Innovation Benefits Realization Management

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BLUE OCEAN STRATEGY

5 Phase-Gates For Managing Innovation

From Formulation to Implementation By Dr. Iain Sanders, Design for Innovation, New Zealand

Innovation Benefits Realization Management for Implementing

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By way of introduction…• This is part-1 of a 5 part series on -

Innovation Benefits Realization:

1. Innovation Benefits Realization Management: Blue Ocean Strategy

2. Innovation Benefits Realization: 7 Levels to Manage

3. Innovation Benefits Realization: Ideation TRIZ

4. Innovation Benefits Realization: Managing Complexity

5. New Product Development Process: NZTE Workshop

(The other parts can be viewed here: http://www.designforinnovation.com/portfolio.html)

http://www.designforinnovation.com/portfolio.html

http://www.designforinnovation.com/portfolio.html

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What is Blue Ocean Strategy (BOS)?

• BOS is the result of a decade-long study of 150 strategic moves spanning more than 30 industries over 100 years (1880-2000).

• BOS is the simultaneous pursuit of differentiation and low cost.

• The aim of BOS is not to out-perform the competition in the existing industry, but to create new market space or a blue ocean, thereby making the competition irrelevant.

• While innovation has been seen as a random/experimental process where entrepreneurs and spin-offs are the primary drivers: – BOS offers systematic and reproducible

methodologies and processes in pursuit of innovation by both new and existing firms.

Design for Innovation

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Blue Ocean Strategy Imperative

• Prospects in most established market spaces (red oceans) are shrinking steadily.

• Technological advances have substantially improved industrial productivity, permitting suppliers to produce an unprecedented array of products and services.

• And as trade barriers between nations and regions fall and information on products and prices becomes instantly and globally available, niche markets and monopoly havens are continuing to disappear.

• At the same time, there is little evidence of any increase in demand, at least in the developed markets, where recent United Nations statistics even point to declining populations…


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Emerging economies have developed the

business development capabilities of

OECD economies…

They have access to virtually limitless

resources…

A bottomless pool of cheap labour…

An endless stream of hungry,

motivated and skilled workers

Thanks to Low Cost Differentiation!

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Value-Creation Barometer

random arrays of internal business opportunities driven by project / business requirements

idea creation & management, product innovation & development, business process improvements

No training and leadership to formulate and implement blue ocean strategy…

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Internally managed and developed product development process

Connections enable continuous innovation

“Systematic value capture, evaluation and development”Value-Creation

Barometer

Some training and leadership to formulate and implement blue ocean strategy…

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Internally and externally managed and developed product innovation and development process

Cluster activities are driven by strong leadership

These people drive the creation of new venturesand spin-outs, JVs etc.(True entrepreneurs)

“Leadership-driven Value Creation”


Significant training and leadership to formulate and implement blue ocean strategy…

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Internally and externally adaptable and evolving value capture-creation: new ventures initiated anywhere at anytime

Network-venturing among business asset clusters to create new kinds of assets, faster

Network-venturing brokers are the key to creating endless possibilities in an

innovative climate!

“Systematic Value Capture-Creation for New Ventures”

BUSINESS ASSET-CREATING NETWORKS

NewVentureCreation

New Asset Cluster


Blue Ocean Strategy

Formulation & Implementation

is the Norm

10AGILE INNOVATION FOR SUSTAINABLE COMPETITIVE ADVANTAGE

Technology Innovation Typology of Technological Innovations at the Enterprise Level

Low

HighLow

High

Degreeof

Management

Degree of Leadership andContribution to Competitiveness

Unplanned Improvements

Continuous IncrementalInnovation

Radical Innovation

Strategic Systemic Innovation


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Fastthinking

Fastdecision-making

Fasttomarket

Sustainingspeed

Forecasting & road-mapping

Anticipating Spotting trends Brainstorming Putting every

idea through the “grinder”

Letting the best idea win

Setting rules Getting rid of

bureaucracy Shuffling

portfolios Unpacking

proposals Constantly

reassessing

Launching a crusade

Owning competitive advantage

Getting suppliers move fast

Staying beneath the radar

Institutionalizing innovation

Simplicity Boundarylessness Self-confidence &

growth attitude Financial flexibility Business Process

Mgmt System Managing creativity Staying close to the

customerAdapted from “It’s not be big that eat the small…It’s the fast that eats the slow”, J.Jennings & L.Haughton

Moving With Speed: AgilityOpportunity-driven Business Development

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Survival vs. Market Leadership StrategiesEntry ticket to the competition game

SURVIVAL STRATEGYStaying alive

LEADERSHIP STRATEGYTargeting market

leadershipWinning and Retaining Customers

Customer Value Low cost/benefit ratio Creating higher customer value

Marketing Strategy Mass marketing Differentiation and positioning

Customer Satisfaction Customer service Customer intimacy

Product Innovation New attributes & Line extensions

New product categories & New brands

Building Your Competitive AdvantageStrategic Growth Focus Building resources Building distinctive

capabilitiesInnovation Linear SystemicTechnology Innovation Incremental Radical

Process Innovation Functional improvements Enterprise-wide BPM

Business Innovation Perfecting traditional business model

Creating new adaptable business models

D4IFOCUS


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Design Domains for Business Activities

Customer Needs

(CNs)

Goals

(Gs)

Strategies

(STs)

Activities

CustomerDomain

Functional Domain

PhysicalDomain

ProcessDomain

WHAT? HOW?

Vision DesignPhase

WHAT? HOW?

Mission DesignPhase

WHAT? HOW?

ImplementationDesign Phase

(ATs)

Strategy Formulation & Implementation

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Customer Needs

(CNs)

Goals

(Gs)

Strategies

(STs)

Activities

CustomerDomain

Functional Domain

PhysicalDomain

ProcessDomain

WHAT? HOW?

Vision DesignPhase

WHAT? HOW?

Mission DesignPhase

WHAT? HOW?


(ATs)


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Customer Needs

(CNs)

Goals

(Gs)

Strategies

(STs)

Activities

CustomerDomain

Functional Domain

PhysicalDomain

ProcessDomain

WHAT? HOW?

Vision DesignPhase

WHAT? HOW?

Mission DesignPhase

WHAT? HOW?


(ATs)


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Customer Needs

(CNs)

Goals

(Gs)

Strategies

(STs)

Activities

CustomerDomain

Functional Domain

PhysicalDomain

ProcessDomain

WHAT? HOW?

Vision DesignPhase

WHAT? HOW?

Mission DesignPhase

WHAT? HOW?


(ATs)


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Strategic Alignment of Business Priorities with Opportunities

1. Where are we going? (External Perspective: Market Scenarios)

2. What can we use? (Relevant Context: Customer Needs)

3. How do we use it? (Formulate Strategy: Identify & Evaluate Opportunities)

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5 Phase-Gates to Manage:1. Where are we Going?2. What can we Use Now?3. Create New Possibilities.4. Select Best Possibilities. 5. Take Appropriate Action.


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1. Where are we Going?

Gate-Check Focus: Benefits Identification


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How do we compete more effectively?

Maintain current strategy

Diversify anddeepen existing

relationships

Expand intonew markets

or applications

Diversify andexpand intonew markets

Existing Value New Value

New Context

Existing Context

What is our key value proposition?

