Innovation in the consumer market: new and disruptive concepts

As I wrote the last time, during the credit crisis companies continue proactively looking for innovations to growth their business value. However, the credit crisis has significantly changed the perspective of the consumer. Before the crisis the consumers are mainly driven by an almost unconscious impulsive buying behavior now the consumer’s attitude is mainly focused on deliberately making choices. Capgemini’s research (published in October): trends in Retail 2009-2010: uncertain consumers back to square one, it appears displays the purchase decisions on the knife-edge.

"Partly as a result of the economic instability perceptions and value sets of consumers are finally changed in the last eight months. In addition to the focus on so-called “price-set”, responsible “Choice-set” and the attractive alternatives became essential. Striking is that a good service (ease), and a high level of attractiveness (pleasure) of the formulas by the consumer to be regarded as a hygiene factor: they are not distinctive, but they will be missed if they are not directly be observed by the consumer. "

Companies of consumer products and services, would do well to proactively anticipate on the new trends and translate these in new concepts. However, I hear you thinking: this is much easier than done. And I will not deny that it isn’t easy to put successfully new concepts on the market, but it is certainly possible. Richard Brandson describe his successes in his book: Business Stripped Bare: Adventures of a Global Entrepreneur. I highly recommended this book. Despite the sometimes detailed descriptions of specific cases it makes it very clear what, according to Richard, what is the core to be successful by putting new concepts in, for him, new markets. I cherry-picked the following aspects:

• Never include a legacy of someone else, but start your own business
• Have patience, create great plans (large) but building the concept slowly
• New concepts needs to be as simple as to be executed in your own
• You need to stay full of passion for your own idea all the way
• Take every opportunity to clarify the new concept and be consistently
• Highly regulated environment will create medium results
• Take people on the basis of their mentality, skills training is always possible
• Teams are perishable and will continuous change of composites
  

The fun of the book by Richard Branson is that we in our innovation team, recognizes a great deal of his approach and experience the success in doing business.

Innovation Leader or Laggard?

Capgemini published a survey where 375 executives from Leading Innovator companies shared their vision on: Innovation as a Competitive Success Factor During Times of Economic Recession: a short inroduction of the report ...

Capgemini Consulting, in conjunction with HSM, the sponsors of the World Innovation Forum, conducted a survey of more than 375 executives on the subject of innovation. Traditionally, it seems that companies have used periods of economic downturn to cut back on the untested, focusing instead on ways to maintain the status quo at a lower cost. Given current global economic conditions, we were eager to find out whether innovation had lost its appeal. Would our respondents have similarly cut back during the current recession, we wondered?

We were pleasantly surprised to discover that this was not the case, especially for companies that consider themselves leading innovators. In fact, now more than ever, innovation is seen as a critical business priority, and a “must-have” to position for future recovery. As one interviewee described it, innovation is a matter of “organizational sustainability.” Leading innovators overwhelmingly agreed that they were using the current economic downturn as an opportunity to fundamentally transform their businesses.

Perhaps more important than the fact that companies were continuing to innovate was the extent to which innovation has evolved as a core principle for many businesses. Our interviews with successful innovators confirmed our hypothesis that successful innovation is embedded in the corporate DNA, rather than being treated as an extraordinary add-on by the organization.

Innovation leaders stressed the importance of organizational factors in supporting innovation: creating a learning organization; supporting a culture that encourages risk taking; rewarding smart failures as well as successes; encouraging continuous customer conversations; establishing formal innovation processes, and infusing employees throughout the organization with the spirit of innovation. None of these ideas is new. However, the challenge is to operationalize and execute on these concepts. Our respondents agree that while this is difficult, it is critical to long-term survival.

Some have fundamentally restructured the way their organizations do business to support innovation. Others propose new partnership models to support open source innovation and new methods of ideation and experimentation. Still others are making creative use of the global labor force and new collaborative tools to better serve their customers.

