competing on innovation - concept discussion- pgpex - dec 15

COMPETING ON INNOVATION

Professor Ranjan DasProfessor of Strategy, Innovation, Entrepreneurship and Leadership &

Chairman – The Strategy Academy

• The Strategy Academy • IIM Calcutta • IIM Ranchi [ Visiting : 2014-15]• IIM Trichy [Visiting : 2014-15]• Indian School of Business, Hyderabad [Visiting : 2008-09] • Hong Kong University of Science and Technology, Hong Kong [Visiting : 2005-06]• Haigazian College, Beirut, Lebanon [Visiting : 1979-80]______________________________________________________________________

The Strategy Academy A Prof Ranjan Das Creation

Live the NOVELTY│ Feel the DIFFERENCE │Make an IMPACTwww.thestrategyacademy.org

M: +919830052722; EMAIL: [email protected]

COMPETING ON INNOVATIONPROGRAM DESIGN

• 10 Sessions [2 sessions per day] – to be detailed in the next 2 slides• In general, in each session, there will be 3 components:

– Concept discussion/ Q&A based on faculty PPT, distributed in advance– Group exercises [in most classes] – one case study in each session of

90 min – Faculty feedback on each case, after the group exercise on the

concerned case is over• Evaluation:

– Group exercise: 40% [ it is expected that 8 group exercises will be completed over 10 sessions each of 90 mins duration]

– Group Project – 30% [application of concepts in specific industry setting – to discuss details later]

– End term exam – 30%

COMPETING ON INNOVATIONSession-wise Content & Cases

Session Discussion topics and Cases

1 Concept of Innovation and different types of innovationTypes of Innovation

2 Getting ideasWhere to look for ideas: Insights Case: Nypro – Product and Process Innovation

3 Product innovationMaking connection across seemingly unrelated fields and disciplinesCase: TCL – Product InnovationCase: HP – Failure to develop innovative product

4 Competition and innovationBusiness Model innovation From blank page to insightCase: Harley Davidson – meeting global competition through innovation

5 Disruptive InnovationMeeting the challenge of disruptive innovationInnovation StrategyYou need an innovation strategyCase: Nintendo – Disruptive Innovation

6 Strategic InnovationA Framework for Strategic InnovationCase: [1] Taxi for Sure, [2] Google Inc 2014 [abridged]



7 Growth through new business development and organizational changesRead:Creating new market spaceCase: Alibaba

8 Innovation against the backdrop of complex operationsRead:Overcoming hidden barriers to innovation Case: LEGO – Innovation in complex operational context

9 Innovation supporting social changeRead:Disruptive innovation for social changeCase: Godrej – Social Innovation

10 Concept Discussion: Making Innovation happen in an organization – structure, system, leadership and culture issuesCase: Managing Disruptive Technological Change – The fictional case [but close to reality] of Electric powered vehicle



1 Context and Concept of Innovation and different types of innovationTypes of Innovation






SESSION 1Context and Concept of Innovation

and Different types of Innovation

WHY DO GREAT COMPANIES FAIL?

LATE 70s 2000AUTOMOBILE GM TOYOTA

AIRLINES PAN AMERICAN SIA, SWA

TYRES FIRESTONE, GOODYEAR BRIDGESTONE, MICHELIN

IT IBM MICTOSOFT, GOOGLE

SEMICONDUCTOR TI, MOTOROLA INTEL

DECLINE OF THE STAR PERFORMERS

SATISFACTORY UNDRPERFORMANCEPerformance

Path of Competitive Decline Time

ROADMAP TO OBLIVION

PERFORMAMCE The Moment of Truth

X TACTICS –SHORT TERM Performance freefall

TIME Clear Sailing Denial and defense Downfall

Today’s Performance

Tomorrow’s Actual Performance

Inferior

Value

Doomsayers’ Projections

WHY DO GREAT COMPANIES FAIL?