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Product-Market Matrix:

Market Penetration

MarketDevelopment

ProductDevelopment Diversification

Current Market New Market

New Product

Current Product

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Product-Market Matrix:

Market Penetration

MarketDevelopment

ProductDevelopment Diversification


New Product

Current Product

De facto strategy: change nothing and

sell more of the same to existing customers and

extend customer base

Well-developed products introduced into new markets to extend value: ideal

when little modification

required & room for growth in original

market is restricted

This strategy chosen in conjunction with one or more of the others or when a crisis has been

recognized

Make new product offers more

effectively and inexpensively to

existing customers rather than to new

ones

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Green Mountain Coffee Roasters Strategy

Phase 1:Sell to

Core Market

Phase 2:Expand Base viaCatalogue, Viral

Marketing

Phase 3:Sell

ComplimentaryProducts


New Product

Current Product

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Product-Customer Matrix:

Increase marketing

intensity andawareness

Market and reachnew customers,

improvescalability

Define newcomponents andsolution needs

Approach withcaution

Old Customers New Customers

New Product

Old Product

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Increase marketing



improvescalability




New Product

Old Product

Develop new emerging “retail” customers

Move transaction serviceshorizontally

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Increase marketing



improvescalability




New Product

Old Product

Develop new emerging “retail” customers

Move transaction serviceshorizontally

Better solutionarchitectures,

partnered productsNew devices, broader control

of customer network

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• FUTURE SCENARIOS– What will the ECONOMIC ENVIRONMENT look like in X years?– What will the POLITICAL ENVIRONMENT look like in X years?– What will the REGULATORY & LEGISLATIVE ENVIRONMENT look like

in X years?– What will the DEMOGRAPHIC & SOCIAL ENVIRONMENT look like in X

years?– What will the MARKETS look like in X years?– What will CUSTOMER / USER PROFILES & HABITS look like in X

years?– What will the COMPETITIVE ENVIRONMENT look like in X years?– What will the next two to three GENERATIONS OF TECHNOLOGY

look like in X years?– What FEATURES & CONTENT will PRODUCTS have in the next X

years?– What will MANUFACTURING PROCESSES & CAPABILITIES look like in

X years?– What will SALES / MARKETING METHODS look like in X years?– What will DELIVERY / DISTRIBUTION METHODS & SYSTEMS look like

in X years?– What will HUMAN, FINANCIAL, & NATURAL RESOURCES look like in X

years?

Charting the Future

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PULL or PUSH Economy?• PULL ECONOMY

– SUPPLY VS. DEMAND– CUSTOMER-DRIVEN– MARKET

FRAGMENTATION– SMALLER NUMBERS OF

CUSTOMERS, DISSIMILAR NEEDS

– TAILORED PRODUCTS– PREMIUM PRICES– SHORTER PRODUCTION

RUNS– FLEXIBLE, EFFECTIVE

MANUFACTURING– SHORTER PRODUCT

CYCLES– LITTLE BRAND LOYALTY– PROCESS INNOVATION– CHANGING RULES– FAST & NIMBLE

• PUSH ECONOMY– DEMAND VS. SUPPLY– PRODUCER-DRIVEN– MARKET SEGMENTATION– LARGE NUMBERS OF

CUSTOMERS, SIMILAR NEEDS

– GENERIC PRODUCT– COMMODITY PRICES– LONG PRODUCTION

RUNS– EFFICIENT

MANUFACTURING– LONG PRODUCT CYCLES– STRONG BRAND LOYALTY– PRODUCT INNOVATION– FIXED RULES– STURDY & STABLE

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Quantify Opportunities:

ExploitedOpportunities

UnexploitedOpportunities



Served Customers Unserved Customers

Unarticulated Needs

Articulated Needs

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Quantify Opportunities:

ExploitedOpportunities




Served Customers Unserved Customers

Unarticulated Needs

Articulated Needs

Articulated-Served Customers: known world of customer

needs

Articulated-Unserved

Customers: offerings developed & perfected for

existing customers extended to new

customers in different markets

Unarticulated-Unserved

Customers: proactive and

visionary companies like Honda seek to get inside he heads

& experiences of unaddressed

customers

Unarticulated-Served Customers:

potential for satisfied customers

to become frustrated or

uninterested if unexpressed but felt needs not addressed

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Blue Ocean Strategy in Action• To reconstruct buyer value elements in

crafting a new value curve, a Four Actions Framework is used.

• To break the trade-off between product / service differentiation and low cost, and to create a new value curve, four key questions are used to challenge an industry's strategic logic and business model:


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Four Key Questions to Challenge Strategic Logic and Business Model:• Which of the factors that the industry

takes for granted should be eliminated ?

• Which factors should be reduced well below the industry's standard?

• Which factors should be raised well above the industry's standard?

• Which factors should be created that the industry has never offered?


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Where are we going?

Under-shotCustomers Nonconsumers

Over-shotCustomers

ChangeConsumers

Existing Industrial Standards

Changing Industrial Standards

Reduce / Eliminate Factors

Raise / Create Factors

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Where are we going?

Under-shotCustomers Nonconsumers

Over-shotCustomers

ChangeConsumers





Which factors should be raised well above the

industry’s standard?

Which factors should be created that the industry

has never offered?

Which factors that the industry takes for granted

should be eliminated?

Which factors should be

reduced well below the industry’s standard?

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Wine Example

Raise:- Price vs. budget wines- Retail store involvement

Create:- Easy drinking- Ease of selection- Fun & adventure

Reduce:- Wine complexity- Wine range- Vineyard prestige

Eliminate:- Oenological terminology & distinctions- Aging qualities- Above-the-line marketing





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Cirque du Soleil Example

Raise:- Unique venue

Create:- Theme- Refined environment- Multiple productions- Artistic music & dance

Reduce:- Fun & humour- Thrill & danger

Eliminate:- Star performers- Animal shows- Aisle concession sales- Multiple show arenas





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Market Entry / Growth ScenariosSCENARIO 1

Non-consumers converted via cost, access or education

Example: telephone replacing telegraph, wireless replacing cable

SCENARIO 2Non-market legal barriers or distortions overcome or bypassed

Example: Wireless bypasses telecom monopoly access to customers

SCENARIO 3 Business models exploit non-market regulatory barriers without addressing economic constraints

Example: Revolving loans for bundled Renewable Energy options address reliability requirements but not economies of scale constraints

SCENARIO 4 Non-market forces will not remove technological interdependence

Example: Broadband ISPs dependent on telecom landline access

SCENARIO 5 Non-market forces will not overcome lack of industrial motivation or ability

Example: Artificial price-fixing at petrol pump

SCENARIO 6 New business models emerge to serve least demanding overshot customers

Example: Advertising revenue model for free Google software

SCENARIO 7 Specialists entering and displacing integrated players for overshot customers

Example: DataCol meter reading services for electric utilities

SCENARIO 8 Standards or rules allow different providers to meet min. requirements of overshot customer segments

Example: Parallel imports of solar hot water systems, synthetic substitutes and other appliances

SCENARIO 9 Sustaining new, and/or improved products and services for undershot customers: integrators thrive, specialists struggle

Example: Windows operating system

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Signals of Change1. What jobs are customers in the industry trying

to get done? Are customers not served, undershot, or overshot by current offerings? Along which dimensions do firms compete for customers?

2. What improvements garnered premium prices in the past?

3. Do integrated or specialized business models currently prevail? Are interfaces specifiable, verifiable, and predictable? If so, where is modularity occurring?

4. Where are new business models emerging? Is there growth in fringe markets?

5. What role does the government or its regulatory bodies play in enhancing or inhibiting innovation?

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Competitive Battles1. What are industry players’ business models?

What are their motivations? What are their skills?

2. How do industry players compare to one another? How do they compare to the needs of the market? Where are there symmetries? Where are there asymmetries?

3. Do the asymmetries tilt in favour of the attacker or the incumbent?

4. Does the innovation naturally fit its target market? Is there evidence of cramming (forced fit)?

5. Are there signs that a company is ceding a low-end market and trying to move up? Is there an “up” to move to? For how long?

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Strategic Choices1. Is a company in a situation in which the right

strategy needs to emerge? Is the firm giving itself the freedom to encourage emergent forces? Have managers wrestled with problems they are likely to face again? Have they shown the capacity to learn?

