is more get to production. And that on the organization.
about independence than the involves an enormous amount of
absolute investment. We have the coordination and collaboration
complete, independent budget to across the company.
pay for all of the resources and The highest calling we
people required to run alpha and
beta tests and experiment with
Creating excellence at small scale have is to demonstrate
is relatively straightforward.
technology. Even if the business is Doing so at scale is extremely
the power of an idea
integrated into an alpha test, we hard. And that’s where most or an insight through
can self-fund it, so we do not have
to ask the business for anything
innovation centers struggle. actually bringing that
that we start. Another key challenge is
into reality rather than
obviously talent. We are very just talking about it.
careful and selective about who
We are very careful we bring in. We have incredibly
talented people in our Labs but it
and selective about takes a very long time to recruit
who we bring in. the right people.

76 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
DIGITAL TRANSFORMATION REVIEW

However, I question whether we What are the key ingredients


would have had the same success for making an innovation
in a different bank, even if we center a success?
had exactly the same people and
Great talent, great culture, great
initiatives. I think our success
ideas, and great relationships
is very much due to who we are
across the company and with the
as a company – an organization
tech community are absolutely
obsessed with innovation.
essential. It is also important
to know the difference
Could you share some success
between true innovation
stories?
and “innovation theater,”
One very good example is the or shiny object syndrome.
launch of the Capital One Wallet True innovation is
that works with Apple Pay. This unglamorous, incredibly
app helps you quickly verify your hard to do, and requires
account balances and details persistence over many
and keeps you connected to your years. When we deliver
spending. The initial elements of a beautiful consumer
this product were developed in experience, the bigger story
Labs and served as the foundation is the immense amount of
for the product that was ultimately work that goes into building the
delivered by the enterprise. Another capability under the hood.
example is Second Look, which is
a service that combs transaction
data to look for anomalies in our
customers’ spending, such as an Our success is very
unusually high tips or a cable bill much due to who we
that is well beyond what it has
historically been. The customer
are as a company
is alerted to the charge via a text – an organization
message or email. It’s one way we obsessed with
are looking out for the customer
using information we already
innovation.
have available. This capability was
incubated in Labs in partnership
with our Card team.

D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 77
Capital One Labs - Manifesting the Core Principles
of Innovation Centers
Capital One is a Digital Leader, conducting more than 80,000 big data experiments
a year and processing 75% of customer transactions digitally

Capital Ones Labs…

Is a network of innovation centers A team of just over 100 product The experimental product and
across 3 locations: San Francisco, managers, designers, design thinkers, technology arm of Capital One
New York and Washington D. C. engineers and data scientists

Set up nearly 4 years ago

Getting the Basics of Innovation Centers Right

Focuses on a 24-month horizon and Has the complete and independent Fosters connections with the tech
spot potential disruptors with less budget to pay for all resources and community by selectively working
predictable yet far-reaching returns people required to experiment with with startups to accelerate their
technology product agenda

Key Success Stories

Capital One Wallet, a payment app that Second Look, a service that helps customers
seamlessly works with Apple Pay spot anomalies in their spends
DIGITAL TRANSFORMATION REVIEW

Has Capital One acquired


startups to kickstart
Great talent, great innovation? I think that is
culture, great We have made several acquisitions. actually the best
ideas, and great They have been smaller companies scenario when
– we don’t try to acquire companies
relationships across with really high valuations. We are
the business units
the company particularly strong at integrating themselves are
and with the tech startups into our company and asking for your
giving them the space, time, and
community are resources to do their best work.
capabilities and
absolutely essential. Capital One is a mission-driven funding it.
company and we are careful
Fostering connections with the to engage only startups who
tech community is also a key believe in our mission and who How have Capital One Labs
function of Labs. We selectively complement our culture. evolved since they opened?
work with startups who can
The Capital One Labs team has
accelerate our product agenda.
been growing fast – we have
There are a lot of interesting
doubled in size over the past
startups out there. The important
thing is to have a sound judgment
There are a lot of three years. This is due to the
as to which ones to spend time interesting startups out pull we are getting from the
business units. I think that is
with. Not all startups are created there. The important actually the best scenario when
equal. You have to strike the right
balance between the talent that
thing is to have a sound the business units themselves
you have internally and the need judgment as to which are asking for your capabilities
and funding it. Also, many of the
to rely on startups. ones to spend time with. founding members of Labs have
moved into the business and are
We partner closely with our driving major impact across the
ventures team, Capital One company.
Ventures, which is led by the former
CEO of a startup that we acquired.
We sit in the same offices and they
help us identify and connect with
the right companies

