Entrepreneurship in Corporate Organizations

Entrepreneurship means acting in a special modus: experimental, connected to the outside, being authentic and looking for mastery. How does this fit into the typical corporate culture of global organization?

The drive for Innovations in often described in strong marketing language in order to invite employees to come with new business opportunities. But what will happen if you really want to go for this new opportunities? Experimental is oke as long as it fits into our company compliances rules. Connected to the outside world is good but as long as we can protect our knowledge and ideas. Being authentic is fantastic as long as it fits in with our personal development plan template. Mastery is important but needs to be profitable on short notice. As we experience so often, there is a huge gap between the (marketing) company values and the daily practice of balancing between freedom to take risks (entrepreneurship) and the security of our environment (hold on to your job and material benefits).

In the great story of Eric Ries's Lean Start-up we can learn how to practice entrepreneurial skills in a hostile corporate environment.

Innovation leadership study. Managing innovation: an insider perspective

Capgemini Consulting, the global strategy and transformation consulting brand of the Capgemini Group, in partnership with IESE Business School, the top ranked business school of the University of Navarra, today announced the findings of its annual global Innovation Leadership Study, examining innovation management strategies at organizations around the world. The study reveals that innovation leadership is becoming increasingly important, with 43 percent of respondents stating they have a formally accountable innovation executive in place, responsible for driving innovation, compared to just 33 percent last year. This rise of the ‘chief innovation officer’ suggests driving innovation is becoming a key priority for companies everywhere. However, despite this, the majority of companies (58 percent) still do not have an explicit innovation strategy in place, with most companies considered ‘innovation laggards’ (38 percent) and just 7 percent classed as ‘innovation leaders’.


The study, which surveyed over 260 innovation executives globally, suggests that while innovation is an emerging functional area within organizations, limited organizational strategies for driving innovation are impairing growth. Only 30 percent of respondents agree they have an effective organizational structure in place for driving innovation and less than a quarter (24 percent) believe innovation efforts within their companies are effectively aligned. This is mainly due to not having a formal organizational structure for innovation (45 percent) or a well-defined governance structure (45 percent) in place, or a lack of clear roles and responsibilities for innovation (40 percent). 39 percent of respondents also referenced the lack of an effective decision making process for innovation, largely due to not having a well defined process in place to prioritize and allocate time and funding to innovation projects

Download Report: Innovation Leadership Study
 
See reaction son Wall Street Journal and Forbes Magazine

Business Model Innovation, Stick to your Roots !!!

In my advisory practice we work a lot with large corporate companies. In our annual Global Innovation Survey we see the focus on Business Model Innovation and co-creation in the value chain getting more attention every year. The far majority of corporate companies invest in new business models to create sustainable value in a different way. A growing area for changing the current business model is to outsource not only supporting processes like Finance, IT or HR but also primary business processes such as Purchasing, R&D, Logistics and Manufacturing. Many well known Technology companies left their original core competences behind and become a Design, Marketing and Sales company (Philips is a clear example). I understand the business drivers behind this and that senior executives are seduced to go for short term sales growth and stock value. But I believe this is not a sustainable model for a leading innovator. In my opinion there is a need for a balance between R&D, Operations and Marketing & Sales within the boundaries of a corporate company in combination with an open innovation strategy to the outside world. Open innovation and co-creation seems to flourish if a company keeps substantially own core capabilities. The pitfall for large extend of outsourcing is that the company expect to manage the core process with contracts and SLAs. We see often that short term and top line successes are still hard to find. What is missing is a holistic view on collaboration an doing business! The leading success factor is all about trust and long term relationships.

I like to share two examples of successful business models in which core competences are not outsourced, the focus is not on short term money but collaboration with the outside world is based on many different but integrated aspect like economics, politics, social integration and education, green & sustainability, new style of leadership.