2. Are investor values aligned with company needs? If the investor is a corporation, has growth stalled?

3. Do value networks overlap? If they do, what are the degrees of overlap? Do they make it impossible to create a business model that has asymmetries?

4. Is this an appropriate situation for a spinout? Is the company giving the spinout the freedom to do what is necessary?

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Creating the Future• “The best way to manage the future?

Create it!”– The best competitive position to be in is

to have no competition• This position can only be achieved by NOT

playing the way your competition plays the game but rather by controlling the game, by creating products and services that change the rules in your favour.


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How to Create the Future Use a framework that classifies best-practice business processes for

identifying, developing and retaining customers The first-level processes in this framework for identifying best-

practice business opportunities, define a company’s basic operations, such as:

1. Understand markets and customers2. Involve customers in the design of products and services3. Market and sell products and services4. Involve customers in the delivery of products and services.5. Provide customer service6. Manage customer information

Supporting these basic operations, management and support processes maximize the value and use of human resources, information and technology, and financial and physical resources, to name a few


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Set Strategic Direction• Which way is the business heading?

1. What (if anything) gives this business distinctiveness?2. What skills does this business currently have that are better than

those of the competition? Can this advantage be sustained for a period of more than a few years?

3. How is this organization generally regarded in the industry or by outside experts? How do outsiders see the business's strategy? What do they think about it?

4. What are this organization's strengths in creating a high performing business?

5. What are the biggest roadblocks to this business becoming a high performing business?

6. What does the business do? Why? 7. What does it not do? Why not? 8. Who are its customers / Who are not its customers? 9. What are its products / What are not its products? 10.What are its markets / What are not its markets? 11.Why is the business in this business & not another? 12.Why is the business focusing on these customers & not others? Why is

it providing these services (or making these products) & not others? 13.Does this business have more than one strategy?


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Set Strategic Direction• BUSINESS STRATEGY ISSUES

1. VISION, VALUES, PURPOSE2. OVERALL DIRECTION3. DESIRED OUTCOMES4. LONG TERM OBJECTIVES5. STRATEGY TO ACHIEVE OBJECTIVES

• IDENTIFYING BUSINESS STRATEGY ISSUES– Identify 7 business strategy issues that need to

be addressed in your business plan, examining:A. Strategic IssueB. ImpactC. Action Required


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Establish Clear Objectives• What is the business trying to achieve in the near future?

– STRATEGIC1. Has the business developed clear & formal objectives for the long-

term as well as the immediate future? 2. Are those objectives quantified in terms of rate & return, growth,

market share, product or service development?3. Does the business know at what stage in their life cycles its

products currently are? 4. Does the business consider the following in its development of

strategic objectives: Economic conditions, including the effects of inflation? Political conditions? Labour requirements? Capital requirements? Tax implications? Production capacity?

5. Have the strategic objectives been embodied in a formalized financial plan looking a number of years ahead?

6. Are the objectives & plans reviewed regularly & is the actual performance monitored against the plan?


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Establish Clear Objectives• What is the business trying to achieve in the near future?

– OPERATIONAL7.Is the role to be played by each individual Advisor in

achieving the plan clearly identified?8.Have the Advisors developed their own business

plans?9.Is the business planning to expand in the coming year

into a new: MARKET? SERVICE? CUSTOMER BASE?


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Establish Clear Objectives• DEVELOP CLEAR OBJECTIVES & PLANS

– S: SPECIFIC– M: MEASURABLE– A: ATTAINABLE– R: REASONABLE & RESOURCED– T: TIME BOUND

• KEY STRATEGIC OBJECTIVES– Identify 7 key strategic objectives for your

business, the desired outcome, & how it can be measured, examining:• STRATEGIC OBJECTIVE• OUTCOME• HOW MEASURED


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Develop Marketing Strategy• What market is the business in, & who are its

customers?1. Does our current marketing strategy give us the share of

the local market we might expect?2. What kind of demand is there for our products & services?3. Will our strategy provide us with a sustainable competitive

advantage?4. Will this marketing strategy help us accomplish our

business objectives?5. What kind of future opportunity is there if the business

objectives are achieved?6. What are the vulnerabilities of this strategy?7. Is this strategy consistent with the environment &

changing8. How does this strategy fare in future mapping or scenario

analysis?


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Develop Marketing Strategy• DEVELOP MARKETING STRATEGY

1. DEFINING YOUR MARKET2. IDENTIFYING TYPES OF CUSTOMERS3. COMPETITORS4. MARKETING STRATEGY5. PRODUCTS & SERVICES6. CUSTOMER SERVICE

• MARKET SEGMENTATION– Identify the 7 key market segments for your business,

identify their future potential & what action is required:A. SEGMENTB. NUMBER OF CUSTOMERS PER MONTHC. AVERAGE SPENDD. ON WHAT?E. POTENTIAL FOR DEVELOPMENT (HIGH, MEDIUM, LOW)F. HOW TO DEVELOP


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2. What can we Use Now?

Gate-Check Focus:Benefits Qualification


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Customer Value Map Matrix:

Commodity Value Better CustomerValue

Worse Customer Value Unique Value

Low Customer-perceived

quality

High Customer-perceived

quality

High Customer-perceived price

Low Customer-perceived price

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Customer Value Map Matrix:

Commodity Value Better CustomerValue

Worse Customer Value Unique Value


quality


quality



Goods are commodities with

little differentiation between vendors,

resulting in products selling on price

Products perceived as value leaders;

costs are competitive, and the

products possess the quality

attributes that customers value

most highly

Upscale goods and services that offer

unique value. Examples include:

high-margin products such as

custom jewelry for which close

substitutes not available

Customer preferences shift in

economic downturns, higher-

priced products often find

themselves in this position

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Levi Jeans Example

Normal CustomerValue

Better CustomerValue

Worse Customer Value

Normal Customer Value


quality


quality



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Levi Jeans Example

Better CustomerValue

Worse Customer Value


quality


quality



Fair Value Line

Levi’s

Competitor 3

Competitor 1

Competitor 2

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How to Create the Future Use a framework that classifies best-practice business processes for

identifying, developing and retaining customers The first-level processes in this framework for identifying best-

practice business opportunities, define a company’s basic operations, such as:

1. Understand markets and customers2. Involve customers in the design of products and services3. Market and sell products and services4. Involve customers in the delivery of products and services.5. Provide customer service6. Manage customer information

Supporting these basic operations, management and support processes maximize the value and use of human resources, information and technology, and financial and physical resources, to name a few


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SWOT Matrix:

Exploit Search

Confront Avoid or Prepare

Internal Environment

Strengths

Internal Environment Weaknesses

External Environment

Threats

External Environment Opportunities

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SWOT Matrix:

Exploit Search

Confront Avoid or Prepare

Internal Environment

Strengths

Internal Environment Weaknesses

External Environment

Threats

External Environment Opportunities

Opportunity is matched with strength.

Business’s growing edge – where it can

capitalize on areas of strategic advantage

Opportunity is matched with weakness.

Opportunities exist that the organization can recognize but is not equipped to tackle

Threat matched with weakness. Some

threats avoidable, and others are not.