And it is all about the customer. Our respondents consistently agreed that innovative companies are always looking outward, focusing on how to better serve their customers’ needs, including currently unmet-, and even as yet unknown-, needs. New tools, technologies and media make it easier than ever to communicate with customers, and the most successful innovators are taking advantage of them to maintain meaningful customer conversations.

Innovators are also engaging customers earlier in the development process, shifting from a top-down research and development model to a bottom-up, decentralized model that takes advantage of customers’ first-hand insights. By creating constant conversations with their customers and practicing proactive listening, companies are better able to position themselves to be truly innovative."

We see that it becomes vital to see Innovation as a holistic approach to create future business value. With my team of Business Innovators a new Strategic Business Innovation approach is develeoped. We incorporate Business Model Innovation on strategic level with Operating Model Innovation and Commercial Innovation on a tactical level.

Strategic Business Innovation

View more documents from Koen Klokgieters.

Focus shift in Innovation: from Technology to Business Model towards Value Networks

For many of us, Innovation is still related to New Technology (Research and Development). From the global Laboratories the new technology race is heating up: Nano-thechnology, BIO-technology and several non existing technology combinations will bring huge future applications. Interesting surveys shows us that in past history economic crunch, large (global) wars will boost new technology. We can expect R&D spending will rise in the coming years looking for breakthrough innovation protected by Intellectual property (IP). New innovation methodologies like TRIZ will be used more. Only the large global companies will be able to raise significant R&D organizations and budget what is needed to sustain. In technology driven innovation, focus will be on R&D effectiveness: more innovation with spending less money and speeding up the time-to-market. That means hardness on non performing innovation projects, attract and retain top scientists and a rate race for start-up companies with state of the art technology.

But new technology is not enough in the world of successful breakthrough Innovation. Starting with new ideas like the Blue Ocean Strategy, Co-creation and Open Innovation companies are shifting focus from creating new technology to creating more money using different Business Models. Business Model Innovation is changing the way companies will earn money: different ways to create value than they are used to. It’s no longer true that breakthrough technology automatically means that the revenues will boost and the competition is beaded. Significant change in earning can be reached to shift your role and contribution in the value chain (for example low cost carriers in the airline industry and the new Apple concept). So know the focus will be on getting connected and innovate with the consumer (LEGO), co-create with partners and suppliers (P&G), intertwine existing value chains to new ones (Cirque du Soleil). It’s all about making more money with less investments and making the shareholders more happy. Therefore you need to integrate the ‘Golden Triangle’ of R&D, Operations and Marketing & Sales in the company and integrate Value Chains. New Innovation Strategy Implementation methods and Toolkits are needed. This way of Innovation is still a result of the last period of our Neo-Capitalism: create value for a happy few and outperform the enemies in the ‘free’-market.

A New Generation of people has started a much more sophisticated strategy for Innovation: creating new value with the crowd and accessible for everyone. The way they do it is building Value Networks. A Value Network is based on different core-values like: Authenticity, Experimentation, Mastery, and Connectedness. They are using new set of tools to get connected (like social networks), contribute on their own core competences (and getting status for) instead of what the boss is telling them to do, demanding a fair pricing and transparency of governance.

The success of innovation is based on much more variables than only money, it will be based on the volume of people and next generations who benefits from this innovation. The success will be visible in the term: Reputation. And reputation is a gift of members, connectors and users. Reputation is non-negotiable and will be endorse continuously. They will choose their own leaders and are flexible in the accept different role over time. The speed of creating , executing and the use of innovations will be incredible.

The great thing about a Value Network is that is exist and lives on a global level. Even currently closed global regions will be breaking open and joining up. National Governance and large and global companies will be bypassed in light-speed. This is what I will call a real breakthrough Innovation and it will benefits all who joins the Value Networks.