INABILITY TO ESCAPE THE PAST INABILITY TO INVEST IN THE FUTURE

Unparalleled track record of

success

Accumulation of abundant resources

Optimized business system

Success confirms strategy

No gap between expectation and

performance

A view that resources will win

out

Deeply etched recipes

Momentum is taken for

leadership

Contentment with current performance

Resources substitute for

creativity

Vulnerability to new rules

Failure to REINVENT leadership

FAILURE OF SUCCESS PHENOMENA – 7 STAGES

S1: SUCCESSFUL BUSINESS STRATEGY

S2: MANAGERS BEGIN TO BELIEVE THAT THEY ARE GOOD

S3: BUILD LAYERS OF BUREAUCRACY WITH GROWING SIZE AND COMPLEXITY

S4: RISING EXECUTIVE ARROGANCE AND INTERNAL CONTRADICTIONS

S5: STIFLING OF INITIATIVE

S6: GRADUAL DECLINE TO SATISFACTORY UNDERPERFORMANCE

S7: CRISIS

1. Large companies take long time to change

2. Effective companies make dramatic turnaround and change within a short time

CONTEXT OF INNOVATION• Looking at the decline of many well known brands and

companies, it is clear why great companies stumble . • Some obvious reasons are: incompetence, bureaucracy,

arrogance, poor planning and short term investment horizons• Even best of managers are not able to come up with

innovations , despite massive investment of management time and money. In general, innovation remains a frustrating pursuit in many companies.

• One reason for failure to come up with innovative ideas is lack of conceptual clarity regarding different types of innovations and conditions under which each such innovation can take place. Lack of appreciation of the underlying concepts and framework leads to failure to effect successful innovation needed to sustain competitive advantages.

Concept of Innovation and different types of Innovation‘

• Innovation is embodiment, combination and/or synthesis of knowledge in original, relevant , valued new products, processes or services

• Different scholars have introduced different types of innovation. As can be expected, definition of each of these innovations often overlaps. These are:– Innovation – A common classification [Continuous innovation, process

revolution, product or service innovation]– Innovation – 2 way classification: Incremental and radical– Innovation – 4 way classification: Incremental, Architectural, Modular and

Radical – Business Model Innovation– Sustaining and disruptive innovation– Strategic innovation

Innovation – A common classification

DIFFERENT TYPES OF INNOVATION• CONTINUOUS PROCESS IMPROVEMENTS

– Involves countless small investments in incremental process innovations

– GE’s Six Sigma initiative is a method to promote continuous process improvements

• PROCESS REVOLUTIONS– Also improves current businesses but in major leaps – say 30 %

increase in productivity through implementation of major technologies– Wal-Mart investing in RFID for tracking inventory

• PRODUCT OR SERVICE INNOVATIONS– New product or services ideas that will meet new needs of existing

customers but will not alter the business model altogether – Dual core technology vs. earlier technology

INNOVATION – 2 WAY CLASSIFICATION

Incremental INNOVATION

• Incremental innovation aims to exploit existing forms or technologies. It either improves on something already existing or reconfigures an existing form or technology to serve some other purpose

• Intel P 4 is an incremental innovation over P3, since both are based on the same fundamental technologies. P4 incorporated design improvements and new features that enhanced cheap performance.

• An example of a new use of an existing technology is Global Positioning Satellite –GPS – which is used in a variety of applications starting from automobiles

Incremental INNOVATION: Points to remember

• Since radical innovations [defined in subsequent slides] involve risks, expense and long time horizon, most established companies tend to pursue incremental innovation which is safer, cheaper, and more likely to produce results in the short run. By one estimate, 85-90% of R&D portfolios of most companies are made up of innovation projects that are incremental in nature

• While incremental innovations provide business with steady streams of new, varied and improved products and services, incremental innovators must observe 2 cautions:– Avoid adding unnecessary features for the sake of it making the life difficult for

customers [because they have to re-learn] and also new version becomes more costly . As a matter of fact, if this practice is unchecked, new competition will come up with new innovation and compatible features will be made available at lower price [Linux is an example]

– Since incremental innovations cannot hedge against risks posed by a competitor coming up with radical innovation, find a balance between incremental and radical innovation while allocating resources [Kodak and Polaroid focused too much on instant – chemically coated - photography and forgot to invest in digital imaging]