Confronting competitive threats with weakness is not only dangerous but

drains resources

Threat is matched with organizational strength – mobilize to limit and

control the looming danger

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Generic Strategy Matrix:

Cost Focus Differentiation Focus

Cost Leadership Differentiation

Lower Cost for Competitive Advantage

Differentiate for Competitive Advantage

Broad Target for Competitive

Scope

Narrow Target for Competitive

Scope

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Generic Strategy Matrix:

Cost Focus Differentiation Focus

Cost Leadership Differentiation

Lower Cost for Competitive Advantage

Differentiate for Competitive Advantage

Broad Target for Competitive

Scope

Narrow Target for Competitive

ScopeTake advantage of

the unique needs of a segment of an industry that is

difficult or uneconomical for

the broad cost supplier to service

adequately

Added value within a small segment of a market rather than across the entire

market

Deliver some unique form of value that

customers recognize and appreciate, developing or

exploiting talents and resources that set the company’s

offer apart

Achieving the lowest costs in an industry while maintaining an acceptable level of

quality

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Means and Ends Matrix:

Conflict Competition

Coalition Cooperation

Incompatible Ends

Compatible Ends

Compatible Means

Incompatible Means

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Means and Ends Matrix:

Conflict Competition

Coalition Cooperation

Incompatible Ends

Compatible Ends

Compatible Means

Incompatible Means

Situations become increasingly

polarized, resulting in zero-sum, win-

lose outcomes

Companies within an industry compete against each other for customers yet share the need to educate the public

about their collective value

proposition

Deliver some unique form of value that

customers recognize and appreciate, developing or

exploiting talents and resources that set the company’s

offer apart

Formed by competitors to

address common, usually short-term

problems or adversaries

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How to Create the Future The sub-processes (second-level processes) supporting the first-level

processes are as follows:1. Understand markets and customers:

i. Understand the market environmentii. Understand customers’ wants and needsiii. Segment customers

2. Involve customers in the design of products and services:i. Develop new concepts and plans for products and servicesii. Design, build, and evaluate prototypesiii. Refine and customize products or services, then test their effectiveness

3. Market and sell products and services:i. Secure channels of distributionii. Establish pricingiii. Develop advertising and promotion strategiesiv. Develop and deploy a sales forcev. Process ordersvi. Develop customers


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How to Create the Future The sub-processes (second-level processes) supporting the first-level

processes are as follows (continued):4. Involve customers in the delivery of products and services:

i. Offer broad delivery options to become the ‘supplier of choice’ii. Use delivery customization to attract and retain core customersiii. Identify customers’ delivery needsiv. Develop distribution capability

5. Provide customer service:v. Establish ‘points-of-contact’ excellencevi. Build cross-functional ‘points-of-contact’ cooperationvii. Train employees to improve customers’ expectations for products and services

6. Manage customer information:viii. Build customer profilesix. Establish service informationx. Measure customer performance and satisfaction


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How to Create the Future1. Best-practice agenda for understanding markets and customers:

Understand that the market is more than just the customer. In its broadest sense, the market environment includes the company’s supply chain and merchant partners as well as intermediary customers and end users. A company’s understanding of government regulations, trends in consumer purchasing, and unpredictable events can dramatically affect its production and relationship with customers

Systematically create an image of the company’s value chain, from suppliers to end users. Prominently displayed, this diagram serves to inform all employees how they fit into the market environment as well as how other stakeholders with whom they deal (customers, suppliers, and so forth) also fit into the market environment

Survey your customers frequently, systematically, directly, and personally. Review the surveys and then share them with the people in our organization who need to know what those customers have to say. Responding personally to every survey, for example, should provide the norm for executive behavior. If you don’t have time to respond personally, make sure someone in your company does

Revise your products or services as customers request or tell them why they can’t have it their way. Promote the new version and resurvey customers to assess their satisfaction. Survey every customer, for example, and require every employee linked to that customer to read and respond to those comments. Requests for new products and services can lead to expanded offerings and even new companies being launched

Segment customers so that you can meet demands more directly and profitably. Establish the criteria by which customers should be grouped (by age, income, credit history, purchases, demographic factors, and so forth), then offer products and services tailored to those segments. When appropriate, partner with merchants and suppliers to create greater value for customers


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How to Create the Future1. Top ten best-practice diagnostic questions for understanding markets and

customers:1. Can you describe in detail all the major suppliers in your company’s value chain and list substitute

suppliers who could provide raw materials and component parts in an emergency? Do you need a week’s review to do so? (You won’t have a week if a fire destroys a supplier’s production plant.)

2. How often do you survey your customers? Once a month? Once a year? Once a millennium?3. Which customers do you choose to survey? Only those who call you first?4. How good is your process for responding to customer concerns expressed in surveys?5. What quick, tangible rewards do you offer customers who take the time to complete one of your

surveys or requests for information?6. What external sources other than surveys do you typically use to gather information about your

customers? About competitors? About suppliers? About trends in the marketplace?7. What other internal sources do you use to collect this information?8. List five (or more) segmentations that your company currently uses. Can you explain succinctly the

benefits it realizes from grouping customers as it does?9. Name a product or service your company provides that has come about as a result of a customer

request or survey and has since improved your overall profitability.10. Does your company have a process for customers to evaluate your employees and departments? Is it

similar to the Net Satisfaction Index that Dickens Data Systems has developed? Do you support cross-functional teams to analyze customer needs and fulfill them?


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How to Create the Future2. Best-practice agenda for involving customers in the design of products and

services: Survey customers for their opinions, ideas, feelings, likes, and dislikes about products or services.

Whenever possible, meet them face-to-face to discuss their views. Most important, listen closely to what they have to say

From these surveys and other customer interactions, collect, categorize, and deliver information about product use to the people in our organization who need it

Describe to your customers how they can help you understand their needs, then create products and services that meet those demands. Define the values that this step of the process has for them: more precisely customized products and services, speedier development, increased opportunities to participate in the design stages, and greater savings in production and use

Make refinements in existing products and services, partnering with your customers either on their premises or yours when possible. Share information both at home and at the customer’s site

Test the refinement in a controlled environment with targeted segments of customers Market the successfully refined product, but keep the doors open to further improvements as you

receive suggestions from your customers and as their needs change


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How to Create the Future2. Top ten best-practice diagnostic questions for involving customers in the

design of products and services:1. How do you gather customer input about product design and use? Telephone or mail surveys?

Internet bulletin boards? Focus groups? Feasibility studies?2. Do you have a team comprising representatives from various groups – manufacturing, engineering,

marketing, sales, and so forth – that goes out to meet with customers?3. Have you ever allowed your customers to decide whether or not you should implement a change, as

Disney did in creating Mickey’s Starland and character breakfasts?4. To what extent do you involve customers in the design of prototypes? What about their customers?5. Do you look for customer insights before making refinements or customization changes to existing

products, as Black & Decker did in creating its VersaPak line?6. Do you get wisdom and insights from customers at each step of development? Do you have a

customer advisory board?7. Do you partner with customers so that they allow your employees to visit their sites? If so, how many

of these relationships do you have?8. Do you have space reserved in your plant for your best clients (or suppliers) to collaborate with you in

design, production, and other areas? (A mailbox slot or coffee mug doesn’t count.)9. How much do you share information with clients? Do you give them the right to attend design and

engineering meetings? Get input on upcoming advertising and sales campaigns?10. How easy is it for clients to reach someone at your company with a proposed change or refinement?

How long does it take your company to respond? How many people get to see and discuss the proposal?


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How to Create the Future3. Best-practice agenda for marketing and selling products and services:

Make sure you know all links in your value chain – all suppliers, distributors, advertisers, marketers, salespeople, and customers. By its thorough understanding of its value chain, Lexus was able to overcome potential distribution problems

Establish a competitive pricing strategy, as Southwest Airlines has done by looking outside its industry (namely, to automobile rentals and other modes of transportation) to determine pricing policies

Develop strong advertising strategies, seeking input from all levels of your company to develop an appropriate image that can distinguish your company from others in the industry. As Nike has proven, developing a good product is only half the battle. You also have to get the message to your customers

Train your employees, especially those who will sell your products and services, to know everything they need to know about the market, the item they are selling, and the customers to whom they are selling. As Cutler-Hammer illustrates with its team-selling approach, this melding of individuals with different talents and degrees of expertise makes good business sense

Develop an integrated system for processing orders tailored to customers’ needs. Through its ValueLink program, Allegiance Healthcare serves over 150 acute-care hospitals in the United States with 98 percent fill-rate accuracy

Do business with the customers you choose and in the ways you choose – by surveys, interviews, point-of-sale contacts, repair calls, and the like. As Peapod, Inc., and American Airlines have demonstrated, it is possible to partner with customers, establishing key drivers of greater value and lower prices


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How to Create the Future3. Top ten best-practice diagnostic questions for marketing and selling

products and services:1. The foundation of a successful sales effort is knowledge of customer needs and an ability to

communicate how your products and services best fit those needs. What training systems does your company use to educate your salespeople and service technicians on: (i) identifying customers’ key needs; and, (ii) differentiating your products and services from those of the competition?