Innovation paradox: entrepreneurship versus the power of the corporate staff departments

International researches (as from 2006 up to and including most recent) indicates from that the members of the Council of Governing Board continue consider Innovation as the way to growth increase and secure continuity. The Credit Crisis hardly change anything in these thoughts.

The Top 3 most significant challenges for Innovation still remains: successful organizing innovation, increasing the speed of go-to-market and proving the profitability of innovation. Therefore, it is not a matter of new ideas but the realization of those ideas. In my opinion, the reason for this problem is caused by the phenomenon of:

The law of the Organization Gravitation.

The Organization Gravitation is the (economic and cultural) strength which prohibits organizational boarders to adapt to new ideas.

The key drivers behind this strength is the need of people to maximize continuity of their current status and maximizing security. If a critical mass of people in an organization sharing this need is reached, then they will be prepared to give up their individual freedom (free-thinking, experimenting, freedom of speech) for security provided by the organization.
This way company rules, control mechanisms, technocracy and bureaucracy occurs. The aim of company’s technocratic staff departments and corporate centers is carrying out the control and maintain the rules: watch-dogging the company’s status quo. And then the organization gravitation is born.

In practice the Organization Gravitation has proven not be a constant but dependent. As the new idea is proportionally more radical (further outside the existing frameworks of the organization) the organization gravitation will increase. As the outside world becomes more unsafe the organization gravitation will increase proportionally. As the lack of vision and leadership is stronger the organization gravitation will increase.

In practice we see beautiful examples of this law and its developments.
Radical innovation within the existing limits of large organization appears to be difficult. Dr. Axel Rosenø describes in the presentation “Developing Radical Innovation Capabilities in Established Firms” the tensions between the existing organization and radical innovation. Philips has chosen to spin out many innovations in order to avoid the Organization Gravitation (see also Henry Chesbrough and open innovation).
The insecurity in the outside world has increased enormously by the Credit Crunch. As a result, the (corporate) rules have increased enormously. We see a strong tendency of centralizing the power to the corporate centers with the aim far-reaching standardization, shared service centers and cost cutting projects. Nearly every organization starts to behaves as a herd animal: in search of the security and surviving in the herd. But now is the moment to step outside the herd and act anti-cyclics. Again in the world of first class innovation the example comes from discounter Ryanair: not in spite of, but thanks to the economic crisis we are able to manage significant discount for the purchase of new, better planes (Michael O'Leary, the director of Ryanair). Examples of lack of vision and leadership are not only restricted to the businesses but also in politics this is not an exception. Although Obama and Merkel give it a fair try.

If the Organization Gravitation has reached a certain scope a so-called Organization Black Hole is born: an organization with maximum closed borders and internal autism for renewal and entrepreneurship. The attraction of the Organization Gravitation is so strong that escaping becomes impossible is. Only a terrible impact (bankruptcy or take-over) can break open the borders. By then Entrepreneurs and Intrapreneurs probably have left the organization already.

How to Innovate the Macro Business Model

Up to now I focused my writings on innovation of Business Models of companies and their role in the Value Chain. The credit crunch and its effect on the real economy asked for a reflection on how to innovate the current Macro Business Models and the possibility to create a so called ideal Super Business Model on macro level.

The Russian Economist Nikolai Dmitrievitsj Kondratieff discovered in the early nineteen hundreds a economical cycle of fifty years in four different stages (seasons): Spring (starting up), Summer (consolidation), Autumn (stabilization) and Winter (liquidation). Eric Mecking (Universiteit Amsterdam, Deflatie in aantocht) recognized strong similarity between the situation of 1920-1929 and 1980-2000. These periods are also recognized as typical Autumn Seasons.
We are just at the beginning of the Winter Season and for the first time in the whole world at the same time. It will be much worse than today and it will be not over in just one or two years! On the contrary, based on the counter measures of National Administration (based on the old Business Model of one-faced value measuring and often extreme unequally value sharing) I expect they even enlarge the problem.