Radical INNOVATION• Radical innovation brings something NEW to the world and a distinct

departure from existing technology or method. The terms discontinuous or breakthrough are often used as synonyms for radical innovation

• An example: The transistor technology developed by Bell Labs represented a radical innovation that undermined the dominant players of electronics industry who were deeply committed to vacuum technology. Digital imaging that replaced chemically coated technology of Kodak and others is another example. Digital imaging in fact almost killed the sales of photographic films

• In general, radical innovation is an innovation that has one or more of the following characteristics:– An entirely new set of performance features– Improvements in performance features of 5 times or more– A 30% plus reduction in cost

An industry time-line of radical and incremental improvement

Performance/CostImprovement

Radical Innovation

Time

Incremental and Radical Innovations: Meaning of PROCESS INNOVATIONS

• Process innovations are as important as product innovations• Process innovations can lower cost of production, distribution and

services by reducing/ eliminating number of unnecessary/ disconnected process steps.

• Glass making technology originally comprised several separate steps such as mixing and melting ingredients, creating glass ingots, annealing finally grinding and polishing the ingot, making it slow, high labour and energy consuming and expensive. In 1960s, FLOAT GLASS process was introduced by Pilkington that combined all the just mentioned steps into one automated process and flawlessly smooth finished products emerged at the end of the process. The costly grinding and polishing steps were eliminated and Pilkington enjoyed competitive advantage for many years

Incremental and Radical Innovations: The Product-Process Connection

• It is one thing to create an innovative product or service; its another thing to create a process capable of delivering or manufacturing the said product/ service at a price that the target market will accept.

• Thus, innovations in products/ service must wait till required process innovations, required to get market traction, are put in place

• A good example is P&G’s diapers. While the product development did not take much time, the process of manufacturing - required to produce this multi-part, multi-material product in huge quantities at a price acceptable to target customers– took long time to streamline.

Incremental and Radical Innovations: Defining Service Innovations

• Service innovations sometimes produce breakthrough business models [discussed later]

• Some examples:– Dell skipped the middlemen and sold custom configured

PCs to customer within 24 hours of receiving orders, though the product PC was same as that of any other competitor

– SW Airlines: Emphasized low fares, frequent service and fun in its service delivery though the core product viz. ‘safe and on-time departure’ remain same as that offered by any other airline

Incremental, Architectural, Modular and RadicalINNOVATION

• Incremental – Radical dichotomy alone was not enough to explain what company would be in a better position to innovate and under what circumstances.

• For instance, why some incumbents would fail to catch something as straight-forward as some incremental innovations, just like Xerox failed to develop a small plain-paper copier even when it was the leader in xerography technology.

• This indicates the need to divide the technological knowledge required to develop new products, and consequently to introduce innovations, along two new dimensions: knowledge of the components and knowledge of the linkage between them, called architectural knowledge.

INNOVATION – 4 WAY CLASSIFICATION

Incremental, Architectural, Modular and RadicalINNOVATION: An Example

• Incremental innovation will build upon existing component and architectural knowledge. If we consider the hard disk, an improvement in the magnetic disk capacity and a faster rotation speed represent two examples of incremental innovation.

• Modular innovations will require new knowledge for one or more components, but the architectural knowledge remains unchanged. Around the 1980s most hard disk manufacturers substituted the ferrite read/write heads with thin-metal heads; this is a clear example of modular innovation


• The opposite of modular innovation is the Architectural Innovation. This type of innovation will have a great impact upon the linkage of components, but the knowledge of single components will remain the same.

• The hard disk industry went through several waves of miniaturization, the first mainframe computers were packed with 14-inch diameter disks, after some years the industry came out with 8‘, 5,25‘, 3,5’ and 1,8‘ disk drives. Each and every time the size of the hard disk diminished the knowledge of the linkages between components was evolving, while the single components were using pretty much the same technology, as a result we classify such changes as architectural innovations


• When a certain innovation revolutionizes both component and architectural knowledge it will be a Radical Innovation.

