chp - what to innovate

8/19/2019 Chp - What to Innovate

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Chapter – 5 What ToInnovate

The business of innovation pervades the daily business of lifeWhen implemented and managed with skill, innovatioenriches and enhances our lives.

We already looked at ‘Why’ innovate now we are going tfocus on ‘What ’ to innovate i.e. ways to determine as t

which novel products, services and processes will achievmarket place success for growth and pro!t.


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RISk and RETURNS

A study by Kim and Mauborgne of new business launches found the follo

" ma#ority of launches $si% out of seven& were incremental improvements $red

industries. They accounted for '() of total launch revenues but only *+) of launcne out of seven were in industries which were not in e%istence $-lue cean&. T*+) of launch pro!ts. These !gures include launch failures.

"bove clearly illustrates the link between RISK and RETURN which is much shato innovate.

In cricket also if a batsman has to score a century, he needs ones twos, threessi%es. There has to be a proper balance.

imilarly companies need to have a proper balance of ones twos etc. anwhen to swing for a si%. I.e. invest massive e/ort in !nding a truly radi

Determining what to innovate will thus dier !or dierent "rm’stheir age$ si%e$ resour&es and &a#a'ilities(


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)ISI*N$ Strategy and INN*)+TI*

0ision, strategy and innovation are closely linked as allstrategic innovation processes begin with a vision.

0ision de!nes ,What ought to 'e- what the organi1atioseeks to are always gaps between what it is today and wha

plans to be 5 234 years down the line.

trategy is an operational plan regarding how best to bridthe gap between what it is and what it ought to be no e/ec

strategy can be articulated without a clear vision.


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The link .etween )ision$ *'/e&tives and Stra

The process of articulating

an organi1ations vision,and updating it, begins

with 6Core Ideology of theorgani1ation. This consists

of the rgani1ation. Thisconsists of Core 0alues

and Core 7urpose. 8or

e%ample Walt 9isneyscore belief that6Imagination and

wholesome fun are

intrinsic values .


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9:8I;ITI;

0ore Ideology 1 The core values and core purpose of the organi1core values never change< core purpose may change in responchanging technology and market conditions.

-ig =airy "udacious >oal $-="> or ?ission& – " bold, audacious

year goal, described vividly $as a photograph& $vivid descriptionsupported with a powerful mantra.

2antra3 " three2word description of the organi1ations value2crproposition.

Strategy 1 "n perational 7lan that shows how the organi1atioclose the gap between what is today and what ought to be in the futhe organi1ations vision is to be reali1ed.

Strategi& Innovation 1 Innovation that supports, strengthenreinforces strategy, by rethinking all aspects of the organi1including its products and services, business design, core processeits innovation process itself.

In rapidly changing world, some aspects of the organi1ation must change these are called ‘0ore )alues’ which are non2negotiabunchanging.


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0+SE STUD45 6*ND+ 0*RE )+7UES )ERSUSR+DI0+7 06+N8E

In boom times when demand is growing it is no trick for managers to lines $revenues& and bottom lines $net pro!ts&. -ut in bad times, wh

contracting, that indeed is a great achievement. @et us, therefore looat =onda. In "merica, where high oil prices and the housing bustconsumer spending, >?, 8ord and Toyota reported large sales decline3B percent and percent in (44+ and it is struggling to maintain invcars Dy out of the show2rooms. Its E operations remain highly pro!ta

" brilliant combination of what Gerry 7orras and Gim Collins in theiCalifornia ?anagement eview article call 6Core 0alues and purposechange . 8rom the time =ondas namesake founder oichiro =ondeJciency. When >?, Chrysler and even Toyota chased the high2marsport utility vehicles $E0s& and trucks, =onda stuck to its core valuhatchback, which uses only liters of gasoline per 344 kilometers, wasintroduction and in (44+ its sales were up by H)percent, despite th=ondas Civic and "ccord models are also selling well.


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What to InnovateF

What is the key Luestion regarding what toinnovateF

=ow can innovators tell the di/erence between awinning idea and a disastrous oneF ?any radicallynew ideas seem at !rst right to be meticulousA andthere are many ideas that sound wonderful at !rsthearing.

>reat Innovators insist on never re#ecting oraccepting an idea at once because bad ideas candrive out the good ones as they consume scareresources and time. What are then the hallmarks ofa winning innovationF


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What to InnovateF

tep 3 – 60ision 6e%pressed as uniLue value proposition $E07&.

E07 – tates how your product or service creates substantial addecustomers in a way that. Competitors do not.

:%ampleA Eninterrupted mobile phone service anywhere in the woranyplace $?T@"&.

The above value proposition failed because the price tag of M *444. WfailedF -ecause it failed to ask the LuestionA

6ow does your ideas &hange your &ustomers or &lients lives9

It is therefore, obvious that ideas driven by demand – needs and wanon 1eal evidence are far more likely to succeed than those driven by su

6pushed by technology. "n idea that when implemented delights the c:very winning idea should have a powerful E072 if you cannot frainnovation is in trouble.