2. How often do you retrain your employees in these and other areas? What tests do you give them?3. When was the last time you critically evaluated your channels of distribution? Have you considered

emerging channels such as the Internet?4. Do you monitor your price performance and that of your competitors? How do you determine what

customers are willing to pay?5. Does your advertising strategy address current and developing trends in your market?6. Have you studied non-customers and your lost customers to identify their needs? Have you

responded to them appropriately?7. How do you go about building a positive image for your company and its products? How do you help

potential customers understand that they need your products and services8. What degree of integration (such as EDI) do you have in place for processing orders?9. What special offers or incentives do you offer selected segments of your customers?10. Do you know what differentiates your products and services from your competitors’ products and

services? How do you communicate those differences?


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How to Create the Future4. Best-practice agenda for involving customers in the delivery of products and

services: Become the ‘supplier of choice’ by using out-of-box thinking to generate customer delivery solutions

not bound by conventional wisdom, as New Pig Corporation, Norrell Corporation, and Holy Cross Hospital have done

Customize delivery systems to fit the needs of core customers, in particular by creating channels of communication and service offerings to meet their demands. Establish a program similar to the CERRFS initiative undertaken by SARCOM

Identify customer delivery requirements through a complete understanding of the impact that distribution has on a customer’s business. As Granite Rock and Cemex show, often a best-practice company builds extensive lines of communication within its own system before streamlining its delivery services to customers

Develop distribution capability as exemplified by Campbell’s, paying close attention to small details – such as pallet size – that combine to solidify the customer-supplier relationship


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How to Create the Future4. Top ten best-practice diagnostic questions for involving customers in the

delivery of products and services:1. How do you respond to customer delivery needs in emergency situations?2. How do you identify the delivery service needs of individual customers? Do you use these needs as a

method of customer segmentation?3. Do you have just-in-time supply and continuous replenishment services?4. What steps have you taken to ensure reliability in your delivery process? How do you communicate

this process to your customers?5. Do you have in-plant reps at customer sites? If so, what do you consider the biggest advantages of

these relationships?6. What is your delivery channel strategy? Do you align your delivery strategies to service specific

customer needs?7. Can you continuously track products from the production line to the customer’s door?8. Do you offer special delivery deals for large-scale purchases such as same-day shipping? Twenty-

four-hour delivery? Any other customization features in packaging and delivery?9. How do you differentiate your delivery strategy from competitors’ trying to become the supplier of

choice?10. What methods of feedback (other than a payment) do you get from customers regarding delivery and

repair information? How do you elicit this input – via phone surveys, the Internet, or other means?


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How to Create the Future5. Best-practice agenda for providing customer service:

Establish primary ‘points of contact’ between your employees and customers, instilling in customers the feeling that their needs are being met personally and promptly. At the same time, information can be used to alter company-wide business processes

Build cross-functional cooperation by training employees to understand and enhance the entire customer experience, then holding them responsible for customer satisfaction. This training could come via improving lines of communication between management and frontline employees – much as Coldwell Banker Relocation Services does – or by instructing employees how to treat customers from the first point of contact, such as Hyatt and Disney

Create a database to identify customer service failures and embrace their identification, recalling the principle that drives customer satisfaction at IBM and FedEx: Your customers know best what they don’t like and what they can’t understand

Raise customer expectations for products and services by giving them high-quality treatment each step of the way. Whether it is greeting guests at the front door, as the Red jackets do at East Jefferson General Hospital, or helping guests locate keys to their locked cars, as Disney World attendants do, the best-practice company personalizes its customer service at every point of contact

Make sure each employee has at hand all information needed to process a customer’s request promptly and efficiently. Providing this information may require sophisticated databases such as those used by Hyatt Hotels to identify specific guests’ needs and FedEx has in place to help customers track shipments. Or the organization may assemble data from customer surveys and distribute it as needed to appropriate personnel, much as East Jefferson General Hospital has done by collecting information from groups such as senior citizens to better prepare employees associated with its Elder Advantage program


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How to Create the Future5. Top ten best-practice diagnostic questions for providing customer service:

1. What is your customer retention rate? Does it indicate any trends you can act upon?2. What is the level of cross-functional communication between your company and its customers?3. Do you train employees throughout the organization in various tasks so that any of them can handle

any problem that arises during the customer cycle?4. What financial empowerment do you provide to your frontline employees to solve customer problems?

Do you give them additional authority to make decisions on the spot?5. Do those frontline employees have access to executive groups such as IBM’s customer action

councils where they can receive additional assistance and powers of authority?6. Do you have in place a cross-functional database to track and analyze customer service highlights and

lowlights?7. How do you explicitly gauge your customers’ satisfaction? Do focus groups play a role?8. Is any portion of your company’s merit system based on customer service?9. Do you have a client advisory board? How often does it meet? What does it accomplish?10. Do you surprise your customers with great customer service as East Jefferson general Hospital does

with its red-jacketed representatives who accompany visitors to their destinations?


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How to Create the Future6. Best-practice agenda for managing customer information:

Design and build profiles using a common database to track customer information. As American Express demonstrates, a complete and flexible database allows a company to capture significant information about customers and merchants, thereby controlling this three-way relationship by virtue of its involvement in each transaction

Collect observations about customer preferences from point-of-contact employees who serve as ‘listening posts’, as the Ritz-Carlton does

Communicate customer satisfaction throughout the company. By using the chain’s extensive database, each Ritz-Carlton hotel can combine its own employees’ observations with those from employees who encountered the same guests on visits to other Ritz-Carlton hotels. This process helps the company prepare for guests’ visits and secure long-term relationships

Establish service information by studying how customers use (or misuse) products and services. Black & Decker discovered that it could actually instruct customers how best to use its VersaPak product, thereby altering customers’ perceptions and ensuring sales. Peapod, Inc., on the other hand, finds that by understanding customers’ buying patterns and preferences, it can capture present and future sales

Gauge customer performance and satisfaction through both internal measures such as sales growth and revenues, and external ones such as industry analyses and customer surveys. As the Orange County Teachers FCU shows, it is possible to preserve customers’ privacy while simultaneously establishing acceptable levels of risk and tracking how the company ranks against its competitors in terms of customer satisfaction


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How to Create the Future6. Top ten best-practice diagnostic questions for managing customer

information:1. Do you know your customers’ purchasing patterns s o well that you can pinpoint when they will likely

make their next purchase of one of your products? Are you holding your breath, or are you taking a jar of Skippy off the shelf as Peapod is doing?

2. Do you study customer profiles to determine how much individuals are willing or likely to spend for products or services?

3. Where will customers make their next purchase of one of your products? At a discount store, through a catalog, over the Internet? Will you be there to make the sale wherever the order occurs?

4. Can you track customer preferences and how they change over time? If so, what do you do with this information?

5. What means do you have for collecting, organizing, and sharing customer data with people throughout your company? Why do you want to keep your people in the dark?

