Session IV

Growth by Innovation

You are always one innovation away from getting wiped

out%
Frugal Innovation – Another Perspective
 Favoring agility over efficiency
 Don’t seek wow with technically sophisticated
products
 But good quality solutions that deliver great quality
 Radical change in company’s business model
What frugal innovators do
 Its not just about more for less …
 Its also about better for less
 Building Circular value networks
 Cradle to Cradle or C2C
 Regenerative design
 Biomimetic approach to the design of products and
systems
 Based on the model of human industry on nature's processes
where waste is healthy and safe for the ecosystem
 C2C certification is now emerging name of the game
 Tarkett …flooring and sports surface solutions provider
What frugal innovators do
 Crowdsource solutions
 In-house capabilities and resources are not a smart
solution anymore
 Partnering with external innovators can shift the
perspective of employees
 GEs recent 3D printing design quest …lighter, next
generation aircraft engine brackets
 699 entries… Indonesian engineer
 Frugal innovation … Open innovation …global brains…
faster, better and …cheaper solutions
Agenda for Today
 Various forms of innovation
 Strategic importance of innovation
 Some tools
 Discussion on readings
 … and some more
Some Directions for Innovation
 Low Cost
 Operational excellence
 Constant Innovation
 Product leadership
 Customized Offerings
 Customer Intimacy
 Michael Porter offered similar starting points in his three
generic strategies
 But Disrupters at times are absolutely indisciplined
 Many start life with better performance at low price & greater
customization

Michael Treacy and Fred Wiersema (1993) -The Discipline of Market Leaders
Big-Bang Disruption
 A new kind of innovator can wipe out incumbents in a flash
 Is disruption synonymous with low price lower end?
 Disrupters come out of nowhere and instantly be everywhere …and
then they are hard to fight
 They don’t create dilemmas for innovators; they trigger disasters
 Angry birds
 Downloaded over a million times in the first 24 hours
 Seven months later, the game had been downloaded 200 million times
 Often unplanned and unintentional
 Competitors like these blindside you
 PLC has only three stages now : development, deployment and
replacement
 Less of early adopters and more of early majority … Gordon Moore
 No intended disruption …but the collateral damage

Big-Bang Disruption by Downes & Nunes

Crossing the Chasm (1991) by Gordon Moore
Ten Types of Innovations
Profit Product
Network Structure Process
Model Performance

Product Customer
Service Channel Brand
System Engagement
 A recent global survey of more than 4000 senior
managers by the Economist Intelligence Unit found
that 54% favored new business models over new
products and services as a source of future competitive
advantage

How companies do business will be as important as what

they do
Profit Model
 How a company makes money
 Find a fresh way to convert a firm’s offerings and other
sources of value into cash
 Often challenge an industry’s assumptions
 How Netflix turned the video rental industry on its
head by implementing a subscription model
Network
 Hyper connected world
 Doing everything of business alone … is a sin
 Its about harnessing the capabilities of others
 Its about using the assets of others
 Crowdsourcing
 Maggi Masala
 Very regular in B2B world
Structure
 Managing in unique ways that create value
 Ingenious configurations of heavy capital
equipment to superior talent management
 Supremely productive working environments
 John Mackey at Whole Foods
Process
 Innovations in activities and operations that produce
an enterprise’s primary offerings
 Patented or proprietary approaches
 Special sauce that you use …and competitors can’t
replicate
 Zara – from sketch to shelf in record time
Product performance
 Innovations that address the value, features and
quality of a company’s offering
 Distinguishing features and personality
Product System
 Interoperability, modularity, integration and other
ways of creating valuable connections
 Delight customers through ‘solutions’
 Defend against competitors
 How Nike+ parlayed shoes, sensors, apps and devices
into a sport lifestyle suite
Service
 How you support and amplify the value of your
offerings
 Reveal features and functionality that customers might
otherwise overlook
 Smooth rough patches in the customer journey
 Idea is to elevate even bland and average products into
compelling experiences that customers come back for
again and again
 “Deliver WOW through service” is Zappos’ #1 internal
core value
Channel
 How you deliver your offerings to customers and users
 Multiple and complementary ways
 Idea is to create immersive experiences for consumers
 How Nespresso locks in customers with its useful
members only clubs
 Patanjali
Brand
 Brand innovations help ensure that consumer recogn
izes, remembers and prefers your offerings to those of
competitors
 Promise conveyed across many touchpoints
 Virgin and now Patanjali
Customer Engagement
 How you foster compelling interactions
 Understanding deep seated aspirations of customers
and users
 Broad avenues for exploration
 Santosa & Jurong
 Local Motors
Why Innovate
 Research in Motion’s Blackberry
 Its also ok if its creamy tomato soup along with regular
tomato
 Lowest and survival form of innovation
 Routinized innovation
Why Innovate
 Incremental Innovations
 “ A little bit at a time”
 Breakthrough Innovations
 “ in a completely crazy way”
Incremental Innovations
 Very low risk
 Continuous improvement
 Matching or bypassing customer expectations every
time
 Products stand a better competitive chance
 Its very hard to go wrong
 And of course cost less
Breakthrough /Radical
 Higher risks
 Campbell’s no calorie soup
 Achieving a breakthrough is a fervent hope – but a rare
event
 Its not about design change …it’s a new platform
 CNN, IKEA, STARBUCKS … JIO