D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 79
The Innovation Game: Why and How Businesses are Investing in Innovation Centers

The Innovation Game:


Why and How Businesses are Investing
in Innovation Centers
By Brian Solis, Altimeter, Jerome Buvat and Subrahmanyam KVJ, Capgemini Consulting

Why Should Companies Launch Innovation Has Never Been Enter the Innovation Center
Innovation Centers? More Important...Or So Difficult
The weaknesses of traditional
In today’s highly competitive innovation approaches have led a
We live in an era of digital
economy, innovation is more number of ambitious organizations
Darwinism. As technology and
critical than ever. A recent survey of to seek new inspiration. These
society evolves, it becomes
large corporations found that 65% organizations have launched
imperative that organizations
of senior executives face increased innovation initiatives or full-
also evolve their business models.
pressure to innovate2. However, the blown innovation centers in major
Companies that don’t invest in
challenges of innovation continue technology hubs with the explicit
counter-disruptive measures
to defeat many. In 2014, around mandate to accelerate digital
will learn that evolution doesn’t
$1.6 trillion was spent on R&D innovations. Innovation centers
wait. 52% of the Fortune 500
globally3. Despite this significant achieve this by rethinking customer
have merged, been acquired
investment, the results are falling experience, improving operational
or have gone bankrupt since
short. In consumer goods, for efficiency and testing new business
20001. Over the last ten years,
example, research shows that more models through the use of digital
there are myriad examples of
than 85% of new products fail4. technologies such as Big Data, the
established corporates that have
Internet of Things, Social, Mobile,
fallen on difficult times. How can
To excel in these times requires Robotics, Augmented Reality and 3D
companies avoid this fate? The
innovation, to protect against Printing.
answer is innovation.
external threats and create new
competitive advantage. But many These innovation centers, comprising
R&D teams at large and traditional teams of people and often physical
52% of the Fortune corporations seem ill-equipped to sites, are established in a global
respond. They can be constrained tech hub. The goal is to leverage
500 have merged, by legacy organizational models, the ecosystem of startups, venture
been acquired or risk-averse cultures, and a rigidity capitalists, accelerators, vendors, and
have gone bankrupt of approach. A recent study academic institutions that these hubs
revealed that only 5% of R&D staff provide.
since 2000. feel highly motivated to innovate5.
This is a worrying tendency given
the urgency to innovate.

80 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
DIGITAL TRANSFORMATION REVIEW

Debbie Brackeen, Citi Ventures, says The Size of the Innovation


that the mission of their innovation Center Prize
centers is to “pioneer and test new Walmart’s internal
disruptive solutions for customers, Innovation centers offer a range of
testing new business models and benefits. They: search engine,
technologies that advance our
■ Accelerate the speed of
developed by
position on the market… We’re
innovation Walmart Labs in 9
looking at making significant
impact to the overall business and ■ Provide a fresh source of ideas months, drove a 20%
not just incremental changes.” ■ Enhance risk-taking ability
increase in online
Over the last year, we interviewed ■ Attract talent
sales conversions.
leaders of innovation centers and ■ Drive employee engagement
also conducted extensive Web-based Provide a Fresh Source of Ideas
research of the 200 largest companies ■ Build a culture of innovation Innovation centers, by virtue of their
in the world by revenue. The research location and extensive engagement
probed a number of key issues: Accelerate the Speed of with the local community, can
Innovation be a rich source of ideas. Many
■ What kind of companies are
investing in innovation centers? An alarming 90% of companies innovation centers actively reach
believe that they are too slow to out to startups, venture capitalists,
■ Where are the preferred locations market and often over budget6. academics, and other industry
for setting up these centers? Innovation centers can help stakeholders for regular events. One
■ What are their mission and resolve this issue. Walmart’s executive from a major European
purpose? innovation center – Walmart financial services firm said: “We
Labs – helped develop an internal have a stated goal to host over a
■ What are the challenges and search engine in just nine months, million external people for different
critical success factors? driving a 20% increase in online events, from big data to social media
■ How are outputs and results sales conversions7. Staples’ and emerging payments or peer-to-
measured? innovation lab helped launch a peer lending. We host hundreds of
digital wallet service in nine weeks people in these events every day.
The research methodology at the The idea is that if you become sort
– Staples’ fastest deployment ever8
end of this paper provides further of the epicenter of the velocity of
(see Figure 1).
detail on our approach. ideas and innovation in the space,
you will benefit from that.”