6. Are you constantly surprising and delighting customers with your products and services? How do you know?

7. How do you build long-tern loyalty? (See ‘Building Customer Loyalty’ below)8. Does our organization have the capability for identifying customers to target with promotions specific

to their needs? Can you find fans of a particular merchant or product as adeptly as American Express?

9. Can you deal with ‘ugly guests’ as effectively as the Ritz-Carlton does?10. Does your company try to educate customers in the proper use of products and services as Black &

Decker does, or do you pray they’ll educate themselves?


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Establish Current Position• What is the current position of the business?

1. What does the business do & why?2. How long has the business been operating?3. What stage of growth is the business at?4. What is the form of the business? (Limited Company etc.)5. Is the current form of business appropriate for future

operations?6. What makes the business different?7. What are the major accomplishments of the business?8. What major setbacks have you met?9. What are the major challenges facing the business in the

future?10.Who are your business partners or who do you have important

relationships with?11.Are there well-defined business agreements & levels of service

drawn up with business partners?12.Why is the business attractive to you & potential investors?13.How stable is the business financial performance?14.Does the business have a good reputation in its industry?


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Establish Current Position• FIVE STAGES OF GROWTH

1.EXISTENCE2.SURVIVAL3.SUCCESS4.EXPANSION5.MATURITY


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Assess Business Environment• What is happening in the business environment & what

are the implications for the business?1. POLITICAL FACTORS: What is the Government doing? -

still the major influence in the economy, consider pending elections, de-regulation, tax policy, & public confidence

2. ECONOMIC FACTORS: What is the economy doing? - Inflation, leading indicators, interest rates, exchange rates, employment levels etc.

3. ENVIRONMENTAL FACTORS: What is happening in the general environment? - Controls on business activity, regulations, availability of resources, climatic events

4. SOCIAL FACTORS: What are the factors affecting society? - Population drift, immigration, wage rises, unemployment, mortgage rates, racial & cultural issues

5. TECHNICAL FACTORS: What is happening in your particular industry or sector? - New products & services, organizational trends, market trends?


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Assess Business Environment• ENVIRONMENTAL FOCUS

– External Focus• Identify the 7 most significant factors

in the business environment– A. Impact on Business– B. Action Required

– Internal Focus• SWOT Analysis: List as many factors

about our organization that you can think of


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Identify Critical Success Factors• What does the business need to be good at to succeed?

1. Critical Success Factors (CSFs): List between 5-7 factors that are essential to the future success of the business

2. How often are the CSFs reported on?• Weekly?• Monthly?• Quarterly?• Six Monthly?• Annually?

3. Does the management information system provide the necessary information to monitor CSF performance at the appropriate level of detail?

• TYPES OF CRITICAL SUCCESS FACTORS1. INDUSTRY FACTORS2. BUSINESS CAPABILITY3. FUNCTIONAL4. ENVIRONMENT


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Identify Critical Success Factors• IDENTIFY CRITICAL SUCCESS

FACTORS– Identify 7 Critical Success Factors for your

business, how they impact, & how they should be measured, examining:A.Critical Success FactorB.Impact on BusinessC.How Measured


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Outline Business Processes• What activities need to occur to achieve the business objectives?

1. What are our major business processes? How many are there?2. What are our Units of Competitive Advantage (UCA) - those

things that distinguish us from competitors & create an advantage in the market?

3. What is our Value-added Support Work (VA) that facilitates the accomplishment of UCA work?

4. What is our Essential Support Work (ES) that does not directly create an advantage of facilities that work, but which must be done if we are to continue to operate?

5. What is our Non-essential Work (NE) - work that has lost its usefulness but continues to be done because of tradition?

6. Which areas of our work could be regarded as industry best practice?

7. Which areas of our work could benefit from comparison & improvement to meet industry best practice?

8. Is taking risks accepted & used as a learning experience?9. Is creativity & innovation rewarded?10.Are all key business processes well under control?


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Outline Business Processes• OUTLINE BUSINESS PROCESSES

1. INPUTS: Time & resources you require for yourself & others to perform key activities

2. ACTIVITIES / PROCESSES: Tasks you perform to add value to inputs you have received

3. OUTPUTS: Your work product or services that meet your customer's requirements

• BUSINESS PROCESS– Select one of your main business processes, then:

1. Start at the first step, & note (for each step) the activity that takes place

2. Work through each step in the process until you reach the end result

3. Categorize each activity I - IV ranging from:(I) UCA - unit of competitive advantage(II)VA - value-added support work(III)ES - essential support work(IV)NE - non-essential support work

4. Identify possible process improvements


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3. Create New Possibilities.

Gate-Check Focus:Benefits Quantification


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Portfolio Analysis Matrix:

Exit Adjust or Limit

Maintain Grow

Non-existent Mutual Value

Symbiotic Mutual Value

Excellent Business Quality

Poor Business Quality

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Portfolio Analysis Matrix:

Exit Adjust or Limit

Maintain Grow

Non-existent Mutual Value

Symbiotic Mutual Value

Excellent Business Quality

Poor Business QualityThis type of client

relationship is unsupportable and

should be renegotiated or

stopped as soon as legally and morally

possible

These assignments are strategically well aligned, but they are

not profitable and may not be generating

additional work

It is profitable, growing, and

strategically well matched,

representing a virtuous cycle of learning, growth, and profitability

Worth doing for the money but

contributes little to long-term strategic

development

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Identifying Opportunities1.Unexpected Successes2.Unexpected Failures3.Unexpected External Events4.Process Weaknesses5.Industry / Market Structure Changes6.High-Growth Areas7.Converging Technologies8.Demographic Changes9.Perception Changes10.New Knowledge


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Unexpected Successes1.What unexpected product success have you had

recently?2. In which geographic areas have you had unexpected

success recently?3. In which market / industry segments have you

experienced unexpected success recently?4.What customer segments have provided unexpected

success recently?5.What unexpected successes have your suppliers had

recently?6.What unexpected successes have your competitors had

recently?7.Which of your technologies has had unexpected

success recently?8.What unexpected customer / user groups have bought

from you recently?9.What unexpected sources have asked to sample,

distribute, or represent your product recently?

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Unexpected Failures1.What unexpected product failures have you had

recently?2. In which geographic areas have you had unexpected

failures recently?3. In which market / industry segments have you

experienced unexpected failures recently?4.What customer segments have provided unexpected

failures recently?5.What unexpected failures have your suppliers had

recently?6.What unexpected failures have your competitors had

recently?7.Which of your technologies has had unexpected

failures recently?8.Which customer / user groups have had unexpected

failures recently?9.Which distributors, dealers, & / or agents have had

unexpected failures recently?

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Unexpected External Events1.What unexpected external events

have occurred recently?2.What unexpected internal events

have occurred recently?3.Have any expected external &

internal events combined in an unexpected way recently?


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Process Weaknesses• Every process or system in existence has one of

three things wrong with it: 1.A bottleneck2.A weak link3.A missing link

• Checklist1.What self-contained processes exist in the

organization?2.What process weaknesses exist in our customers'

organization?3.What weakness or "missing link" prevents better

process performance?4.Why do some processes perform better at some times

than at others?5.What bottlenecks do each of these processes have?6.What process weaknesses among our competitors

might we be able to improve on?

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Industry / Market Structure Change1.What major structural changes are occurring among

your customers?2.What major structural changes are occurring in your

geographic markets?3.What major structural changes are occurring within

your market / industry structure or in the conduct of your business?

4.What major structural changes are occurring among your competitors?

5.What major structural changes are happening in your customers' businesses?

6.What major structural changes are occurring within your regulatory environment?

7.What major structural changes are occurring in your supplier relationships?


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High-Growth Areas1.What parts of the business are growing faster

than economic or population growth?2.What other businesses are growing faster than

economic or population growth?3.What potentially high-growth businesses

related to yours are dominated by only one or two companies?