• Once again if we consider the hard disk industry one example of a radical innovation was the passage from magnetic to optical technology. The introduction of the laser in the disk drive industry required not only new components but it also changed the configuration of such components inside hard disks


• Even if some innovations might appear incremental at a first sight this may not be the case, it is necessary to analyse how it impacts both component and architectural knowledge.

• Companies, therefore, must be careful in distinguishing between incremental and architectural or modular innovations because the competencies and strategies required to exploit one might not suit perfectly the other, if at all.

• Canon was able to invade Xerox’s turf because it developed the right architectural knowledge required to re-design the photocopier machine with smaller dimensions

Incremental, Architectural, Modular and Radical INNOVATION: Another Way to describe

BUSINESS MODEL INNOVATION[to be discussed later in details]

• There is limit to growth and profitability based solely on product and process innovation. Also, many a time product and process innovations are time consuming and huge upfront investment in R&D, specialized facilities etc.

• Many companies are hesitant to make huge bets involved in product and process innovation and instead turning towards business model innovation either as an alternative to product/ process innovation or to complement the same

• Business model innovation can consists of adding/ deleting activities, linking activities in a new way or changing the service providers to perform an activity in a different way. The focus is on taking a fresh look at segments of customers to be served, core value proposition and/ or value delivery processes.

• Novelty, lock-in, complementarities and efficiency are major value drivers in business model innovation

Sustaining and disruptiveStrategic innovation

[to be discussed later]

SESSION 2: Getting Ideas & Insights

• In 21st century, innovators are demanded everywhere and not just in R&D Labs, a design group or a start up venture. Today innovators are in demand in from factory floor to the salesroom, from IT Help desk to HR Department, from employee cafeteria to C-Suite.

• Innovation thus is not a department. It is a mindset that must permeate the entire enterprise.

• Feedstock for innovation is INSIGHT – an imaginative understanding of an external or internal opportunity that can be tapped to generate revenue or improve productivity or boost engagement.

• Such an INSIGHT can relate to stakeholders needs, market dynamics or even how value is created and delivered

• INSIGHTS are useful since few people can find great ideas on a blank canvas. Most of us need our imaginations channeled.


• While INSIGHT can be powerful, how does one finds the same. Obviously, some INSIGHT can emerge by chance but it is indeed possible for individuals to approach innovation through INSIGHTS in a systematic way.

• A research shoes that there can be up to 7 INSIGHT CHANNELS that can be used by an organization or an would-be-innovator in any function or role.

• One can focus imagination, organize thinking, spur creativity and find valuable ideas for growth by periodically tuning in to these channel and methodically running through them


1. ANOMALIES – Examine deviations from the norm– Do you see unexpectedly high or low revenue or share in a

market or a segment? Surprise performance from a business process or a company unit?

2. CONFLUENCE – Find macro trend intersection– What key economic behavioural, technological or

demographic trends do you see? How are they combining to create opportunities?

3. FRUSTRATIONS – Pinpoint deficiencies in the system– Where are customer pain points for your products,

services or solutions? Which organizational processes or practices annoy you and your colleagues?


4. ORTHODOXIES – Question conventional beliefs– Are there assumptions or beliefs in your industry that go unexamined?

Toxic behaviours or procedures at your company that go unchallenged?

5. EXTREMITIES - Exploit deviance– What can you learn from the behaviours and needs of your leading-

edge or laggard customers, employees or suppliers?

6. VOYAGES – Learn from immersion elsewhere– How are your stakeholders’ needs influenced by their socio-cultural

context? You can get insights by visiting stakeholders in their setting

7. ANALOGIES – Borrow from other industries or organizations– What successful innovations do you see applied in other disciplines?

Can you adopt them for your own?