So it is time to Innovate the Macro Business Model (MBM) !!!

What are the key elements to change in the current MBM:

1. From extreme unequally value sharing towards a more balanced sharing. President from Brazil showed a nice example with his Bolsa Familia how he managed to implement the first steps to balance the value sharing. Its seems to work for Brazil.
2. From individual value measuring towards collective and sustainable value measuring. Noreena Hertz wrote about the change from Gucci-Capitalism to Coöp-Capitalism. The core values are based on cooperation and collective interests.
3. From absence of Government or overregulated Government towards a balanced and facilitating Government. In the VS the Administration is not endorsing basic human needs. President Obama showed that every 30 seconds a family is forced to lose their house because than can’t pay the medical bills. China bounds every economic model to operate freely. The EU suffocates entrepreneurship, innovation and risk taking with ridicule law and legislation. Administrations needs to develop new formats based on the balance between freedom and safety. It should be flexible, adaptive and therefore based on the courage of new generation of world leaders.
4. From one-side technology based innovation criteria towards holistic measurement instruments of Innovation. In many countries we measure innovation based on R&D spending, the amount of new IP and the volume of engineers. Successful innovations should be measured as I described in our Point of View on Business Model Innovation.

I strongly believe that all pieces of the puzzle are there but not in place. We need to co-create on a global level to reach out to a new Macro Business Model working for everyone and in any place. We need to step forward and show new leadership and entrepreneurship!

Does have Purchasing a role to Play in the success of Innovation?

In many organizations Innovation is the domain of Research and Development or Marketing. How come that Purchasing is almost not on the radar screen of innovation? And what may be the impact of this?

In the Master Thesis Strategic Purchasing and Innovation, written by Casper ten Cate from the University of Utrecht (Science & Innovation Management) in collaboration with Capgemini Consulting, an answer on the questions are given. In his survey, he handles 12 case studies of Purchasing Functions in organization of different market sectors. He shows a significant correlation between three factors regarding Purchasing and the impact of the success of innovation:

• Level of Strategic Purchasing
• Supplier Involvement
• Purchasing Integration
  

De hypothesis is validated that if all three factors applied in the organisation, contribution to the success of innovation is significantly.

In respect to this he describes four different patterns in the relation of Purchasing and Innovation:

Pattern 1: Achieving a contribution to innovation by purchasing:
Pattern 1 comprises those companies that have obtained high scores for ‘level of strategic
purchasing’ and high/medium scores for ‘supplier involvement’ and ‘purchasing integration’, as well
as a medium/high score for the dependent variable ‘purchasing & innovation’.

Pattern 2: No innovation via purchasing:
Pattern 2 includes the companies that have low or very low scores for the three independent
variables, as well as for the dependent variable. This applies to both of the Maritime and Harbour
Services companies. Contributing to firm innovation is not within reach.
These companies are currently busy defining the purchasing function and its position in their firm.
The majority of purchasing activities are operationally oriented, there is little room for long-term
issues or carrying out a purchasing strategy.

Pattern 3: Entrepreneurial purchasing:
Pattern 3 comprises the companies that have a medium/low score for the ‘level of strategic
purchasing’, but generally high scores for ‘purchasing integration’ and ‘supplier involvement’, and
also an above average score for ‘purchasing & innovation’. These companies – while large on a national scale – are relatively small compared to the other
companies in the case study and correspondingly have a relatively small purchasing staff. While this
means that the level of strategic purchasing is medium or low for these companies, it does mean that purchasing is inherently closer to the rest of the organization: purchasing is well integrated in both companies.

Pattern 4: Stuck in the middle:
Pattern 4 includes the companies that are typically in between the companies in pattern 1 and the
companies in pattern 2 in all the variables. They have medium scores for the ‘level of strategic
purchasing’ and medium/low scores for ‘supplier involvement’ and ‘purchasing integration’.
Furthermore, they have little contribution to firm innovation by purchasing. These are companies which do have a clearly defined purchasing function in place – albeit not on the
highest strategic level. Furthermore these companies involve suppliers to a certain extent and there
is some purchasing integration in the company. They have thus far been unable to achieve a
contribution to firm innovation by purchasing.