The first example is the Region of Voralberg in Austria. This is one of the most innovative industrialized export oriented region of traditional Europe. Many successful SMEs, traditional craft manufacturers like metal, wood, nutrition, electro, differentiate based on Product (high quality), Design (Modern Trendsetting) and Functionality (usable). There collaboration network enables them to find new product-market-combinations in a high frequency. The schools and education programs are a close partner in their network. The Region is relative small (less than 400.000 habitats) and accelerate on smartness, trust and regional proud rather than volume and power. (source: Prof. GJ Hospers, University Twente)



The second example is American Apparal. American Apparel is a vertically integrated manufacturer, distributor and retailer, based in downtown Los Angeles, California. We currently employ approximately 10,000 people globally (about 5,000 in LA), and operate more than 285 retail stores in 20 countries.

Within our business model, knitting, dyeing, cutting, sewing, photography, marketing, distribution and design all happen in the company's facilities in Los Angeles. The company operates the largest garment factory in the United States, at a time when most apparel production has moved offshore. With our recently opened stores in China, we are now selling Made in USA clothing in the largest consumer market in the world.



American Apparel leverages art, design and technology to advance the business process, while continuing to pioneer industry standards of social and environmental responsibility in the workplace.
(source: americanapparel website)

The most interesting thing about these examples is the strong vision and leadership on sustainable innovation. The strong believe in integrating the most important aspect of human life and living environment into the business model of their companies. It is not about short term, it isn’t about making fast and a lot of money, it isn’t about power play, it is about honesty, fairness, trust and real collaboration for every involved partner. And they are and will be successful! In my opinion the most corporate organization can learn a lot of these role models.

Business Model Innovation, yes you can!!!

I mentioned many times the high impact on business value of innovating the Business Model of a company. We choose 2 years ago to adapt the Business Model Framework of Alex Osterwalder. With my team we adjusted the framework in more detail while working with a significant amount of our key clients. The results are far above any expectations. This is the reason that we as Capgemini choose to co-work with Alex and his network. Two members of our team: Bas van Oosterhout and Daan Giesen represented us in the co-creation of the new book: Business Model generation, written by Alex Osterwalder & Yves Pigneur. It is the first extended handbook for innovators working on changing the business models for the future. Besides the superb content, a lot of effort is put into the design and accessibility of the book.

All this is support by a strong community of co-workers facilitated by the Business Model innovation Hub. We expect a lot of this initiative where all global brains on this theme will meet, work and enjoy the near future state of doing business.


The next challenge will be the integration between the Innovation Strategy, New Business Modeling and capturing the implications for the current Operating Model of the company. Integration of these three dimension will be key to implement the full range of business transformation in order to harvest the new business value in the market. The first draft model of this overall Business Innovation approach is already out of our Innovation Lab in the Netherlands and bringing into practice with our key clients.

I never experienced so exiting breakthroughs in innovation and this will accelerate only more in the near future!

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.

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.

What impact will have the Financial Crisis on Business Innovation?

So far we have seen Innovation as a luxury in growing economy. What will happen if we are facing with severe down scaling of the real economy? Do the current innovations methodologies like Blue Ocean Strategy, Open Innovation, Co-Cration, Brand Building helps companies to Innovate without having money for investments available?

I think this will be the time to change significantly our vision on Business Innovation. The financial sector has created a virus of so called Phantom Innovation. These innovations are focus on one-sided and short term enrichment for a small group of Robbers (hedge fund owners, specific group of CXOs). Of course they played with the less smarter but not less greedy consumer and small private investors. The Phantom Innovation creates only Phantom Value.

The good thing about the crisis is that there is a global burning platform to change from Phantom Innovation to Sustainable Innovation. We need to develop global real value with accessibility for everyone.
We saw different people speaking up against the legal robbers in politics and the economy. People like Charles Leadbeater but also Noreena Hertz: "I realised that economics is not about models, graphs and curves, but about people, politics and society, about history and culture; that these are all legitimate things to be concerned about as an economist. In fact, you would be a much better economist if you did understand these things."

I believe we will face a new generation of global leaders showing us the way to more Sustainable Social Innovations. I see it already emerging in different companies and the flow is with them. The future history will refer to this last decennia as the NEO- middle-ages in politics and economy.

Why are Business Innovation Managers more successful than others?

In many different Innovation Management Surveys the key issue still is successful implementation. The theories will promise outstanding results but the hardness of reality faces us with tough hurdles to cross.

The theory “Blue Ocean Strategy” is one of the examples which supplies managers with a perfect model to change market boundaries. In my opinion the implementation part is still very academically and lacks concrete practical keys for implementation.