D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 81
The Innovation Game: Why and How Businesses are Investing in Innovation Centers

Figure 1: Innovation Centers Accelerate the Speed of Innovation

Zappo Labs enabled Zappos to launch its Staples’ innovation lab helped launch a digital wallet
“Ask Zappos” digital personal assistance service in 9 weeks Staples’ fastest deployment ever

service in just 12 weeks


Rapid
Experimentation,
Prototyping and
Launch

Walmart's search engine was developed at Walmart AT&T's Foundry innovation centers have significantly cut
Labs in 9 months with just a handful of employees the

the time from idea to launch. Collaboration with startups
tool drove a 20% increase in online sales conversions has delivered successful solutions such as a personalized
video bill service and self-optimizing network

Source: FastCompany, “How Zappos uses one-week work sprints to launch big projects fast”, July 2014 ; Adweek, “How an Office Supply Brand Stays On the
Cutting Edge of Retail”, November 2014 ; Walmart, “Welcome Adchemy to @WalmartLabs!”, May 2014 ; Capgemini Consulting and Altimeter interviews

Enhance Risk-Taking Ability Attract Talent


Unlike their larger, risk-averse Organizations can use their
Our innovation parent organizations, innovation innovation centers to showcase
center lets us take centers are inherently “risk- their brand strength and startup
seekers”. In being so, they move culture, and attract top talent
on risks that the rest the entrepreneurial risk away at universities. Also, in large
of the organization from the parent organization. organizations, the innovations
may be unwilling to This ability to take on risks is developed by centers have the
crucial for delivering innovation. opportunity to see mass adoption,
take on. In the words of AT&T’s Ruth unlike most startups. This can
Yomtoubian: “Our innovation be a key proposition for the
– Ruth Yomtoubian,
center lets us take on risks that the parent company to pull skilled
business innovation rest of the organization may be individuals who are willing to
lead at AT&T Foundry unwilling to take on.” experiment their ideas at scale.

82 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
DIGITAL TRANSFORMATION REVIEW

Drive Employee Engagement Build a Culture of Innovation


The positive impact on employee The greater positive impact of
We went to campus engagement is an often- successful innovation centers
placements overlooked benefit of innovation includes the development of an
centers. Engaging with the latest innovation culture within the
right after the technologies and new ideas excites larger organization. The head of
announcement of and motivates employees, even innovation at a leading bank says:
our innovation lab those in industries that are slow to “If your company is counting on
change. An innovation executive
and our ticket was at a large bank says, “If we never
your innovation center to do all
your innovation, you will fail. It
hotter than Twitter graduated a single concept from should be one of the tools that
and Facebook, which the labs into production, we would help, and it is a sort of catalyst
was shocking. still get a ton of benefit just from
employee engagement. That gets
for serving the business.”

overlooked a lot.”
– Innovation executive
at a leading retailer

D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 83
The Innovation Center Heat Map
North America Europe

London (10)
Munich (5)
53 centers
Berlin (5)
Silicon
Valley Chicago (4)
Paris (9)

Asia Top Ten Cities


Top Cities Number of Innovation Legend
Ten Centers
Seoul (4) Silicon Valley 53 1-3 centers
Tel Aviv (4) Tokyo (6) London 10
Shanghai (6) Paris 9 4-6 centers
Singapore 7
Tokyo 6 7-10 centers
Shanghai 6
Bangalore (4) Singapore (7) Berlin 5
> 50 centers
Munich 5
Tel Aviv 4
Chicago 4

