Alan Harlan CEO 09/13/2014

BUILDING AN INNOVATION &

STRATEGY PROCESS

Operational Effectiveness (OE) is not StrategyImproved OE is important, yet not sufficient o OE competition does shift the productivity frontier outward

and produces absolute improvement in OE, but relatively improvement for no one;

o The more benchmarking the companies do, the more competitive convergence they get (the more indistinguishable they are from one another )

OE and Strategy both are required to superior performance Company must establish a difference it can preserve Productivity frontier is constantly shifting TQM

benchmarking

What is Strategy?

3

Case StudyIKEA’s Activity System

4

Southwest Airlines Case Study

5

From To

Innovation is episodic Innovation is an ongoing, systematic

Governance and budgeting done the same way across the business

Governance and budgeting for innovation separate from business as usual

Resources devoted primarily to exploitation A balanced portfolio of initiatives that support the core, build new platforms, and invest in options

People work on innovation in addition to their day jobs

Resources dedicated to innovation activities

Failure to test assumptions; relatively little learning

Assumptions continually tested; learning informs major business decisions

Failures avoided and un-discussable Intelligent failures encouraged

Planning orientation Experimental orientation

Begin with our offerings and innovate to extend them to new areas

Begin with customers and innovate to help them get their jobs done

New strategy playbook: innovation proficiency

6

Positioning options consist of initiatives in which you know there is a demand, but what is unknown is what combination of technologies and capabilities will be required to address that demand. Mobile devices such as smartphones in the United States are a bit like this—because there is no overall standard for wireless service, handset makers need to keep their options open by maintaining access to various types of standards.

Scouting options are situations in which you have a capability or technology that you know how to use, and what you are trying to do is extend its reach into a new arena. That could be a new customer segment, a new geography, or a new appli cation. Initiatives in this stage require a fair amount of proto typing and testing before you learn what will ultimately work. Apple, for example, built a mock-up of its retail store format and rigorously tested every aspect of the experience before rolling out its actual stores.

Stepping stones are situations in which you think there will be a demand, and think the technology will eventually be good enough to address it, but the moment is pretty far off. The goal here is to begin commercializing with modest applications that solve a real problem but that aren't too tech nologically challenging. The way nanotechnology is being developed today is a case in point—everybody knows that down the road nano manufacturing is going to produce mar vels we can only dream of today. What is commercially availa ble using nano-scale technology today? Wrinkle-free Docker's pants. Cellphone screens that are fingerprint-resistant. All great, as they will lead step-by-step to an eventual commer cial solution.

Positioning Stages

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• Step 1. Assess the current State of Things and Define the Growth Gap

• Step 2. Get Senior Management Alignment and Resource Commitment

• Step 3. Set Up and Innovation Governance Process• Step 4. Start Building a System and Introducing It to the

Organization• Step 5. Start Off with Something Tangible and Real• Step 6. Create the Supporting Structures for Innovation

Building an Innovation Proficiency

8

An opportunity portfolio

Technical and execution

uncertainty

High Positioning options Stepping stones

Medium Platform launches

Scouting options

Low Core enhancements

Low Medium High

Market and organizational uncertainty

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A low-growth portfolio

Competitive AnalysisDifferentiation

10

SDLC

Best Prac

tices

UI/UX COE

Analytics

DS Prac

tices

Diverse

Mobil P

ort Fo

lio

Embed

ded Dev

elopmen

t

Retail V

ertical

Health

care T

echnology

Enter

prise T

ech/ N

etW

Digital

Med

ia

Automotive0

1

2

3

4

5

6

Competitive Worksheet

EPAMSSGlobal

Rank

ing

Differentiation worksheet

EPAM SS Global

SDLC Best Practices 2 4 2

UI/UX COE 5 1 3

Analytics DS Practices 3 1 3

Diverse Mobil Port Folio 4 2 3

Embedded Development 0.5 0 3

Retail Vertical 4 2 4

Healthcare Technology 1.5 3.5 4.5

Enterprise Tech/ NetW 4 4 4

Digital Media 5 1 3

Automotive 0 0 5

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Operational Effectiveness is not strategyEmbody your cultureFail Fast ( Intelligent Failure )Have as much FIT as possibleDifferentiate from your competitionContinuous improvementHave fun!

Summary

Thank you

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