Techniques for idea generation like SIT (systematic Inventive Thinking) en TRIZ (Theory of Inventive Problem Solving) are too complex to incorporate in our organization of today. These systematic techniques ask for structural new ways of working and organizing the innovation process. This isn’t something an Innovation Manager with a project portfolio to manage can fixed at the same time.

A Innovation Manager faces quite some hurdles to be successful in implementing innovation projects:

- A manager per definition lacks the time to master complex models and even to endorse it in his organization.
- The Innovation Manager’s task is to integrate the so called “golden triangle”: R&D, Marketing & Sales, Operations. Each business function has its own objective and targets. This lead in many cases to a Political Arena. The Innovation Manager becomes suddenly a Gladiator.
- In order to get budget for the innovation project, many project managers create a Social Accepted Business Case. Their Sales Funnel looks like a perfect Hockey Stick. Of course, during the implementation reality it looks like a flat horizontal line.
- An innovation project is seen as one of the many projects instead as a business project (focus on capturing new business value: money!)

Together with top innovation managers tried and tested (special thanks to Mr. Remco van Es, DSM) we defined some Innovation Project Characteristics of successful implementation:

- Projects with focus on one unique product versus more than one product.
- Projects with clear focus on one unique positioning in the market versus a product with more interpretations on the benefits for the client.
- Projects with just one partner versus more than one or non partners.
- Projects managed by a Manager with an entrepreneurial Business Profile versus a managerial Marketing, R&D or Operations profile.
- Projects with a stable core dedicated team players versus changing team settings.
- Projects with specific cross functional design events (high pressure cooker approach) versus just separate project streams.
- Projects with implementation scenarios versus one “best” way.

The characteristics of Innovation Projects seems to be a little trivial but in real-life situations we see hardly any manager able to endorse it.

It seems to be that Innovation Manager prefer to go down as a Gladiator in the Political Arena rather than being the successful Outsider of the company!

Business Model Innovation Archetypes

In the engagements with our client we face that business model innovation is a complex issue. Many aspects are involved and these are also intertwined. As I wrote in articles earlier we use a Business Model Innovation Framework based on Oosterwalder. We use this framework to facilitate the in depth discussion with our clients according to the systematic approach to create more business value. In these discussion sometimes we end up into an academic dilemma if we can speak about a new business model or just an improvement of the current business model. In concrete terms: how many of the building blocks of the framework have to change in order to speak of a real new business model. Personally I think that it is not a key discussion but I looked for some interesting peer views on the web. I found an interesting paper of MIT Sloan: Do some business models perform better than others? The authors defined a Basic Business Model Archetypes. They use two key criteria:
1. What rights are being sold?
2. What type of asset is involved?

In the first criteria they defined different rights: ownership, use, matching. In the situation of ownership they distinguish an ownership of asset with significant or limited transformation.
The second criteria they came also with four different types: Financial, Physical, Intangible and Human assets. If you combine these two sets of criteria you get theoretical 16 possible archetypes. The good news is that in the study of the largest 1000 US companies they discovered only seven types in practice. As I work a lot with high tech companies and manufacturers I am interested in the physical assets with gives three archetypes:
1.Manufacturer: creates and sells physical assets. Buys raw materials or components from suppliers and then transform or assembles the asset to create a product sold to buyers. (example: General Motors)
2.Wholesaler/Retailer: buys and sells physical assets. Buys a product and resells essential the same product to someone else an may provide additional value by transport, repackaging and customer service. (example: Wall marts)
3.Physical Landlord: sells the right to use a physical asset. The asset may be a location or equipment or even complete production plants (example: Marriot, Hertz).

We see that a lot of our Business to Business Clients are willing to move from one to type two or event to type three. We start to analyze the different archetypes in terms of differentiation of the Business Model Innovation Framework. As expected we see some logical differences in dominancy of the buildings blocks within the framework.
We use the outcome in two parallel ways. The first way (insight out) is we analyze the impact on the current business model of a running innovation project and see if it will lead to a new Business Model archetype and what kind of transformation is needed. In the second way (outside in) we use the Business Model Archetypes to challenge the current Innovation Portfolio in order to change the projects to boost the value creation.