4.What parts of your competitors' businesses are growing faster than economic or population growth?

5.What parts of your customers' or suppliers' businesses are growing faster than economic or population growth?


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Converging Technologies1.What technologies in your business

are converging or merging?2.Which of your technologies is now

being joined to outside technologies?

3.Which of your technologies can be more effective if deliberately converged?

4.What would be the ideal convergence of technologies in your business?


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Demographic Changes• 4 categories of demographic changes need to be monitored in a

firm's end customers: 1. Income2. Age

3. Education4. Mix

Checklist1.How is the age distribution of your customers & users

changing?2.How will the educational level of your customers & users

change in the next few years?3.How will the income distribution of your customers & users

change in the next few years?4.How will the geographic distribution of your customers & users

change in the years ahead?5.How might the buying habits of your customers & users

change in the years ahead?6.What are the customer demographics that might change over

the years ahead?7.How will the mix of your users & customers change in the next

few years?

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Perception Changes1.What changes are occurring in how your products

& services are perceived?2.What changes are occurring in the values of your

customers?3.What changes are occurring in the lifestyle, image,

& status of your customers?4.How will changes in perception affect your

customers & suppliers?5.For what new purposes have customers purchased

your products & services recently?6.What intangible reasons are customers developing

to support your products & services?7.What societal, peer, & normative pressures will

affect your products & services in the future?

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New Knowledge1.What new knowledge has recently

become known about your business?2.What combinations of knowledge

have created new insights into your business?

3.What new sources of information about your business have recently been tapped?

4.What new patents or discoveries have been announced relating to your business?


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Determine Business Capability

• How is the business organized, who are the key people involved, & is it capable of high performance?

• A. BUSINESS CAPABILITY1. What is this business really good at? 2. What skills does this business currently have that are better

than those of competitors? 3. What capabilities are needed with this strategy? 4. Where do customers say we need to improve? 5. What is the gap between current capabilities & those

capabilities needed to give the company an advantage?6. How easy is it to acquire or build the needed capabilities?7. How much time & money will be needed to develop these

skills?8. What clients or contracts have been lost & to whom were they

lost?9. Where & how is the competition beating this company?10.What programs does the company need or have in place that

are designed to improve capabilities?


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Determine Business Capability How is the business organized, who are the key people involved, & is

it capable of high performance? B. BUSINESS STRUCTURE

1. What parts of the business are well aligned to delivered our business strategy?

2. What current beliefs, policies, procedures, systems, or other elements are not aligned to deliver our business strategy?

3. What business initiatives are going well?4. What are the things that get in the way of the business achieving its

objectives?5. What are the things in the business that are working well to support the

business strategy?6. What does the business need to do better to execute the business

strategy effectively?7. What gets in the way of people doing their work? Are there areas where

effort is wasted?8. How do people spend their time?9. Where should efforts be focused to ensure competitive advantage?10. Where are the opportunity areas for improving efficiency & effectiveness?

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Determine Business Capability• Determine Business Capability

– Governance– Structure– Organization– Management– Capability

• Organization Capability– Identify key individuals in our organization and for each specify:

1. Name 2. Area of responsibility3. Length of service in industry (years) 4. Length of service in this office /

area5. Key strengths 6. Weaknesses7. Key areas for specialization 8. Development actions required9. Successor if person left


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Strategic Alignment of Business Priorities with Opportunities

1. Where are we going? (External Perspective: Market Scenarios)

2. What can we use? (Relevant Context: Customer Needs)

3. How do we use it? (Formulate Strategy: Identify & Evaluate Opportunities)

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Dimensions to Opportunities Identified Dimension Definition ExamplesOfferings Develop innovative new products or

services• Gillette Mach3Turbo razor• Apple iPod music player & iTunes music service

Platform Use common components or building blocks to create derivative offerings

• General Motors OnStar telematics platform• Disney animated movies

Solutions Create integrated and customized offerings that solve end-to-end customer problems

• UPS logistics services Supply Chain Solutions• DuPont Building Innovations for construction

Customers Discover unmet customer needs or identify underserved customer segments

• Enterprise Rent-A-Car focus on replacement car renters • Green Mountain Energy focus on “green power”

Customer Experience

Redesign customer interactions across all touch points and all moments of contact

• Washington Mutual Occasio retail banking concept• Cabela’s “store as entertainment experience” concept

Value Capture

Redefine how company gets paid or create innovative new revenue streams

• Google paid search• Blockbuster revenue-sharing with movie distributors

Processes Redesign core operating processes to improve efficiency and effectiveness

• Toyota Production System for operations• General Electric Design for Six Sigma (DFSS)

Organization Change form, function or activity scope of the firm

• Cisco partner-centric networked virtual organization• Procter & Gamble front-back hybrid organization for customer focus

Supply Chain

Think differently about sourcing and fulfillment

• Moen ProjectNet for collaborative design with suppliers• General Motors Celta use of integrated supply and online sales

Presence Create new distribution channels or innovative points of presence, including the places where offerings can be bought or used by customers

• Starbucks music CD sales in coffee stores• Diebold RemoteTeller System for banking

Networking Create network-centric intelligent and integrated offerings

• Otis Remote Elevator Monitoring service• Department of Defense Network Centric Warfare

Brand Leverage a brand into new domains • Virgin Group “branded venture capital”• Yahoo! as a lifestyle brand

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Opportunities Identified

1. Unexpected Successes2. Unexpected Failures3. Unexpected External

Events4. Process Weaknesses5. Industry / Market

Structure Changes6. High-Growth Areas7. Converging Technologies8. Demographic Changes9. Perception Changes10. New Knowledge

Dimensions Available

1. Offerings2. Platform3. Solutions4. Customers5. Customer Experience6. Value Capture7. Processes8. Organization9. Supply Chain10. Presence11. Networking12. Brand

Dimensions to Opportunities Identified

Vs.

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Generating Product Concepts from Opportunities Identified

• The Product Sacrifice Tool– Apply the “Product Part Removal” process

• The Product Parasite Tool– Apply the “Product Part Replacement” process

• The Product Unification Tool– Apply the “External Product Functionality” process

• The Product Multiplication Tool– Apply the “More Of The Same” process

• The Product Division Tool– Apply the “Divide And Reorganize” process

• The Product Breaking Symmetry Tool– Apply the “Dimension-Values Distinction” process

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Applying New Product ConceptsSix Stages of the Buyer Experience

Cycle1. Purchase

2. Delivery

3. Use

4. Supplements

5. Maintenance

6. Disposal

Customer productivitySimplicity

Convenience

Risk

Fun & Image

Environment Friendliness

Six

Uti

lity

Leve

rs

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4. Select Best Possibilities.

Gate-Check Focus: Benefits

Qualification and Quantification


114

Test Your Assumptions First!

(Or pay for the consequences of not doing so later)


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Evaluation Criteria Supporting QuestionsCLARIFY: Can you elaborate?

■ Can you elaborate on that point? ■ Can you express that point in another way? ■ Can you give an illustration? ■ Can you give an example? ■ Can you restate / rephrase to clarify the meaning?

ACCURACY: Is that true?

■ Is that really true? ■ How can we check to see if that is accurate? ■ How can we find out if that is true? ■ How can we verify or test that?

PRECISION: Can you give details?

■ Can you give more details? ■ Can you be more specific? ■ Can you be more exact?

RELEVANCE: How does that effect the issue?

■ How does that relate to the problem? ■ How does that bear on the question? ■ How does that help us with the issue? ■ How is this idea connected to the question / issue? ■ How does this idea relate to this “other” idea? ■ How does your question relate to the issue we are dealing with?

DEPTH: What are the complexities?

■ What factors make this a difficult problem? ■ What are some of the complexities of this problem? ■ What are some of the difficulties we need to deal with? ■ Are we dealing with the most significant problems / factors?