GROUP[ EXERCISE - NYPRO








6 Disruptive InnovationMeeting the challenge of disruptive innovation

7 Innovation StrategyYou need an innovation strategyCase: Nintendo – Disruptive Innovation

SESSION 3: CONCEPT DISCUSSIONProduct innovation: Making connection across

seemingly unrelated fields and disciplines• As Steve Job said, “Creativity is CONNECTING the UNCONNECTED”• Innovators often have a taken-for-granted skill called ASSOCIATING that enables

them to make surprising connections across areas of knowledge, industries and geographies and help them pursue diverse NEW information and ideas through questioning, observing, networking and experimenting

• A good example is Salesforce.com which was World’s most innovative company in 2014 [according to a research done by Forbes].Seeing the growth of Internet in late 90s, the FOUNDER Benioff, then working at Oracle, asked some basic questions viz. “Why are not all enterprise software applications built like Amazon and e-bay? Why are we still loading and upgrading software the way that we have been doing all the time when we now have the Internet? [ remember, Amazon and e-bay were totally disconnected to enterprise software business].

• Benioff synthesis or association – “enterprise software meets Amazon” challenged the industry tradition of selling on CD-ROMs and engaging companies in lengthy and expensive installation process. He started delivering software as a service over the Internet 24x7. He also saw opportunities in SMB ignored by Oracle or SAP


seemingly unrelated fields and disciplines• Benioff started asking recently: Why isn't enterprise SW [including

salesforce.com] is like FB? [another association that has nothing to do with SW]. This led to creation of CHATTER, a new social SW application that is referred to as “FB for business”.

• Chatter takes the best of FB and Twitterand apply it to enterprise collaboration. Chatter helps people see easily what individuals and teams are focusing on, how projects are progressing and what deals are closing.

• Chatter changed the way companies collaborate on product development, customer acquisition and content creation by making it easy for everyone to see what everyone else is doing. Need for emailing each other ref the same project gets eliminated.

• Example like salesforce.com shows that adoption of following 3 steps can help in getting ideas using the principle of ASSOCIATION:– Associating: What is the meaning – Associating: Where it happens and – Associating: How it works

SESSION 3Product innovation: Making connection across

seemingly unrelated fields and disciplines• Associating: What is the meaning • It is an ability to connect and cross- pollinate ideas – own as

well as those originating from multiple fields such as people, industry, objects, services, technologies and disciplines and develop new and unusual innovations

• Disney, Apple, Virgin and Amazon are companies where such associating skills required to cross-pollinate ideas are very common. Sony’s Walkman came up this way.

• Innovators think differently to associate ideas originating from different fields based on their ability to associate, a cognitive skill which is at the core of Innovator’s DNA.. One can develop such a cognitive skills as discussed later


seemingly unrelated fields and disciplines• Associating: Where it happens - finding the NEW idea • As mentioned, innovative ideas flourish at the intersection of diverse

experience, whether it be others or are our own. More diverse is the mix of experience, more will be the possibility of surprise developments occurring out of synthesis of these ideas

• Innovators tend to focus intentionally at the intersection where diverse experience flourish and foster the discovery of new ideas. Successful innovators can see and feel a spark that occurs in a geographic space or market space where a combination of novel ideas brings to surface quite surprising outcomes

• Identifying the diverse experience sets that are likely to contribute in getting fresh ideas and then immerse oneself in the same with an objective to generate ideas at the intersection is a critical skill of all innovators


seemingly unrelated fields and disciplines• Associating: How it works• To understand how innovators get ideas vs. non-innovators, it is important

to know how our brain works. Research has established that more diverse knowledge the brain possesses, the more connections it can make when fresh additional inputs of knowledge enters the brain and such fresh inputs trigger the association with diverse knowledge the brain already possesses and creates novel ideas

• Such “unexpected” associations are powerful and act as supplements to data when working through a problem or a challenge.

• Analogies and associations are critical creative tools to help innovators generate strategic insights.

• When brain is actively absorbing the new knowledge, it is more likely to trigger connection between ideas to synthesize novel inputs.