38% of companies have set up innovation centers Breakdown of Innovation Centers


by Region
61% of companies with centers have a presence in the Silicon Valley...
...But other hubs are also emerging – top 10 locations represent Asia

only 35% of total centers


29% 29% 25%
N=309
Source: Capgemini Consulting and Altimeter Analysis

Focus Area Main Mission of Innovation Centers


% of companies % of companies
Mobility 63%
Big Data / Analytics 51% Gaining access and exposure
65%
Internet of Things 39% to latest technologies
Robotics 13% Deeper understanding of
35%
Virtual Reality 13% customer needs
3-D Printing 5%

Single Center Vs Network of Distribution of Innovation Centers


Innovation Centers by Funding Model
% of companies 4% % of companies
33%
Companies with Single Innovation Center Internal
23%
Partnership
67% Companies with a Network of Innovation
Centers Data Not Available
73%

N=75
Source: Capgemini Consulting and Altimeter Analysis

84 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
DIGITAL TRANSFORMATION REVIEW

How can Innovation Centers a slippery slope of challenges that


Successfully Scale the Slippery innovation centers must overcome to
Slope of Digital Innovation? succeed at digital innovation. Leading Most innovation
companies avert these challenges
It is extremely challenging to make by factoring critical success factors centers commit one
a success of innovation centers. A into their journey.These factors of two cardinal sins.
seasoned innovation expert and broadly fall into three phases – laying Either they think too
senior executive at a leading global down the foundation of vision and
bank told us: “About 80 to 90% of governance, harnessing talent and far out into the future,
innovation centers fail, and end up partnerships and delivering on the or they get involved in
being a massive waste of resources.” core promise of innovation (see routine projects.
Such high failure rate results from Figure 2).
– Seasoned
innovation expert
Figure 2: Critical Success Factors for Innovation Centers

Extend
Innovation
Across the
Deliver on the Core Enterprise
Innovation Promise

Prove Value with Maintain


Quick Wins and Focus by Culling
Follow Through Unfeasible Projects

Harness Talent
Hire Employees that Engage with
and Partnerships Create a Diverse Partners
Thrive in Both
Cross- Structured and but Use Sound
Functional Team Unstructured Judgment When
Environments Selecting Them

Lay Down the


Foundation of Vision
and Governance Define the Right Garner CEO Set Up a Ensure Business
Purpose and Focus Support Governance Model Units’ Involvement

Source: Capgemini Consulting and Altimeter Analysis

D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 85
The Innovation Game: Why and How Businesses are Investing in Innovation Centers

Laying Down the Foundation of out and had a conversation with


Vision and Governance the CEOs of just about every major
Define the Right Purpose & Focus retailer in our category of retail about It is important to
this topic and about our mission.
Defining the purpose of the Ultimately, that’s ended in a go-to
know the difference
innovation center is critical. Different plan with the management teams.” between true
approaches will deliver different
results, with an innovation outpost
innovation and
Set up a Governance Model with
not delivering the same benefits Stakeholders from Across the “innovation theater,”
as an in-house innovation lab. An Business or shiny object
innovation executive told us: “Most
innovation centers commit one
A common challenge cited by many syndrome.
respondents in our research is the
of two cardinal sins. Either they
need to identify the ‘right’ set of – James Patterson,
think too far out into the future,
or they get involved in routine
stakeholders from across the business. Managing Vice President
An innovation executive from a and Head of
projects.” Successful innovation
global financial services firm says:
centers establish clear space between Capital One Labs
“It’s not a good answer to have one
themselves and everyday operations
or two champions for an innovation
yet ensure their breakthrough
center. You need a governance
innovations can be turned into Ensure Business Units’
body where you have a number of
commercial reality. Involvement
stakeholders at a senior level. This
will help avoid dependence on people One risk that innovation centers face
CEO Support is a Must to Nurture
and move it to a process. This way, is that, by working in an autonomous
Innovation Centers
you also help innovation permeate fashion, they can get disconnected
Innovation should be a top-down throughout the enterprise.” from the larger organization. It is
approach where the CEO/leadership crucial that business units are closely
team looks to entrench a culture involved in the selection, scoping
of innovation throughout the and execution of innovation center
organization. It is imperative that projects. In certain cases, innovation
the CEO/leadership team nurture the About 80 to 90% of centers are directly managed by the
innovation centers and champion the innovation centers business and, as a result, are in sync
its initiatives throughout the
organization. Kevin McKenzie, Chief
fail and end up being with the business requirements.