SIGNIFICANCE: What ideas are important?

■ What is the most significant information we need to address this issue? ■ How is that fact important in this context? ■ Which of these questions is most significant? ■ Which of these ideas / concepts is most important to focus?

LOGIC: Does this make sense together?

■ Does this all make sense together? ■ Does what you say follow from the evidence? ■ Does all this fit together logically? ■ Does this really make sense? ■ Does that follow from what you said? From the evidence?

FAIR: Are these assumptions justified?

■ Is our thinking justified given the evidence / context? ■ Are we taking into account the weight of evidence that others might advance in the situation? ■ Are these assumptions justified / supported by the evidence? ■ Is our purpose fair given the situation / implications of our behaviour? ■ Are we using concepts justifiably or are we distorting them? ■ Are we addressing the problem fairly?

BREADTH: What other perspectives are there?

■ Do we need to look at this from another perspective? / point of view? ■ Do we need to look at this in other ways? ■ Is there another way to look at this question? ■ What would this look like from a… view point?

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Assessing Concepts• COST-BENEFIT RELATIONSHIP

1.What is the cost of this new product or market opportunity?

2.What is the benefit of this new product or market opportunity?

• CHECKLISTCosts BenefitsPeople Market ShareMaterials Return / ProfitEquipment Prestige / ImageResearch Service / SatisfactionMarketing Earnings / DividendsLegal Fallout / ResidualsPromotion Safety / SecurityTime QualityPilot Morale / MotivationContingency Growth / Size

117

Assessing Concepts• Strategic Fit / Difficulty of

Implementation Relationship– Strategic Driving Force– What is Driving the Business?– What Should be Driving the Business?– Identify Strategic Fit– Assess Difficulty of Implementation


118

Strategic Fit / Difficulty of Implementation Relationship • Strategic Driving Force

1. Product Concept-Driven Company: e.g. automobile industry2. Market category-Driven Company: e.g. American Hospital

Supply3. User Class-Driven Company: e.g. Johnson & Johnson's

strategy of making products for "doctors, nurses, patients, & mothers"

4. Production Capacity / Capability-Driven Company: e.g. paper companies because of enormous capital tied up in their mills

5. Technology / Know-How-Driven Company: e.g. Du Pont & 3M6. Sales / Marketing Method-Driven Company: e.g. Mary Kay,

Tupperware, Amway7. Distribution Method-Driven Company: e.g. telephone

operating companies, department stores8. Natural Resources-Driven Company: e.g. Exxon9. Size / Growth-Driven Company: e.g. conglomerates10.Return / Profit-Driven Company: e.g. Virgin

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Strategic Fit / Difficulty of Implementation Relationship What is Driving the Business?

1. Which strategic driving force is currently acting as the heartbeat of your business & driving your strategy?

2. Which driving force do you think each of your key subordinates would say drives your company & acts as the strategic heartbeat of the business?


120

Strategic Fit / Difficulty of Implementation Relationship What Should be Driving the Business?

1. What component of the business should drive the strategy of the business in the future?

2. Should we continue to be driven as we have been, or should we explore another driving force?

3. If we explore a new driving force, which one should that be?4. What implications will that have on the choices that we

make on the nature of products, customers, & markets that we do or do not offer?

5. What will our future strategic profile look like if we change the driving force of our company?


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Strategic Fit / Difficulty of Implementation Relationship Identify Strategic Fit

1. How similar are the products this opportunity brings compared to the products we currently offer?

2. How similar are the markets (segments or geographic) this opportunity brings compared to the markets we currently serve?

3. How similar are the customers this opportunity brings compared to the customers we currently serve?

4. How similar are the production capabilities & / or processes this opportunity brings compared to the production capabilities we currently have?

5. How similar is the technology this opportunity brings compared to the technology we currently know?

6. How similar are the sales / marketing methods this opportunity requires compared to the ones we currently use?

7. How similar are the distribution / delivery methods this opportunity requires compared to the ones we use currently?

8. How similar are the human resources & skills this opportunity requires compared to those we have currently?

9. How will size / growth & return / profit criteria compare with current levels of achievement?


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Strategic Fit / Difficulty of Implementation Relationship

Identify Strategic Fit Checklist PRODUCT / SERVICE CUSTOMER BASE MARKET SERVED TECHNOLOGY / KNOW-HOW PRODUCTION CAPACITY / CAPABILITY METHOD OF SALES / MARKETING DISTRIBUTION METHOD OR SYSTEM NATURAL RESOURCES SIZE / GROWTH RETURN / PROFIT


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Strategic Fit / Difficulty of Implementation Relationship Assess Difficulty of Implementation

How much change will be required, in each of the following areas, to implement this new product or market opportunity?

ORGANIZATION STRUCTURE PROCESSES & / OR SYSTEMS SKILLS & / OR TALENTS MANUFACTURING METHODS & CAPABILITIES SELLING & / OR MARKETING METHODS DISTRIBUTION OR DELIVERY METHODS TECHNOLOGIES CAPITAL & FINANCING LEGAL & REGULATORY ISSUES IMAGE, REPUTATION, & QUALITY COMPENSATION SYSTEMS RAW MATERIALS CUSTOMER SERVICES CORPORATE CULTURE


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Critical Factors1.Technical Factors2.Timing Factors3.Stability Factors4.Position Factors5.Growth Factors6.Marketability Factors7.Production Factors8.Financial Factors9.Protection Factors


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1. Technical Factors• Availability or requisite scientific /

technical skills• Adequacy of research resources• Quality & quantity of support

personnel• Probability of technical success &

validation• Government & / or regulatory

position


126

2. Timing Factors• Research completion versus market

need• Market penetration & development• Known & assumed competitive

actions


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3. Stability Factors• Durability of the market• Chances for a dominant or

preeminent position• Probability & impact of down markets• Stability of largest projected users• Volatility of the approach


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4. Position Factors• Impact on other products & services• Impact on overall credibility• Ability to assume a rapid leadership

position• Ability to facilitate other

opportunities


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5. Growth Factors• Diversification• Possibility of substantial future

growth in volume, units, & / or revenue

• Possibility of a family of products• Possibility of changes or shifts in the

industry of which this product & / or service can take advantage

• Short-term market potential• Long-term market potential• Impact on market share


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6. Marketability Factors• Market potential in the immediate future• Market potential in the long-range future• Compatibility with current & long-range

marketing objectives• Competitive environment• Promotional requirements to launch• Promotional requirements to sustain• Adequacy of present distribution systems• User view of cost versus value• Applicability to current customers• Servicing requirements• Impact on reputation


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7. Production Factors• Capabilities of production facilities• Utilization of familiar production

processes• Availability of human resources


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8. Financial Factors• Calculation of DCF• Expected ROI• Expected increase in profits or

earnings per share• Expected new capital outlays for

equipment• Expected cost to complete the

project• Expected cost to complete the

development


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9. Protection Factors• Possibility of a patent• Unique character of the product,

process, service


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Where are the Business Opportunities?• Business Opportunity

– Use the critical business development factors to determine whether the ideas / concepts created are worth pursuing.


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5. Take Appropriate Action.

Gate-Check Focus:Benefits Monitoring and

Control,Delivery and Review


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Innovation Benefits Realization Management =

Benefits Identification {Phase-Gate-1} +

Benefits Qualification {Phase-Gate-2 and -4} +

Benefits Quantification {Phase-Gate-3 and -4} +

Benefits Monitoring {Phase-Gate-5} +

Benefits Control {Phase-Gate-5} +

Benefits Delivery {Phase-Gate-5} +

Benefits Review {Phase-Gate-5} .

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Thank you.

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For more informationPlease contact:

[email protected]

mailto:[email protected]

Innovation Benefits Realization Management

Business

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