Developing and Managing a Developing and Managing a Successful Successful

Innovation Strategy Innovation Strategy

Effective Innovation Strategies Answer Effective Innovation Strategies Answer Three Key Questions:Three Key Questions:

How will we Create value?

How will weCapture value?

How will weDeliver value?

Reasons to have an Reasons to have an innovation strategy:innovation strategy:

1. 1. To make choicesTo make choices

Overcommitment destroys Overcommitment destroys productivityproductivity

Average

Value-Added

Time on

Engineering

Tasks

Number of Projects per Engineer

100%

80%

60%

40%

0%

20%

65431 2

Reasons to have an Reasons to have an innovation strategy:innovation strategy:

22. . To be able to change itTo be able to change it

The SThe S--curve Maps Major Transitionscurve Maps Major Transitions

Performance

Time

Ferment

Takeoff

Maturity

Disruption

Transitions often challenge existing Transitions often challenge existing organizations severelyorganizations severely

Transitions are hard!Transitions are hard!

Answers to the key strategic questions: Answers to the key strategic questions: –– How do we create value?How do we create value?–– How do we capture value?How do we capture value?–– How do we deliver value?How do we deliver value?

CHANGE!CHANGE!

A map of the course….A map of the course….

Ferment

Takeoff

Maturity

TechnologyMarkets

CompetitionOrganization

Value CreationValue Creation

The nature of technical work changesThe nature of technical work changes

Performance

Time

Will it work? Exploration, fun, creativity key

Can we make100,000?And service them?

We need to be responsive & flexiblebut controlled

Will it work? Exploration, fun, creativity key

The marketing challenge evolvesThe marketing challenge evolves

Performance

Time

Who needs this?

Do we haveany referencecustomers?

Stay close to yourcustomer – really close

Who needs this?

Some new technologies sell to niche markets Some new technologies sell to niche markets with less demanding requirementswith less demanding requirements

Value CaptureValue Capture

Uniqueness & Complementary Assets Uniqueness & Complementary Assets over the Life Cycle:over the Life Cycle:

The ways in which a firm captures value also The ways in which a firm captures value also evolve dramaticallyevolve dramatically

Performance

Time

Speed, IPDifferentiation,Frontier performance key

We can sell it, make it, service it, ship itMost of the time

We may not be leading edgebut you’d rather buyfrom us because…

Speed, IPDifferentiation,Frontier performance key

Value DeliveryValue Delivery

Competencies evolve over time,Competencies evolve over time,creating “competency traps”creating “competency traps”

Performance

Time

Ferment

Takeoff

Maturity

Growth?

Change challenges every aspect of an Change challenges every aspect of an organizationorganization

Leadership & Strategy

Structure &Process

Incentives

Culture & Mental Models

But strategically, growth must build on But strategically, growth must build on existing assets…existing assets…

Control & Coordination

The Organizational Challenge:The Organizational Challenge:

EntrepreneurialDrive,Freedom from the “old ways”

Successful growth unites entrepreneurial insight with

effective coordination

StartupsStartups

B as UB as U

What can be done?What can be done?

Problems in RecognitionProblems in Recognition(problems in strategy?)(problems in strategy?)

Growth opportunities do not arrive with labels on themGrowth opportunities do not arrive with labels on themForecasting the future of technology is hardForecasting the future of technology is hardForecasting customer needs and market demands is Forecasting customer needs and market demands is even hardereven harderGrowth opportunities often look less profitable than the Growth opportunities often look less profitable than the current businesscurrent businessDeep rooted mental models may make even “easy” Deep rooted mental models may make even “easy” recognition difficultrecognition difficult

Some discontinuities will pose harder Some discontinuities will pose harder problems than others:problems than others:

New needs

Old needs

Lower marginsHigher margins

Problems in ResponseProblems in Response(problems in organization?)(problems in organization?)

Fear of CannibalizationFear of CannibalizationTime horizons & IncentivesTime horizons & IncentivesOverloadOverloadCompetency TrapsCompetency Traps

What can be done?What can be done?LeadLeadStructure Structure IncentIncentTransform the culture & mental modelsTransform the culture & mental models

Where we go next:Where we go next:Dealing with discontinuities:Dealing with discontinuities:–– SynthesSynthes–– Allied ChemicalAllied Chemical–– DonnelleyDonnelley–– Xerox Technology VenturesXerox Technology Ventures–– Corporate ventures @ Procter & GambleCorporate ventures @ Procter & Gamble–– Ciba Ciba GeigyGeigy/Alza/Alza

The mechanics of doing strategyThe mechanics of doing strategy–– MedtronicsMedtronics–– Kirkham Kirkham InstrumentsInstruments

Pulling it all togetherPulling it all together–– KodakKodak–– NokiaNokia