The conclusion is that Business Model Archetypes can indeed help clients to improve the discussion of the current Innovation Portfolio and how to boost there business value. But only if the archetypes are in detailed analyzed by the Business Model Innovation Framework value can be captured.

Business Model Innovation: Rational versus Emotional value performance

In my Innovation Team we work with clients on innovation and the influence on their current business model. We analyze the current business model using a framework based on the ideas of Alexander Osterwalder. We focus on the business model impact of the innovation portfolio of the client. In addition to the financial (Rational) performance of the business model we analyze the emotional side of the performance as well. We find out that two value performance indicators can be measured and managed on the emotional side of the business model: Reputation and Experience.

Reputation is the way stakeholders think of, speak about and act upon the image of your company. If you can create a company that people identify with, that is responsive to their sense of values, justice, fairness, ethics, compassion and appreciation, they will help you to be successful [Walter Haas, Jr., Chairman of Levi-Strauss].Reputation can be measured and managed. Good examples and cases can be tracked from the Reputation Institute. RI is the leading international organization devoted to advancing knowledge about corporate reputations and to providing professional assistance to companies interested in measuring and managing their reputations proactively.

Experience is a well known term in marketing for many years. In relation to innovation a new term is out: Experience Innovation. Clients and customers choose products and services more and more for emotional reasons. The get a first idea of what Experience means look at Wikepedia: Value can be placed on a continuum from undifferentiated (referred to as commodities) to highly differentiated. A possible classification for each stage in the evolution of value is:
- If you charge for undifferentiated stuff, then you are in the commodity business.
- If you charge for distinctive tangible things, then you are in the goods business.
- If you charge for the activities you perform, then you are in the service business.
- If you charge for the feeling customers have because of engaging you, then you are in the experience business.
- If you charge for the benefit customers (or "guests") receive as a result of spending that time, you are in the transformation business.
Experience can also be measured and managed. In 2005 Thomas Thijssen, director of research of the European Centre for the Experience Economy developed, together with Ed Peelen (Nyenrode Business School) and Susan Bink (University of Amsterdam), a new tool to measure the impact of meaningful experiences.

To become successful in business model innovation is is vital to include the two additional building blocks in the business model framework: REPUTATION and EXPERIENCE.

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Do you feel that managing Innovation in your company is hard and no fun?

In many large companies managing Innovation is like being just one of the many risk avoiding grey suits. But working on Innovation supposed to be fun, different, free-thinking. Do you recognise yourself in the following situation:

• You are responsible for the start of or running a complex and long term innovation program or portfolio with clear innovation objectives and targets
• This portfolio exits of more complex innovation projects
• The basics of project management of each separate project is well in place
• Each project works in parallel to deliver the innovation targets
• There are (strong or weak) interrelationships between these projects to manage
• There are different (internal and external) stakeholders to manage

This sounds like one big opportunity. But there are some complications like:

• The Innovation Objectives and targets are defined in only financial terms: Revenue/Profit growth
• The Innovation Strategy doesn’t give directions for prioritizing and decision making processes
• There is not overall logic overview for the portfolio to ensure the overall targets
• There isn’t framework to oversee the impact of the portfolio on the current Business Model
• There isn’t framework to oversee the impact of the portfolio on the technology integration needs
• There isn’t a systematic way to manage the execution of the innovation projects successfully
  

And you left with the following questions:

1. Do I really understand the Innovation Strategy of my company? If not how can I?
2. Have I optimized our Innovation Portfolio to set the right priorities and the take the right decisions? If not how can I?
3. Am I able to mobilize and manage the execution power in my company? If not how can I?
   
   And you just looking for some insights to get the answers:

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Discontinuous Innovation Lab

This week the Benelux Discontinuous Innovation Lab organised a Kick-off Workshop to start an active link between the academic world and companies active in new innovation approaches. On behalf of Capgemini I took a membership in this DILab.
The main objective of this new community is to look for insights, experiences in searching, selecting and implementing new ways to realise discontinue innovations.
Prof. John Bessant shared his vision by presenting an entertaining overview in this field. He is one of the writers of the executive briefings of the Advanced Institute of Management Research: “Dealing with Discontinuity” and “Twelve search strategies that could save your organisation”.
The second presenter was Victor Paashuis from the company NEDAP. He showed us the innovation practices in his company. I was pleasantly surprised by his insights and his vision on how to execute and boost the innovation initiatives! One of his statement is that NEDAP innovates value which is not asked for by any customer, isn’t thought of by any R&D or Manager in his company. Good ideas come from a very selective group of free thinkers. They stick to the idea until it is launched in the market in spite of the dominancy of mangers focused on reducing risk.
I will keep you informed on the progress of this new initiative in the Benelux.