We must keep in mind that many pressing needs are not consciously or verbali1ed by customers $latent needs&.

>reat innovators anticipate needs long before are articulated.

The following case study provides an e%ample.


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The Israeli global software company. Checkpoint was born in a stuapartment in Guly 3HH*. Three software – engineer friends wrote plan for 8irewall23, an Internet security product designed to protec

from hackers and invaders.

The World Wide Web $www& had been launched only two years3HH3. -ut already showed signs of phenomenal growth. -asee%perience in military intelligence, the three engineers knew that teventually be a demand for 68irewall security for internal companyeven though few companies used such networks at the time and thdemonstrable market demand. The three innovators sensed that

users growing by 54percent yearly, and with security issues inevitafrom it, the ultimate market would soon be huge.

The friends created a software solution for an embryonic need tresearch most likely could not have shown or revealed. They percneed because they themselves needed the product they were lau(44B, checkpoint a market leader, had sales of nearly M'44 milliopro!t of about half that or M*44 million.


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Identi!ying :eelings ; Needs(

;e%t logical Luestion isA

What aspects of peoples lives are improved by yourinnovation, what speci!c feelings are generated andwhich needs are metF

There is therefore, need to clearly identify feelingsand needs and ensure your innovations is able tochange lives of your customers.

In present :ra, many people are starved of emotion

and feeling because many modern technologieslimit or reduce face2to2face human interaction. Theinnovations therefore need to create emotionalbonding between the product and buyer.


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8et 4our 0ustomers to love your #rodu&t(

Click ic Today the Luestion is how you get your customers tolove your product rather that how you get them to likeand buy your product.

@et us look at the product.@"99: – " memorable and delightful e%perience that acustomer will love and remember.

=igher your product is in the commodity – to2transformation @adder, the higher your pro!t marginsand stronger will be customer loyalty.

In todays global markets there are powerful forces

which drive your product down the ladder. "s theproduct 6Clicks in the market, they are initiated andbecome standardi1ed and commodi1ed over a period oftime. What therefore is reLuired is continual innovationto remain as high as possible on the ‘7+DDER’(

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C": TE9NA W=:; 8I;";CI"@ :0IC: -:C" C??9ITN -ET "; :P7:I:;C:A T=: C":

"n "merican bank, E"", topped -usiness Weeks (44H ranking for superior customer service. It has ranked Q 3 or Qother !rm comes close. urely, this provides a terri!c best – practice benchmark for customer service. E"" provimilitary families. These families have special needs related to the fact that part of the family serves in distant peverything it does, the !nancial services out!t puts itself in the spit2shined shoes of its often highly mobile customer!nancial challenges.

=ere are a few things E"" does to provide superior customer serviceA

When ta/ ergeant Corey ?ason wants to deposit a check, he does not use an "T?, a teller at a branch or even a stslip. ather, the *2year2old >7 systems specialist takes a picture of the check with his i7hone, uses an applicatiowithin minutes the money shows up in his account.

E"" was the !rst bank to allow i7hone deposits, it routinely te%ts balances to soldiers in the !eld, and it heavily discouwhile they are deployed overseas. They do all this really creative stu/ that applies to guys and gals who are in "fgresearch director at consulting !rm Tower >roup. There is nobody on this earth who understands their customer better t

=ere are some things E"" does to keep its employees happy and in touch with their customersA

Customer IntimacyA Training for E"" employees is steeped in the military e%perience. ;ew representatives attend ?:s,r R meals ready to eat S, which troops consume in the !eld. They try on Oevlar vests and Dak helmets.

"nd each representative is handed a bona !de deployment letter – with the names changed, of course – to get them decisions customers face at such an emotional time. Colleen Williams, a 7hoeni%2based service representative who #osays the training clued her in to family issues that help her when answering calls. I speak to women who havent talk

weeks, she says. It never really registered to me the real disconnect deployed soldiers have from the

Training is not the only thing E"" lavishes on employees. "fter all, it takes satis!ed workers to get satis!ed customeagents at E"" saw bonuses nearing 3H percent of their pay, up from 3*.5 percent the year before. " new M 5 – an –

employees outsource errands on the cheap during the workday. "nd when the company closed two call centers in (44Hcompany2paid relocation package to #obs at other locations, even helping sta/ers burdened with underwater mortgage

3,(44 a/ected workers, 54percent accepted move o/ers, far more then the fewer than (4 percent E"

ta/ers get time to do their #obs, too :mployees are not rushed through calls with customers or evaluated on how fas?embers satisfaction trumps every single metric, says 8orresters Temkin. ther call centers may rela% things like avera

measure it, and still you get in trouble if youre out of bounds.

epresentatives are also armed with software that lets them view a history of the online screens a particular customwebsite, letting them know what policies or business lines the customer was perusing – and may be re

:very business has a number of generic functions it does. Customer service is one. :ven if your business is very distan?any of their best practices can be adopted and adapted. uperior customer service sensitivity and pro!t marg


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Technology and 7sychology

The story of radio and television e%empli!es hoetechnology and intuitive psychology interact to satisfyunarticulated needs and create memorable e%perienceswhen in the hands of master visionary innovators like9avid arno/.