Digital Officer of Westfield, says: “If a massive waste of


companies truly do want to innovate, resources.
it’s got be sponsored by the CEO…
Our Co-CEO has personally gone – Senior executive
at a leading global bank

86 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
DIGITAL TRANSFORMATION REVIEW

Harness Talent and Partnerships Engage with Diverse Partners Deliver on the Core
but Use Sound Judgement in Innovation Promise
Create a Cross-Functional Team
Selecting Them
Prove Value by Demonstrating
The composition of the innovation
Engaging with the tech ecosystem Early Wins and Following
center needs to be diverse. James
is integral to the mission of Through on the Promise
Patterson, Managing Vice President
an innovation center, but it is
and Head of Capital One Labs, Innovation centers, by virtue of being
equally important to not waste too
confirms this. Capital One Labs is the standalone units, must constantly
much time. As James Patterson,
experimental product and technology prove the value that they add to
Managing Vice President and
arm of Capital One. He says: “The key the business. Leading innovation
Head of Capital One Labs puts
is to bring the right people along for centers overcome this challenge by
it: “It is important to know the
the journey at the right time – not demonstrating early wins. When
difference between true innovation
too soon, not too late – and having Walmart set up Walmart Labs in
and “innovation theater,” or shiny
the right integrated teams that 2011, it made several key acquisitions
object syndrome. There are a lot of
include the business working on upfront to build momentum. One
interesting startups out there. The
ideas together.” of its early acquisitions, Kosmix,
important thing is to have a sound
proved instrumental in developing
judgment as to which ones to spend
Hire Employees that Thrive in a new search engine to power
time with.”
both Structured and Unstructured its e-commerce website9. They
Environments accomplished the task in just nine
months and the updated website
Shortage of digital skills is an
also increased the conversion of
issue, but attitude is as important
as aptitude. The lead at a telecom We bring all sorts of visitors into buyers by as much as
20%. Today, WalmartLabs continues
innovation center said: “The people best practices and to be a driving force behind digital
element cannot be underestimated.
It takes a certain kind of person
tools and techniques innovation at Walmart.
to work in any innovation center, across the business
where half your time is spent in a to help make people
very open-ended and ambiguous
environment working with startups,
more creative, more
and the other half with the engaged, more
traditional and risk-averse side of innovative.
the business.”
– Head of innovation labs
at financial services major

D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 87
The Innovation Game: Why and How Businesses are Investing in Innovation Centers

Sunset Programs and Ideas that Extend Innovation Across The Next Innovation Wave
are Unfeasible… But at the the Enterprise
The digital economy offers a
Right Time
An innovation center can be said solution and an inspiration for the
Innovation centers are all about to have reached its pinnacle when perennial challenge of successful
experimentation, and a trial-and- it is able to extend the innovation innovation. The advent of thriving
error approach is one of its defining practices far beyond its walls and technology hubs, and the appetite of
features. At the same time, it is crucial deeper into business units and new digital entrants to relentlessly
to focus resources and energies on functions. One way of doing this is to disrupt and innovate, has created
the most feasible and viable projects. ensure that learning from innovation an innovation ecosystem that
Hence, projects that are unfeasible centers is constantly routed back to traditional organizations can tap
need to be terminated, and quickly. the business. The head of innovation into. By combining the culture and
The VP at the innovation lab of a labs for a financial major confirms approach of innovation centers
leading fashion retailer said: “You this by saying: “We bring all sorts of with the budget firepower and
need to be honest with yourself best practices, tools and techniques access to customers that they enjoy,
about what is working, regardless across the business to help make traditional organizations have an
of the amount of time, money, or people more creative, more engaged, excellent opportunity to re-energize
personal capital you have spent.” more innovative”. their innovation capability.
At this retailer, ideas are tested in 1
to 2 stores and, based on feedback, a
prototype is created for a pilot in 10
to 15 stores.