Perfect example of innovative communication

Eric Bun is a real innovator of what I call the new generation. He is astonishing good in building communication formats in an innovative way. The latest achievement is a book review of "Brand Hijack'' from Axel Wipperfürth. He showed that a book review is not simple a plain text with an opinion but also a way of bringing the message across!

The great Battle (3): The DNA of an Innovation Knight

In the first part of The great Battle, I discussed the battle between the Robber Barons and the Innovation Knights. Robber Barons are companies that still perceive human capital as a cost item or production resource. This unilateral perspective kills innovation. Innovation Knights are the leaders of the future. Leaders that operate with self assurance from authentic values and modesty. I describe this future in part two. A future in which the distinction between consumers, producers, owners, funding organisations and developers will fade away. New organisation forms will emerge, that float upon the concept of Mass Participation: innovation as a social, cumulative and shared process. Not everyone will automatically feel at ease in this new organisation form and with this collaboration method. My position is that the real Innovator will feel right at home. But: ‘How do I recognise a real Innovator?’ This will be discussed in part three.

What is an innovator?
To answer this question, a real Innovator starts with consulting the collective wisdom of the internet. Google provides a lot of information on innovation, but not a profile of an Innovator. Wikipedia offers a lot of text on the concept of innovation, but not an unambiguous profile of an Innovator. So, I turn to the old-fashioned way, a dictionary’s definition: innovator = someone who introduces changes and new ideas in the way something is done or made; a pioneer.

Innovator profile
Still, a company that is looking for a future leader will have to search for people with such a profile. One of the many job sites offers the following explanation:
Companies that operate in the vanguard – i.e. companies that consider it their role to introduce something new – cannot do without innovative talent in their organisation. People with innovative talent are able to:
· think ahead and see opportunities
· discover what people will be needing in the future
· think outside the trodden paths
· communicate ideas for something new successfully so that they are realised
(source: http://www.carrieretijger.nl/functioneren/professionele-vaardigheden/vernieuwingsgerichtheid)

This is starting to look like something. I am particularly drawn to the last property: communicating something new successfully so that it is realised. But how do I know whether someone really has the characteristics that allow them to realise this?

Obstructions
If we change the perspective from: ‘What an Innovator should be’ to ‘What characteristics prevent someone from being an Innovator’, we find the following obstructions:
· lack of time
· set in their ways
· lack of daring
· short-term thinking
· ego effect
· fear of the unknown
(Source: http://www.symbio6.nl/barrieres_innovatie.php )

If we can remove these obstructions in people, will they become Innovators automatically? I know people who have ample time, are definitely not set in their ways, have daring, and only think long term without being afraid of the unknown. The last property: lack of a big ego, does reduce the group significantly. But to call these people excellent examples of an Innovator … I don’t know.

New generation of Innovators
So what are the characteristic properties of Innovators? I return to the characteristics of the new generation I already mentioned in my previous article. I believe that ‘they’ have the ingrained qualities of an Innovator:
‘We think they are superficial. They are interested.We think they are indifferent. They are filled with passion.We freeze up in the face of the information overload. They are very much at home in the world of 24/7 information and communication.We learn linearly according to fixed patterns. They learn laterally using associations.We wait until someone tells us how it should be done. They discover and investigate.We reduce science to tricks. They can handle complex matter.We accept that the world isn’t fair. They consider honesty the greatest good.We don’t take them seriously. They respect everyone who is authentic and straight.We talk and expect them to listen. They communicate with each other.We are stand-alone. They live, learn and work in networks.We accept bullshit. They don’t.;
(Source: http://www. keesie.nl )

Four basic values
I myself am part of a group of - often young - innovation consultants. We help our customers increase their innovation capacity and then actually realise innovation. This is best achieved not only by collaborating intensively with the customer, but to install a real Innovator from Capgemini next to the customer. After some research, we have classified the properties we are looking for in our innovation consultants in four basic values that we feel describe how an Innovator looks at the world: Authenticity, Experimentation, Mastery, and Connectedness.