Another conclusion of this survey is the fact that the key bottle neck for Purchasing to contribute to the success of Innovation is the Purchaser him or herself!!! I wrote already that the business community is desperately looking for the New Generation Innovators, this is also very truth for Purchasing.

I like to invite you to watch our vision on slideshare:

Innovation Driven Procurement

Freedom of speech, transparency of information and new web technology: minimum basis for Open Innovative Society

In December Capgemini organized a round table session for clients in corporation with the Center for Inquiry of the United Nations and Mint Consultancy. The topic of the event was: “An more active role for companies in creating an open innovate society is vital for solving global social issues”

Several trends and developments describe the rise of an open innovative society. In this kind of society, there will be no differences between people and their role in the classic way of producer, consumer, owner, civilians and patients. Now the can play each role simultaneously. Key indicators for success are freedom of speech, transparency of information and the availability of new web technology.

Up to now this theme is mainly discussed in the academic world and global governmental organizations. The (global) business community is relative not active participating in the discussions and needed action to create an open society.
We organized this event to invite some of our clients like DSM and Friesland Foods to take their share in the process.

Our keynote speaker of the event was Austin Dacey. He is a philosopher who works as a United Nations representative for the Center for Inquiry, a think tank concerned with the secular, scientific outlook. He is also the author of the book: “The Secular Conscience”.

The key message of his speech is the power of the new concept Open Society: mobilizing the individual capabilities of people to create innovative solutions for social problems in the world. This new concept is also described by other new thinkers such as Charles Leadbeater in his book “We-thinking”. How to create an open society?

1. Create the core of a basic idea for a social problem: enough to work on, but with enough possibilities for additions.
2. Motivate and entice participants: treat the participants as ‘peers’ and not as employees, civilians or suppliers. Participants see their contribution as representing personal development and status. They are looking for concrete and practical benefits. Besides this, low entry barriers and user-friendly tools are essential.
3. The need for (virtual) meeting places: a place where people can work together interactively and where clear rules of ownership (getting, using and returning) are established, based on new web technology.
4. Self-distribution of work: an open working method based on high acceleration of the peer-to-peer review process that quickly identifies the good ideas and that can be elaborated upon.
5. Think LEGO: innovations are split into a series of modules that fit together and can be integrated. The integration is regulated on the basis of clear, simple and centrally created design rules. These rules and protocols make it possible to allow mass innovation.
6. A new form of leadership: these are no traditional corporate chief executives ore political party chief, but leaders with characteristics such as modesty, willingness to remain in the background, self-confidence, strong norms and values, passion and attachment. Their specifically top-down style of leadership makes large-scale, decentralized, bottom-up innovation initiatives possible.

Based on the ideas of Austin the participants discussed the role and responsibilities of business organizations. There are many road blocks ahead:

• Large companies have already great difficulty to create this concept within the boundaries of their own organization, let alone to organize this beyond their boundaries.
• Companies have to accept the paradox of interest: short term profit based on constrains in transparency versus long term value based on openness.
• Many employees fighting the paradox of Security versus Freedom. People give up (personal) freedom to Executives, Financers, Governments in order to take key decisions and accept the consequences. In a lot of places in the world there are still many firm constraints to speak up freely without severe personal consequences.

All participants believe strongly in the new concept en the need for their active participation. Not only for their own business innovation capabilities to create short term profit but also to participate in enduring openness of the society in solving global issues. The key question still is how to begin and to endorse the initiatives?

Capgemini and the Center of Inquiry of the United Nations together will take further initiatives to play an active role en bring concrete solutions to clients and stakeholders.