Giving HR the Innovation Advantage

the clarion groupREAL. CLEAR. INSIGHT.

Prepared for:


Prepared for:


Giving HR the Innovation Advantage

Human Resources Leadership Forum

January 19, 2012

© The Clarion Group, Ltd., January 2012


Question

What is innovation?

Why is it important?


“Innovation”

“Innovation” is:

A Creative Process

An Outcome

The Introduction of Something

New or Different

Causing

A Foundational Change in or Adaption to

What is Done Today


Primary Environmental Drivers for Innovation

The new market place is requiring companies to rethink the basics of their business− The “theory of the business” may have changed (e.g., healthcare, investment management)− The market place dynamics have changed, including, for example, consumer trust − The economic model may have shifted where the end buyer now may weigh their purchases

differently− The internet and social networking have permanently altered the ways in which people

engage in commerce

The “maturity” of many industries and the companies within them − “Maturity” shows up as single-digit growth primarily realized by stealing market share from

competitors− The staying power of mature industries and companies is limited

“If you are not growing, you are dying.”− Growth must be discovered by totally rethinking the current business to “squeeze” growth

out of it and by investing in new avenues of growth

The rebalancing of our global economics is creating new opportunities, e.g., jewelry manufacturing coming back to the US; the EU losing its financial might and corporations in other zones gaining strength

− Slow growth and no one sure where growth will emerge

The deepening of customer intimate core value propositions moving beyond: greater market research, segmentation and extensions to distribution capabilities. From: Firm decides and customers receiveTo: Firm and customer participate in value creation resulting in a new experience for customers


The Call to Action…

These and other environmental factors call many to systemic innovation that goes

beyond just product, service and process innovation

TO

Business model innovation

TO

Innovation in the customer/balance of power equation




Whole Systems View – The Operating Model

Strategy

Culture Organizing Structures

Leadership




Operating Model – Outcomes

Strategy

Culture Organizing Structures

Leadership

Mission, vision, values Customer value proposition

Growth strategies Strategic goals and objectives Scenario thinking and planning

Scorecard and measurement system

Physical space concept design

Team alignment

Change navigation

Competency requirements

Organization, team and individual behaviors

Organizational culture alignment

Decision-making and accountability processes and structures

Macro work process

Organizational design

Talent planning and performance management systems


The 3 Levels of Innovation

Innovation 1Operational Performance (Process Improvement)“Engineer”

Innovation 2Business Model (Transformation)“Architect”

Innovation 3Customer/Balance of Power (Value Co-creation)“Urban Planner”

Increasing degree of: Complexity Change Openness to new ideas

and possibilities


Innovation 1 – Process Improvement

Intact work process: one in which all major steps occur within the same organization:

Interactive work process: one in which the work, at some point during the process, is handed off to another organization for one or more steps, then returned to the original organization to complete:

Input work process: one in which major input is received from another organization during the work process:

There can be many variations and combinations of these simple processes.

Step 1

Step 2

Step 3

Step 4

Step 1

Step 2

Step 3

Step 4

Step 5

Step 1

Step 2b

Step 2a

Step 3

Step 4




Major Activities

Key Interfaces and HandoffsKey Customer Touch Points

Innovation 1 – Value Chain Innovation

Process Improvement

Customer Service

KeyDeliverables

Participants

Key Dependencies/ Interfaces

KeyDecisions

– Xxx– Xxx– Xxx









– Customer input reports– Product blueprints– Competitor product

information

– Engineering– Marketing– VP Product Group A

– Hold customer focus groups

– Develop product designs– Competitor analysis

– Product groups B & C– Customer service reps– Sales reps

Example:





Sales & Marketing

Product Development

Product Design




Examples

1. Fertilize the soil2. Plant the seeds3. Water and nurture4. Aerate soil5. Harvest

1. Float seeds in water sponge

2. Hang in damp air3. Harvest

For each boat:1. Locate the wood2. Loft the plans to scale3. Frame the ribs off the

scale4. Cut and lay the planks5. Seal the seams

1. Build one mold to accommodate infinite number of boats

2. Lay fiberglass within it




Innovation 2 – Business Model Innovation

Business Strategy

Strategic Possibilities

Business DesignStrategic Choices

Execution Management

Organizational Capability Management

Theory

of

the B

usi

ness

Competitive Strategy

Leadership Role and Performance

Stratecution

Go-to-Market Critical Touch Points Core Capabilities Org Design

Product / Service Chain Customer Chain Supply Chain Knowledge Chain

Culture


Example

Cisco Systems turning its structure on its side to transform its “go-to-market”1. Business architecture2. Value Stream3. Ability to add or shrink product lines cost effectively

Product Lines

Fu

ncti

on

s,

e.g

.,

En

gin

eeri

ng

, M

an

ufa

ctu

rin

g,

Sale

s

Pro

du

ct L

ines

Functions, e.g., Engineering,

Manufacturing, Sales

Pro

du

ct L

ines

Functions, e.g., Engineering,

Manufacturing, Sales


Examples

Health Plan Enabling Information

Theme Parks Company

Entertainment Company

Hardware Company Services Company

Running Shoe Company

Mindset Company

Coffee Company Lifestyle Company

“Wax to Glass” Fragrance

TO


Innovation 1Operational Performance (Process Improvement)

Innovation 2Business Model (Transformation)

Innovation 3Customer/Balance of Power (Value Co-creation)