Authenticity
The basic value ‘Authenticity’ assumes that everyone has their own, unique profile. Recognising and accepting your own, unique profile is a continuous process. Thinking, talking and acting according to your own profile helps you grow as a person.
The Innovator is able to be him or herself and clearly state what he or she stands for. The Innovator clearly offers his or her opinion and is able to communicate it in an inspiring fashion. The Innovator is aware of his or her strengths and weaknesses and is open about them to others.

Experimentation
The basic value ‘Experimentation’ assumes that boundaries are the result of fears and that fears prevent you from taking action. If you surpass your boundaries, you experience a situation. That experience helps you become aware of whether a situation is a match for your unique profile or not. Experimentation is necessary to be able to grow.
The Innovator has the will, the ability and the action to evolve. He or she is always searching out the boundaries. He or she feels the need to experience what it is to cross those boundaries. He or she shares these experiences with others and uses them in new experiments.

Mastery
The basic value ‘Mastery’ assumes that quality and success are primarily personal experiences. They are a choice instead of a standard imposed from outside. It is beautiful and important to see people evolve within their own, unique profile. The highest form of mastery is to be successful in helping others evolve towards their own mastery.
The Innovator him or herself determines what quality and success are. The Innovator chooses the path and speed of his or her growth within his or her own, unique profile. He or she respects the growth of others within their own profile.

Connectedness
The basic value ‘Connectedness’ assumes that other people are a mirror: they give you an unconditional opportunity to learn about yourself. The connectedness of people is not defined by place, form or time. A healthy connection between people is based on mutual dependency. Unconnectedness hinders your growth towards mastery.
An Innovator focuses on the unconditional sharing of knowledge and experiences. An Innovator chooses his or her own physical and virtual networks of which he or she is a part. An Innovator determines his or her own role and moment of action and determines how much energy he or she invests in the network. The Innovator creates intimacy with like-minded people, and thereby his or her home base.

Finally
The above four basic values constitute a first draft of properties that we discuss in our team regularly. We test them and modify them at the detail level. We also translate them to the practical work situation within the team and client projects. Now, we also include these basic values in our discussions with new consultants, who want to work for us or with us in projects.
We find that a number of components are not natural matches with the environment in which we work. For instance, the Mastery component ‘The Innovator him or herself determines what quality and success are’ is heavily influenced by the quality requirements and management indicators of the organisation of which we are a part or for which we work. However, by opening up the discussion and sharing our perspective with colleagues and customers, we are already active as Innovators and are already, by definition, practising Innovation. I want to invite everyone to help us shape our first draft of basic values and Innovation!

A realistic picture of the company’s ability to innovate

The realisation of an innovation ambition level revolves around the ability to translate the desired value proposition in concrete terms for the customer. The success of innovation is not determined by the innovators in the organisation. What matters is the degree to which the customers adopt the new value proposition!

A company’s ability to innovate is divided into four different (innovation) domains. Each domain has specific characteristics and makes its own contribution to the realisation of the innovation. The four domains are:

1. The Corporate strategic ability to innovate: the ability to translate the trends and developments into a new value proposition. This is a matter of signalling trends, building scenarios, gauging customer behaviour and above all translating all of this into product, channel and market features. It is an interaction of detailed knowledge and analysis in combination with the feel for customers and the market. This ability is called the “entrepreneurial gut feeling” of the organisation. Examples of companies that are able to translate trends successfully into new value propositions are the Swedish company IKEA (products), the British supermarket chain Tesco (channels), the Dutch beer brewer Heineken (markets) and the Canadian company Cirque du Soleil (new product, market and channel).
2. The External Network ability: the ability to organise different parties in the environment of the business and to realise common innovations. The external network ability is characterised by the viewing from different perspectives outside the organisation. Innovation is not exclusively an internal matter, intensive cooperation with external parties is crucial too. An example of this is so-called “co-creation” at Lego. Children (customer perspective) are actively involved in the development of new Lego “boxes of building blocks”. The children work with R&D over the internet (technological perspective), Sales & Marketing (market perspective) and Operations (business process perspective). The top three best-selling Lego boxes of building blocks have come about in this way. Successful cooperation requires structures and governance to be set up between the company and the external parties. These new structures are called Eco-systems and are mainly aimed at innovating collectively. Twente Care Services for example, the health care company of the Twente Hospitals Group, is also successful. It focuses on products and services that are closely associated with the key activities of the hospitals. The knowledge and experience deployed medically within the Twente Hospitals Group can be utilised with a consumer orientation through an eco-system of more than 30 different parties.
3. The Integral Governance ability: the ability to adapt the business model (structure and culture) to the development and realisation of the new value proposition. Characteristic is the viewing from different perspectives within the organisation. Involved in an innovation are not just R&D for example, but also other business functions such as Sales & Marketing and Operations. It is necessary for the business model and the governance methodology to support the desired flexibility and integration. Thanks to such a “Business Service Oriented” business model EasyGroup (EasyJet, EasyMobile, etc) has proved able to adapt quickly and easily to the different value propositions in the market, without losing the integral governance.
4. The Operational Acceleration ability: the ability to adapt processes, (technical) resources and competences to the development and realisation of the new value proposition. The concept of “Lean Solutions” shows how processes and technology fit seamlessly together as modules in different assemblies. A business with a huge operational acceleration ability is the American media group CNN.
   
   The current and desired ability to innovate can be determined for each domain for a company.
   

Choosing the ambition level in Business Innovation

Knowing where you are as a company
Companies embark upon innovation initiatives with a great deal of energy and a high ambition level. It is not unusual for the enthusiasm to fade as time goes by. The company is often unaware of the success factors of innovation and of its own ability to define the preconditions for success.

An example from the Utilities sector …
In the Utilities sector in the Netherlands all the major electricity companies had sky-high ambition levels when first exposed to market forces. They thought that they had after all built up a good relationship with several million customers over the years. How easy would it be to offer various new home-related products and services to loyal customers and so develop new business. In practice these companies seem to have their hands full innovating their existing services in a way that is in line with the market. For example, simply being accessible by telephone for queries about the electricity bill. Nearly all the new initiatives directed at consumers have been halted, despite huge investments.
These businesses had too high a Business Innovation ambition level in relation to their ability to innovate. Success is determined by awareness of a realistic ambition level in combination with self-knowledge of your ability to innovate.

A company wants to innovate to bring about a distinctiveness for the customer. Innovation can be translated into the innovation of various factors. The result of an innovation can be a new product or a new channel, a new market or a combination of these factors. The value proposition for the customer increases as a consequence of an innovation in the order of product, channel and market level. The impact will increase exponentially if the innovation is applicable at several levels at the same time. We call this a “Blue Ocean” development.

Methods and tools for determining the correct ambition level
The ambition level of innovation is the framework within which the process of creation and the generation of ideas will take place. This process is directed in part by the outcomes of the impact analysis. The company analyses the different trends and the strategic choices for dealing with this impact.
The trends give an insight into the social developments, into what the customers want in the short and long term and into how this will influence their behaviour. The company needs a method and tool to spot trends and to analyse the impact:

With the Innovation Radar Screen the impact is made business-specific. Trends are related to the estimated change on the measuring instrument. The organisation can use this to manage the results (for example the Balance Scorecard instrument).
With the Strategic Innovation Scenario planning method the impact of the trends can be translated into possibly different innovation scenarios. A trend indicates a likely development. Of course a number of key uncertainties remain in a market, the outcome of which is difficult to gauge. Think of the development of the economic climate (rich years versus lean years). The actual outcome of this key uncertainty will have a major impact on the ultimate development of the innovation. A low price of a new product at a time of lean years for example will be very important. In the rich years on the other hand service and quality have a bigger part to play. An innovation scenario is built up on the basis of possible outcomes of key uncertainties. These uncertainties have a major impact on the operating result of the company. The planning method enables a company to cluster relevant trends for each scenario and to translate them into the behaviour of the consumers. The expected reaction of the businesses in the market sector can be indicated for each scenario. With this insight a company can decide for which scenarios adjustments are needed in the current value proposition. In this way concrete innovation initiatives, such as product, channel and market innovations can be defined. The overall review of the scenarios and the strategic choices of the company determines the ambition level for innovation.