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C": TE9NA "9I ";9 T0A 9"0I9 ";88" 0II;"N ";9 I;;0"T

Two of the most powerful innovations of the (4th century are radio and television. -oth wman – 9avid arno/. arno/ immigrated to "merica from E1lian, ussia with his parents

adio

arno/ was a ?arconi telegraph operator atop a tall department store in ?anhattan whe picked up the message, .. Titanic sinking fast. =e rapidly relayed the news proposed to his company, ?arconi, a vision for a 6radio music bo% at a time when radishipping and by amateur ?orse code enthusiasts. 6-ring music into the house by wirvision – a radio in every home $reminiscent of -ill >ates 6vision, a computer in every ridiculed. -ut in 3H3H, >eneral :lectric formed adio Corporation of "merica $C"& to abin the Enited tates. arno/ and his imagination were among those assets. arno/ conbusiness model for his radio innovation, comprising content $?usic, news, sports.&, a raadiola, priced at a steep M 5, or M 54 in todays dollars&, and a national networkarno/ arranged for a ballyhooed pri1e!ght between >eorges Carpentier and Gack 9emon the radio, a memorable e%perience and watershed marketing event. In 3H(', a

manager of C"a subsidiary, ;ational -roadcasting Corporation $ ;-C&. "nd the pro!ts Television

arno/ saw at once the ama1ing potential in inventor 0ladimir worykins 3H(* 6icontelevision&. In 3H(+, arno/ set up an e%perimental T0 station, and launched the !rsfrom W;-T in 3HB3. ;ow we add sight to sound, he said simply.

Today the average E family watches T0 for more than 54 hours a week – more than tworking. Television certainly passes the hurdle of a life2changing innovation.


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=ow can an innovation transform a product orservice into an e%perience with strongemotional appealF Oevin oberst $aatchi Uaatchi& coined the term 6@ove marks$products that arouse deep promotional ties&,and e%plains how to tell the di/erence,between an ordinary branded product and alove mark.

.rand 7o

In!ormation

Re&ogni%ed 'y

&onsumers

@o

8eneri& 7e


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CASE STUDY: STA!UCKS C"##EE AT $% A CU&

:ntrepreneur =oward chult1 had a vision to alter how and wevery "merican has their breakfast co/ee – cappuccino at tarbrather than instant co/ee from a 542cent commodity into

e%perience. It succeeded. Today tarbucks $the name tarcomes from a character in the =erman ?elville novel ?oby – 9icklarge global chain of co/ee shops, with 5,35 company2opeoutlets worldwideA B,''' of them in the Enited tates and 3,4other countries and E territories, together with *,H5' #oint veand licensed outlets, (,((( of them in the Enited tates and 3,other countries. -y creating ambience and stressing the interna6Co/ee Culture. tarbucks is able to charge high prices for its cwhile delighting customers $ the average tarbucks client tarbucks 3+ times a month, almost daily on workdays& threali1ing chult1s vision. tarbucks continues to innovate, provWi28i $wireless computing hotspots and lately, music download(445, tarbucks had M'.B billion in revenues, M BH5 million ipro!t, and in the period 3HH52(445 paid its shareholders an aveannual returns of (.' percent.


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SE+R06IN8 :*R INN*)+TI*N*


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&"CESS ())",AT(")

ne of the most under2e%ploited innovation opportunities libusiness processes that !rms use process innovation oftenmany small incremental improvements, each of which insigni!cant but together lead to enormous productivity gainsreductions. This kind of innovation reLuires everyones participa

- M ! !


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- M .ersus !est !uy* ?s legendary 7resident, later -oard Chairman, William @. ?culture that put employees in direct contact with customerencouraged initiative and innovation. =is philosophy was to liwho proposed an original idea and let him or her 6run with thawhat he called 6e%perimental doodling. Its essential that w

people with initiative if we are to continue to grow, he said. Todpercent rule, reLuiring technical and scienti!c employees to si%th of their time to pursue ideas that are not related to tassignments. "long with its spirit of innovation, * ? is !ercely every innovation must pass the *? trial2by2!reA 6Will it mamarginsF

-est -uy, a chain of retail consumer electronics stores fourth

specialty – retail industry in the Enited tates, de!nes innov6Continuous innovation in operation in operations and service, changing tastes of consumers. Its process innovation begins wneed, identi!ed by an individual, who forms a team that theideas to senior management. -est -uy had sales of M (5 billionpercent from (44*, net pro!t of M 45 million and 344,444 emp


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