• Brain’s “associating” muscles get more and more developed through the active practice of observing, questioning, networking and experimenting


seemingly unrelated fields and disciplines• Associating: How it works [continued]• All innovators are better at “associating” than non-innovators and a good predictor

of such an excellent skill are observing, questioning, networking and experimenting. For example: – Benioff [founder – salesforce.com]showed this orientation [when he asked Why

isn't enterprise SW [including salesforce.com] is like FB? – RIM founder got the idea for the Blackberry at a conference as he listened to

someone talk about future trends in wireless data transfer– Starbucks founder got the idea for Starbucks as he was observing expresso bar

in Italy.• Innovators [particularly the ones who come up with disruptive ideas] shine best at

associating when actively crossing all kinds of borders [ geographic, industry, company, profession, discipline and so on] and engaging with other innovator’s DNA skills

• Finding the right questions, making compelling observations, talking with diverse people and experimenting usually deliver productive, associational insights


seemingly unrelated fields and disciplinesHUNTING FOR NEW ASSOCIATIONS [CRITICAL FOR GENERATING INNOVATIVE IDEAS]:•Creating odd combinations•Innovators often try to put together seemingly mismatched ideas to compose surprisingly successful combinations. •RIM founder Lazaridis learnt to connect ideas across disciplines early in life – for example, he was a student of both advanced maths and electronics and kept bridging the gap between the two by applying the concepts learnt in maths in electronics and vice versa. While in college, he also came to realize that computers and wireless technology will soon get integrated and BB was born•Similarly Google was launched Larry Page created an odd combination by connecting two seemingly unrelated ideas – academic citation [ he knew how academic citations are ranked, since he was a PhD student at Stanford] with web search. Google could set up its web search engine service which ensured that websites with most links [that were most frequently selected] had more citation.•Similarly e-bay founder got ideas regarding how to ship perishable products rapidly to consumers, without damage, from post offices whose staff visit every household almost daily [at least before email and WhatsApp became popular]


seemingly unrelated fields and disciplinesHUNTING FOR NEW ASSOCIATIONS [CRITICAL FOR GENERATING INNOVATIVE IDEAS]:•Zooming in and Zooming out•Innovators do two things together – [a] they deep dive to understand the subtle nuances of a particular customer experience and [b] they fly high to see how the details fit the big picture•Synthesizing these two often results in surprising assumptions•Skype founder Zennstrom maintained that such a lateral think is a must for innovation. Steve jobs, facing problem with plastics part of the first Mac computer, visited shops selling products with plastics components. He could solve the plastic problems of Mac after he discovered a food processor that has many plastic part of the types Mac needed•Jobs also could combine learning from Pixar [a media company that he owned] and computer industry and applied the same while developing a framework for internet based music distribution as well as invention of such products as iTune, iPhone or iPad.•Lego thinking

•A SAFE PLACE FOR NEW THOUGHTS


seemingly unrelated fields and disciplinesHUNTING FOR NEW ASSOCIATIONS [CRITICAL FOR GENERATING INNOVATIVE IDEAS]:•Lego thinking•Innovators have one thing common – they love to collect ideas [like kids love to collect legos]. •Best way to get ideas is to get a lots of ideas, because getting lots of ideas from lots of different sources create context for innovation•Innovators who frequently engage in observing, questioning, networking and experimenting become far more capable at associating because they develop experience at understanding, storing, and re-categorizing all new knowledge gathered. •In most cases, innovators rarely invent something totally new; they simply re-combine the ideas - they get from various sources – in new ways , allowing them to offer something new to the market. The abilities of observing, questioning, networking and experimenting help innovators slowly build larger, richer stocks of building-block ideas, which when combined and recombined create innovative products, processes and services.

•A SAFE PLACE FOR NEW THOUGHTS


seemingly unrelated fields and disciplines• A SAFE PLACE FOR NEW THOUGHTS• innovators get ideas mostly through the process observing, questioning,

networking and experimenting but such ideas rarely get generated during a formal problem solving meeting when discussions normally take place in a focused, convergent manner.

• Actually, ideas are generated when innovators are not “trying” to solve any problem [called defocusing phase]. For example, many innovators got their ideas during “shower” . In general, innovators get new ideas when walking, driving, on vacation, sailing or in the middle of the night

• These innovators get ideas in this way because they get more creative by giving themselves space for generating ideas and also a longer time frame to think. In this way, the innovators are able to improve their chances to connect the unconnected.

GROUP EXERCISE: TCL & HP

SESSION 4: COMPETITION & INNOVATIONBUSINESS MODEL Innovation

• A business model [BM] is much more than a description of a particular product or service.

