commercial success from innovation
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© Property of Stefan Stremersch©
Commercial Success From Innovation
Prof.dr. Stefan Stremersch Erasmus University Rotterdam IESE Business School Rotterdam, the Netherlands Barcelona, Spain Stremersch@ese.eur.nl Sstremersch@iese.edu
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A Great Solution
Unmet
Customer
Needs
$trategy
Generating
Profit$
In Search for Commercial Success…
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… From a Structure Perspective…
Science Market
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1. The Visionary Leader
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2. Delegate Responsibility to Functions
R&D has the responsibility to come up with innovative ideas and solutions
Marketing has the responsibility to understand
customer needs
Degree of Involvement in the job
R&D/ Engineering
Marketing
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“Highway to Hell”
Discovery (Idea Concept)
Development (Prototyping Manufacturing)
Launch Growth
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3. Grassroots Innovation
Grassroots Innovation – emerges from the grassroots.
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Grassroots Innovation: Cases
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Grassroots Innovation at Alcatel-Lucent
N. Camacho, I. Verniers, C. García-Pont and S. Stremersch (2012), Alcatel-Lucent: Marketing the Cell Phone as a Mobile Wallet, IESE Business School, Case M-1279-E. Link: http://www.iesep.com/es/alcatel-lucent-marketing-the-cell-phone-as-a-mobile-wallet-83845.html
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iTREK: Open Innovation with Students
Discovery (Idea Concept)
Development (Prototyping Manufacturing)
Launch Growth
Degree of Responsibility and Passion
R&D/ Engineering
Marketing
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Symbiosis Between Science and Market
“Stairway to heaven”
Market: Discover unmet customer needs and hypothesize how they can be solved
Science: Discover new technology and hypothesize how it can be used to solve user needs
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… From a Process Perspective…
The Shortest Distance From Lab to Market
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Market Hypothesis
Early Validation
Business Model
Learn and Adapt Learn and Adapt
When you make a business plan, the only thing you know for certain is you will not execute according to the plan
“Everybody has a plan until they get punched in the face.” Mike Tyson
Developing Your Market Hypothesis
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Market Hypothesis
Early Validation
Business Model
Learn and Adapt Learn and Adapt
How Do You Find What’s In the Horizon?
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“Prediction is very difficult…”
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“…especially if it's about the future.” Niels Bohr
Nobel laureate in Physics (1922)
Hypotheses from Observation
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“We found Koreans are the second hardest working people in the world. So we devised a way to have the store come to the people.”
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Hypotheses from Observation
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Hypotheses from Observation
Few
Many
Customer Intimacy, Not Customer Surveys.
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Early Validation of Your Market Hypothesis
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Market Hypothesis
Early Validation
Business Model
Learn and Adapt Learn and Adapt
Early Validation: Can Only Be Done by Doing It!
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“If you shipped your product and you’re not ashamed of it, you’ve probably shipped too late.”
Reid Hoffman Executive Chairman and co-Founder of LinkedIn
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Validation from Experimentation...
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Validation from Experimentation...
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Validation from Experimentation...
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Validation from Experimentation…
“Blockbuster” Roll-Out “Controlled” Roll-Out
Business Model
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Market Hypothesis
Early Validation
Business Model
Learn and Adapt Learn and Adapt
Business Model for Mobile Payment
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Consumer’s Bank (Card Issuer)
Payment Card Network
Merchant’s Bank
Merchant Consumer
N. Camacho and S. Stremersch (2012), Rabobank Corporate Netherlands: Turning the Smartphone into an Engine of Bottom-Line Growth, IESE Business School, Case M-1286E. Available from: http://www.iesep.com/
Business Model for Mobile Payment
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App-based Model
A Full Solution for Merchants
Software-as-Service
44 65 94 106.6
235 267
324 Avgerage Fare (EUR)
How Can Ryanair Fly You So Cheap?
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5.5 1
0
10
20
30
40
50
60
70
80
90
Advertising revenue per passenger
Subsidies
Credit card handling fee
Priority boarding
One bottle of water
Checking-in bagagge
Ticket price
Cost = EUR 70
Profit
Ryanair Economics: London-Barcelona
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In Summary: The Hot Spot of Commercial Success
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Market Hypothesis
Early Validation
Business Model
Learn and Adapt Learn and Adapt
A Great Solution
Unmet
Customer
Needs
$trategy
Generating
Profit$
No Profit Failure
No-Customer Failure
Competitive Failure
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In Summary: The Hot Spot of Commercial Success
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Learn and Adapt
Learn and Adapt
Market Hypothesis
Early Validation
Business Model
A Great Solution
Unmet Customer
Needs
$trategy Generating Profit$
In Summary: Conclusions
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• Grassroots innovation: essential in a firm’s innovation strategy to fuse market and science
• Formalize functional co-operation: Avoid highway to hell
• The only thing you know for certain is you will not execute according to the plan
• In innovation, prepare for failure. Otherwise, you are not innovative enough
• Learn & ADAPT!
• Customer Intimacy, not customer surveys • Validate quickly by doing it on limited scale • Pricing and costing is an integral part of the innovation
process not the job of specialists
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