A NEW WAY TO CREATE FRESH VALUE

But the fate is disruption
 Dilemma and disasters
 Suddenly no where to everywhere
 Not just cheaper, but more inventive and better
integrated
 Whatsapp and skype
 The source is usually near perfect market information
Biggest Stumbling Block
 Success & Incumbent’s curse
 A strong wish to avoid undertaking a preemptive
cannibalization
 Desire for steady profits
 Great new idea
 Leadership to convince
 Penalization for failure
 IDEO encourages employees to fail early and fail often
 Not being open to outsourcing
 P&G and “ Connect & Develop” … NineSigma, YourEncore &
yet2.com
Curse of Innovation
 Highly innovative products fail in market
 Behavioral framework
 REFERENCE DEPENDENCE
 LOSS AVERSION
 Consumers undervalue and developers overvalue
innovations
Where can you go to get Innovative
Ideas?
 Customers are a major source of ideas
 Co-creation
 Consumers and customers who are highly
engaged with the brand
 People propose, rank & improve ideas
 Online
 Face to face
Where can you go to get Innovative
Ideas?
 Customers are a major source of ideas
 Co-creation
 Focus group meetings
 Co-creation specially useful in B2B …Boeing
 Alpha &Beta stages of co-creation
 Harley-Davidson & HOGs
Some outstanding ones
 Lego
 Bush Boake Allen ( BBA)
LEGO
•In 2003, theme parks, cliket crafts and Galidor were all flops

•Things changed massively and the engine was innovation

•Today, as the overall toy market declines, LEGO’s revenues and

profits are climbing, up 19%
BBA
 They believe that need and solution lies with the
customer
 Biggest clients are Nestle and Uniliver ( Worldover)
 Now IFF
 80% share in $3 billion market
Lead User Analysis
 Bringing “lead users” into product design process
 “If you work with innovative customers, they will
ultimately come up with innovative product ideas”
 3M – “ Submit your ideas”
 Mountain bikes
Crowdsourcing
 Involving people althrough
 No heavy incentives …prize money or moment of glory
 Fiat Mio – Brazil, more than 17000 participants
submitted more than 11,000 ideas
 Crowdsourcing also gets customers to feel closer to the
company

And now crowdfunding

Creativity Tools
 Brainstorming : Free wheeling thinking aimed at
generating a maximum number of ideas
 No criticism at this stage
 New combinations based on substitution, elimination,
and combining or exaggerating elements
 Later …joint criticism and elimination
Eight steps of “stage-gate” process
 Idea generation
 Idea screening
 Concept development and testing
 Marketing strategy development
 Business analysis
 Product development
 Market testing
 Commercialization
Eight steps of “stage-gate” process
 Idea generation
 Idea screening
 Concept development and testing
 Marketing strategy development
 Business analysis
 Product development
 Market testing
 Commercialization
A-F Process of Innovation
Different members of the company to play a set of roles:-
 Activator
 Browser
 Creator
 Developer
 Executor
 Facilitator
A-F Process of Innovation
Different members of the company to play a set of roles:-
 Activator : follows a lot of changes – and senses some
opportunities for the company
 Browser
 Creator
 Developer
 Executor
 Facilitator
A-F Process of Innovation
Different members of the company to play a set of roles:-
 Activator : follows a lot of changes – and senses some
opportunities for the company
 Browser: Research –deep picture of the facts that
might affect the opportunity
 Creator
 Developer
 Executor
 Facilitator
A-F Process of Innovation
Different members of the company to play a set of roles:-
 Activator : follows a lot of changes – and senses some
opportunities for the company
 Browser
 Creator: Team to work up and test a refined concept
 Developer
 Executor
 Facilitator
A-F Process of Innovation
Different members of the company to play a set of roles:-
 Activator : follows a lot of changes – and senses some
opportunities for the company
 Browser
 Creator
 Developer : Makes and tests a prototype and if
positive, develops a production method
 Executor
 Facilitator
A-F Process of Innovation
Different members of the company to play a set of roles:-
 Activator : follows a lot of changes – and senses some
opportunities for the company
 Browser
 Creator
 Developer
 Executor : Launch of the product
 Facilitator
A-F Process of Innovation
Different members of the company to play a set of roles:-
 Activator : follows a lot of changes – and senses some
opportunities for the company
 Browser
 Creator
 Developer
 Executor
 Facilitator : Who funds the work and makes sure it
progresses toward a completion date
Judging the Idea
 Does it address the real pain point?
 Will it appeal to a big enough market?
 Is the timing right?
 If we pursue the idea, will we be good at it?
 Is it long term
Some Directions for Innovation
 Low Cost
 Operational excellence
 Constant Innovation
 Product leadership
 Customized Offerings
 Customer Intimacy
 Michael Porter offered similar starting points in his three
generic strategies
 But Disrupters at times are absolutely indisciplined
 Many start life with better performance at low price & greater
customization

Michael Treacy and Fred Wiersema (1993) -The Discipline of Market Leaders
Big-Bang Disruption
 A new kind of innovator can wipe out incumbents in a flash
 Is disruption synonymous with low price lower end?
 Disrupters come out of nowhere and instantly be everywhere …and
then they are hard to fight
 They don’t create dilemmas for innovators; they trigger disasters
 Angry birds
 Downloaded over a million times in the first 24 hours
 Seven months later, the game had been downloaded 200 million times
 Often unplanned and unintentional
 Competitors like these blindside you
 PLC has only three stages now : development, deployment and
replacement
 Less of early adopters and more of early majority … Gordon Moore
 No intended disruption …but the collateral damage

Big-Bang Disruption by Downes & Nunes

Crossing the Chasm (1991) by Gordon Moore
And finally …
You can benefit from rival’s new product…
 Competitor’s floods the retail shelf …and if genuine
enough you gain as well
Fast Second
 Dominant Design
 Different from second mover
 Its about timing
 Virgin