• A BM lays down: A. The targeted group of buyers ,B. The value proposition for the chosen targeted group of buyers , C. How such a value will be created and delivered and D. Capability and resources underlying the said value creation and delivery

processesE. H ow the organization proposes to capture part of the value it will create for

the target group of buyersF. How the organization will get economic returns [such as EBITDA% and ROIC]

• Thus a BM is much more than a product/ service. It provides opportunities for innovation across the entire value chain as well as how does the business interact with value chain partners to finance, produce, market and distribute the product/service. An example is Dell. It could make a breakthrough because of its BM

SESSION 4: COMPETITION & INNOVATION BUSINESS MODEL Innovation

• Given the definition of BM as just mentioned, 6 key stages of BM innovations are: I. Exploration – ref customers/ end users who will be at the receiving end of value

creation; it will require not just past data but also immersion and active research into people’s lives and experiences

II. Pattern-finding – to make connections, find patterns and draw new conclusions regarding the ways customers/ end users think, feel, make purchase decisions, consume and reorder; patterns will emerge when live experiences are related to vast range of research and past data

III. Concept development – to conceive a desired experience, form several hypotheses and then flesh out the until a more concrete construct comes out. Collaborative teamwork helps create hypothesis and ideas since multiple voices and multiple inputs are accessed this way.

NOTE: [A] The new concept must clearly articulate the key assumptions being made ref customers, competition and value delivery method; [B] the new concept must pass 4 tests – value test [will someone buy at the proposed price point], execution test, scale test and defensibility test


IV. Prototyping –it is an iterative cycle of activities that transforms concepts into feasible, testable models. The purpose is to create visual [and sometimes experiential] manifestations of concepts that can be progressively refined and tested with users and socialized with a broader organizational audience

V. Piloting – live piloting will determine feasibility of the model. Some key questions will be:– What can I do tomorrow to move the new idea into action and out of analysis?

Describe the first step.– Who might I approach as a potential customer? Collaborator? Value chain partner?– For each of the key assumptions, what new facts, if known, would cause me to alter

my assumption.– How will I recognize success? What are the specific behavioural metrics I want to pay

attention to?

VI. Scaling – required to fully exploit the potential of the business model covering all components of the model [A to F]


• In a highly inter-connected world, in which resources are scarce, entrepreneurs and managers must look beyond products and services and see how to innovate their business model. The introspection can help in discovering new revenue and profit stream.

• Following SIX Questions can be asked examining a NEW business model:1. What perceived need can be satisfied through the new model?2. What novel activities are needed to satisfy these perceived needs? [business model content

innovation] 3. How can we link the required activities to each other in novel ways [business model structure

innovation] 4. Who should perform each of the activities that are part of the proposed business model?

Should it be the company? A partner? The customer? What novel governance arrangements can enable this structure? [business model governance innovation]

5. How is value created through the novel business model for each of the participants?6. What revenue model fits with company’s business model to appropriate part of the total

value created?

Business Model Innovation: An example from traditional book publishing industry

• Traditional book publishers found that even though the number of e-readers – using Kindle and iPad – are increasing at a rapid rate and Google and other competing content and information have stimulated consumer interest in electronic formats, the time consuming and expensive traditional book publishing process had not changed in many decades.

• Noting this developments, publishers started searching for solutions to meet the emerging demand for creating and delivering digital content on portable devices while preserving and enhancing value

• Meeting the demand of digital content will require publishers performing new activities [business model content innovation]. With this development, demand for hardcover/ paperback books will be on the decline and digital content becomes the norm, time taken to add a new title to a new catalogue and to bookstore shelves will be reduced.

• Accordingly, designing, uploading and maintaining the most complete online catalogue may become a central NEW activity in publishers’ BM


• Moreover, as traditional bookstores are less emphasized in their new business model, publishers will have to develop a NEW marketing activity to target retail buyers directly.

• Production will need to change as well and creating content with a digitally enabled streamlined process will be another NEW activity to be learned and to be incorporated in the new BM.