88 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
DIGITAL TRANSFORMATION REVIEW

Research Methodology
■ For the purposes of this research, we considered a company to have an innovation center only if at least one of its centers was
located in the following tech hubs:
Silicon Valley, Tel Aviv, Los Angeles, Seattle, New York City, Boston, London, Toronto, Vancouver, Chicago, Paris, Sydney,
Sao Paulo, Moscow, Berlin, Waterloo (Canada), Singapore, Melbourne, Bangalore and Santiago (list based on a study of
global tech ecosystems conducted by Telefónica and the Startup Genome in 2012- Telefónica Innovation Hub, “Startup
Ecosystem Report”, 2012)
■ We adopted a comprehensive research methodology leveraging both Primary and Secondary approaches:
o Focus interviews with executives from leading organizations, overseeing innovation related activities.
Representing diverse industry sectors, all of these are large organizations with most having revenues
greater than $5bn (see below for list of executives who agreed to be named).
o Web-based research of the largest 200 companies by revenue based on the Bloomberg list. We covered
the following sectors – Automotive, Financial Services, Consumer Products & Retail, Manufacturing and
Telecom, and picked the forty largest companies by revenue within each sector.
The research explored innovation centers along multiple dimensions:
■ Mission behind the centers (e.g. increase innovation output, form relationships with eco-system partners)
■ Focus areas for the centers (e.g. mobility, Internet of Things, Big Data)
■ Collaborative relationships forged (e.g. with large companies, startups, universities)
■ Governance models adopted (e.g. centralized, decentralized, autonomous)
■ Challenges faced
■ Results delivered

Acknowledgments
We would like to thank the numerous executives who graciously spared their time for this research. In particular, we would like to thank: Ruth
Yomtoubian, AT&T; Bridget Dolan, Sephora; Mark Brodeur, Nestlé; Kevin McKenzie, Westfield; Georges Nahon, Orange; Bao Nguyen, Walmart;
Debbie Brackeen, Citi; Karen Weining, DuPont; Ed McLaughlin, MasterCard.
You can find an unabridged version of this research on Capgemini Consulting website or on SlideShare:
https://www.capgemini-consulting.com/the-innovation-game
http://www.slideshare.net/capgemini/the-innovation-game-why-how

1. HBR, “Making Sense of Digital Disruption”, May 2015


2. Lithium, “Corporate America Under Pressure From Consumers’ Rising Expectations”, June 2015
3. Battelle, “2014 Global R&D Funding Forecast”, December 2013
4. Nielsen, “HOW TO FLIP 85% MISSES TO 85% HITS: LESSONS FROM THE NIELSEN BREAKTHROUGH INNOVATION PROJECT”, June 2014
5. Forbes, “Why U.S. Firms Are Dying: Failure To Innovate”, February 2015
6. Oracle, “Understanding the Best Approaches and Tools to Manage the Complexity of Innovation”, 2013
7. Walmart, “Welcome Adchemy to @WalmartLabs!”, May 2014
8. Adweek, “How an Office Supply Brand Stays On the Cutting Edge of Retail”, November 2014
9. Fast Company, “Walmart’s Evolution from Big Box Giant to E-Commerce Innovator”, November 2012

D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 89
DIGITAL TRANSFORMATION REVIEW

About Capgemini Consulting

Capgemini Consulting is the global strategy and transformation


consulting organization of the Capgemini Group, specializing in
advising and supporting enterprises in significant transformation,
from innovative strategy to execution and with an unstinting focus on
results. With the new digital economy creating significant disruptions
and opportunities, our global team of over 3,600 talented individuals
work with leading companies and governments to master Digital
Transformation, drawing on our understanding of the digital economy
and our leadership in business transformation and organizational
change.

Find out more at: www.capgemini-consulting.com

About Capgemini

Now with 180,000 people in over 40 countries, Capgemini is one of the


world's foremost providers of consulting, technology and outsourcing
services. The Group reported 2014 global revenues of EUR 10.573
billion. Together with its clients, Capgemini creates and delivers
business, technology and digital solutions that fit their needs,
enabling them to achieve innovation and competitiveness. A deeply
multicultural organization, Capgemini has developed its own way of
working, the Collaborative Business ExperienceTM, and draws on
Rightshore®, its worldwide delivery model.

Learn more about us at: www.capgemini.com


Digital Transformation Review
Guest Contributors

Michael Osborne Jim Lawton Navi Radjou

Jon Nordmark Gavin Starks Claus von Riegen

Pablo Rodriguez James Patterson