Why are so few companies successful in Business Innovation?

Growing complexity in correlation between trends and developments
So far companies have in particular followed those specific trends and developments that are an extension of their current value proposition. KPN for example has for a very long time concentrated on monitoring and helping to develop above all technological (telephony) developments and translating them for the Dutch market. It is clear that this will no longer be enough for KPN. The new strategy is aimed at the provision of communication, information and entertainment services. For this all the relevant Mega, Consumer and Market trends must be monitored and analysed as they relate to one another. This is also called ‘viewing from different perspectives’. Too often many businesses are still viewing from a single perspective. They have no workable method, tools or the right competences at their disposal to be able to spot these trends as they relate to one another and then to analyse them. Let alone translate them into innovations in their value proposition.

Growing unpredictability in consumer behaviour
If consumers display stable buying behaviour and are easy to classify in customer segments, the company can make a clear delineation at which the innovation is to be aimed. Volvo and Saab for example have succeeded in appealing to a clear target group with a safe, luxury passenger car. Customers have therefore remained loyal to these brands for a very long time.
Capriciousness characterises the behaviour of the consumer of now and the future. Other forms of living together, communicating, consuming and experiencing clearly have their repercussions. The modern consumer wants an appeal to his DNA, the “genetic blueprint” of his behaviour. The company must be capable of understanding this DNA and translating it into a new value proposition. The chances of the company’s survival are determined by two crucial factors: insight into the specific customer and the speed of reaction to the constant changes within the target groups. Capgemini’s research Trends in Retail (2006) shows that only a few companies have proved successful in this.

Obsolete organisational structures and governance models
The growth of companies in recent years has mainly been realised through acquisitions. This has led to a structure of relatively autonomous business units, each with their own Research & Development, marketing, production, etc. The units are aimed at achieving their own result, they are first and foremost product-oriented and there is no flexibility in the cost structure. Growth and expansion are achieved by copying a business unit with a complex, expensive and inflexible structure. From the position of the central company this leads to suboptimisation of the operating result and an uphill struggle to adapt the value proposition quickly.

For these businesses innovating mainly means investing with a high risk factor. Many innovations have been and are still technology (and product) driven. Converting new technology into market products requires research. This research takes place in separate organisational departments such as Research & Development (R&D). Research costs time and money. And research is often driven by budget rather than business cases, in which costs and revenues are related to one another. Improvements of the innovation in R&D environments are often aimed at shortening that lead time, reducing the costs and avoiding the risks. To make the revenues from the innovation understandable there is a need within the business unit to work with other departments such as Sales and Marketing. Differences of insight in the area of control, allocation of costs and income, dealing with risks, etc, do not fit within the existing structures and governance models.

Businesses do not know how they can transform in a controlled manner into new structures and management that do fit in with a flexible manner of innovation. The research “Erasmus Competition and Innovation Monitor 2005” shows that in innovative businesses 25% of the innovation success is determined by R&D investments and 75% by managing cleverly and organising innovatively.


Undeveloped competences in fossilised business culture
Changes in the strategy and structure of a company require changes in the culture of the business. In one organisational structure a specific business culture will have a strengthening effect and in another a paralysing one. Look at a business where technological knowledge of things and 120% quality experience were preconditions for performing (think of the old Utilities businesses). A technocratic organisational culture of hierarchy, protocols, standards, more matter than people-oriented attitude, will have a strengthening effect here. An organisational culture that is characterised by chaotic creativity, scope to keep reinventing the wheel and actually aimed at behaviour of people, has a paralysing effect. A complex change of competences and behaviour of staff is necessary.
A company can develop a new innovation structure (for example strong cooperation between the R&D departments of the business units), but the differences in the organisational cultures often appear to prevent changes. The success of transformation is an interaction between changes in the business strategy, the organisational structure and the organisational culture. This is not an obvious change competence that businesses have in house. Yet the logic of the new innovation structure must be in keeping with the new logic of the feeling.