• Linking the various activities to each other, sequencing these linkages and deciding how different stakeholders will interact with each other in the new BM requires careful consideration [business model structure innovation]. For example, working arrangements with multiple digital distribution partners such as Apple and Amazon [who will distribute digital content to retail consumers] will affect breadth of the publisher’s access to the retail digital book market.

• The NEW linkages among content creators [i.e. authors] editors, other publishing professionals and distributors will constitute the heart of the new BM. These linkages must consider the alternatives available to authors – such as bypassing the publishers altogether –as well as approaches followed by competitors


• Deciding whether all the activities of the new business model will be carried out by the concerned publisher will require critical consideration of trade-offs [ new business model governance innovation]. For example, should the publisher’s digital content be delivered by publisher branded device or by proprietary devices like Kindle or iPad, thereby leveraging their existing position in the market? Or should content be delivered through Internet-based platforms compatible with a broad range of devices, enabling global distribution? These are crucial business model governance questions.

• Book publishers’ NEW business models will create value through complementarities and interdependence among activities and through enormous efficiencies in the publishing process that the new business models could generate.

• A number of alternative revenue models can be considered associated with these new BMs such as single subscription pricing independent of the number of downloaded manuscript, piecemeal pricing and/or value-based pricing for time sensitive publication [like first release of a highly promoted book

• The six questions help identify the ecosystem and networks in which any business operates

SESSION 4: COMPETITION & INNOVATION Concept of Creative Confidence

• There is a myth that creativity is limited to great authors, scientist, architects, musicians, sculptors etc. In reality, it is exactly opposite and one can be creative if one believes that we are all creative.

• Given below are 2 strategies that probably can help us increase our creative confidence:

Think like a Traveller:• During travelling out of our own country, we find things different and hence notice

every detail, from street signs to even how we pay at the restaurants.. We learn new things not because we are smart but because we pay attention. On a trip, we become our own versions of Sherlock Homes. We continuously figure out a world that in foreign and new. in fact, we see the world with fresh eyes.

• Rediscover the familiar with the eyes of a traveller – for example, if we stand in que at check out counter of a Super market and watch what people do – we will get new insight. In general, if we have beginners’ mind and eye in everything we do daily, we will get new insights from familiar setting


Think like a Traveller:•As we meet more people, we will have ‘idea flow’; the more ideas that cross our minds and field of vision each day, the greater our insights will be. A key challenge will be to increase the ‘idea flow’. A few sources will be: meet more people, read more journals, listen to new music, watch a new film, connect with people via social media•To keep our thinking fresh, we must seek our new sources of information. We need to go beyond traditional sources and get data sources with experts’ views, it can be incredibly energizing.•Study of different cultures and organizations can another source of inspiration and creation of ideas. For example, cross-pollination between departments, companies and industries can be useful for individuals working at the same job for a while. It is of course important to see new sources of understanding that our competitors are not studying.


Think like a Traveller:•If we get some set of new ideas, it is better to discuss the same with others rather than holding on to the same ourselves. Such a discussion with other people can provide additional insight and hence making it easier to go from a blank page to insight.Empathize with the end user•In most organizations, having many customers/ end users, there is a tendency to stereotype or depersonalize customers. They become numbers, transactions, data points on a bell-curve etc. while it helps understand the profile of market segments, it rarely captures the what individual consumer is looking for.•To get creative ideas, one approach will be to have empathy with the end user. Empathy is an ability to see an experience through another person’s eye, to recognize why people do what they do. When we have this ability, we can go to real life setting and watch people regarding how they interact with product and services and get ideas where things can be changed for betterment.


Empathize with the end user•Gaining empathy takes some time and resourcefulness, but there is nothing like observing the person we are creating something for, to spark new insights. When we specifically set out to empathize with our end users [implying that we got our own ego out of the way], we will find ideas for major innovations. In other words, empathy is a gateway to better and sometimes surprising insights that can help us distinguish our ideas or approach vs. competition.•NOTE: •Coupling the insights based on empathy with trends that can be seen based on analytics and big data will be the best way forward . The empathy will give ideas based on underlying human element while big data will give the trend in no unclear terms

GROUP EXERCISE – HARLEY DAVIDSON

competing on innovation - concept discussion- pgpex - dec 15

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