The 3 Levels of Innovation

Much greater complexity

Rapidly emerging

Driven by social networking engines

Familiar Domain



Innovation 3 - Customer/Balance of Power Innovation

Value Co-creation

Vast“And Growing”

Many

Few

Low Multiple Alternatives High “And Epic”

Degree of Uncertainty

Vari

ab

les t

o

Con

sid

er

Shared Innovation“Value Co-creation”

Research and Analytics

Business Model Innovation

“Transformation”

ExploreExploit

Firm

and C

ustom

er S

hare

in V

alue

Creat

ion…

it’s t

he ex

perie

nce

Firm

Dec

ides

… C

ustom

er R

ecei

ves

Clear

Complic

ate

dParticipantRecipient

Non-LinearLinearUnknownKnown

Comple

x

Scenarios

Operations Innovation “Process”

Balance of Power


Value Co-creation Example – Healthcare

What’s different?

Patient and patient’s family are integrally involved in the healthcare plan for an individual

- The individual takes on responsibility

- The individual makes choices

- The family takes on responsibility

Greater access to information for all

Emphasis shifts to home care

In aggregate, this results in the patient and the family building a unique path to healthcare for the family member.

Hence, the value creation has been altered with the patient dramatically more engaged in the experience.

“Doctor as Expert”

Healthcare “Family Home Medical Model”

To


Value Co-Creation Example – Big Box Home Improvement Retailer

Growth by adding new stores

Competed on pricing/selection

Individual store-based execution

Helpful Associates ask, “Which product/aisle…?”

Growth slowed from market saturation and the recession

Dramatic Change

Past

Target creative customer

Online access

- Personal database

- Interactive design (text, voice, video)

- Integrated with stores

What are you envisioning vs. what do you need?

Future

Consumer and Associate design together

Mass customized experience


Innovation is Not Simply Being More Visionary or Creative…

Recognizing your unique innovation requirements for success.

…Innovation is not a one-size-fits-all program

Architecting your operating model for creativity and discipline

…Both are required for long-term success

Starting small, testing, iterating, validating and then investing for scale

…Build a portfolio of early stage ideas and continue investments based on data

Maintaining a consistent pace with the appropriate guiding metrics

…Innovation is not a sprint or a single brilliant idea; it’s hard work

Focusing on the day-to-day, but creating time to step back and observe the market for foundational changes and adjusting your course accordingly

…Leadership must create the strategic “container” in which relevant innovation can occur

In our experience, successful innovation is…


Leadership Competency Implications

CharacteristicsInnate operating and interaction styles. Characteristics, although particularly instinctive, may be strengthened or modified to a degree through awareness, practice and reinforcement.

CapabilitiesCharacteristicsCapacitiesCore Motives

CapabilitiesDevelopable, yet differentiating skills and knowledge-based elements that leaders acquire through education and experience. Capabilities are what people have learned to do, involving how people think and their knowledge on a variety of topics, including management practices.

Core MotivesRecurrent concerns that energize, orient and select behavior. They are so deeply rooted that they are often beyond our consciousness.

CapacitiesDifferentiating attributes that influence a leader’s intellectual, emotional, and physical strength, endurance and perseverance. Capacities tend to be more “hard-wired” and less malleable. While not totally within a leader’s control, capacity can expand or contract depending on the situation.


Leadership Competency Implications

The “4C’s” Competency Model

Characteristics CapabilitiesCore

MotivesCapacities Innovation Level

CollaborationCo-Creation

EnablementWildly Open

to the Unknown


Inclusion EnablementOpen to New

Ideas


StructuringDelegation

Authority Control

Focused on Known Domain


Cap

ab

ilit

ies


The Implications for HR

CO

NSULT

ATI

VE

VALU

E

HR Analytic

s

StaffingPerformance

Management

Compensation

Development

Integrated Talent Management

Clarify Strategic and Culture Goals

Employee Services and Infrastructure

Employee Engagement

Individual and Executive Team Performance

Organization Design, Effectiveness and Change Navigation

The HR Value Pyramid







The 3 Levels of Innovation and the Implications for HR

CO

NSULT

ATI

VE

VALU

E

HR Analytic

s

StaffingPerformance

Management

Compensation

Development

Integrated Talent Management

Clarify Strategic and Culture Goals

Employee Services and Infrastructure

Employee Engagement

Individual and Executive Team Performance

Organization Design, Effectiveness and Change Navigation


Individual Innovation Assessment Worksheet

What are the external trends/issues driving your organization’s need for innovation?

Of the three levels discussed, which are needed by your organization and why?

Operational – Business Model – Value Co-Creation –

What are the implications for HR in your organization? What must your HR organization do differently or better?




HRLF Innovation Program Topics Planned for 2012

Strategy

CultureOrganizing Structures

Leadership

HR Practices: Creating a Mindset of Innovation with Jatin DeSai from the DeSai Group (May 1 – AM Meeting)

Talent Acquisition: Innovative Solutions to Recruiting with HireVue and a Panel of Experts

(September 20 – AM Meeting)

Innovate or Perish: Building a Culture of Innovation with Jay Jamrog, SVP Research i4cp

(March 27 – PM Meeting)

Managing Talent in an Age of Uncertainty with Peter Cappelli, The Wharton School (June 5 – PM Meeting)

Strategy: Using Innovation to Stimulate Business Growth at Prudential Retirement with Helen Frye and Sean McLaughlin

(November 13 – AM Meeting)

Giving HR the Innovation Advantage

Business

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