What makes a company an Innovation Winner?

As the knowledge partner of the World Innovation Forum, Capgemini Consulting has recently completed its global innovation survey on the current state of innovation. The study offers a unique perspective by looking at the differences in behavior of 375 innovation leaders vis-à-vis laggards across five key areas (Innovation Strategic Outlook, Innovation Capabilities, Innovation Technology, Innovation Function, Innoation Spending Outlook) in order to identify what drives the success of companies that view themselves as successful innovators.


In summary, the study reveals that:

- Given the strategic priority companies allocate to innovation and their corresponding spending plans, the maturity of their formal innovation governance structure lags behind considerably. To overcome many of the innovation bottlenecks encountered, it is time to establish an innovation function that is able to deal with this kind of innovation governance and decision-making.

- Furthermore, there is an enormous unlocked potential for innovation in the involvement of external parties in the innovation process. Innovation leaders may have out-paced their peers by simply being better at involving external parties, leveraging a much broader innovation network and increasing innovation potential.

- Also, the study shows that more value, in terms of impact on business results, is to be expected from business model innovation, than from any other form of innovation. Targeting new business opportunities in emerging markets is much more likely to be successful when approached outside of the traditional competitive landscape.

Global innovation survey

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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 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

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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.