Innovation management university of monaco luxury goods program 2012

INNOVATION KEY SUCCESS FACTORS FOR GROWTH AND PROFIT ON NICHE MARKETS

University of Monaco, Masters in Luxury Management 2012

Magnus Penker, MBA (Henley Business School), BSc (CTH) [email protected]

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WORLD DOMINANCE

Year 1994 Motorola was world leader in (analogue) mobiles, seven years later Nokia was world leader in (digital) mobiles

0%

10%

20%

30%

40%

50%

60%

Market shares 1994 Market Shares 2001

Motorola

Nokia

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FROM #1 TO CRISIS IN LESS THAN 3 YEAR...

Why ?

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Innovation is creative destruction, where entrepreneurs combine existing elements in new ways…

After Joseph Schumpeter (1883 – 1950)

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THE LEGO STORY

Y2000 "Toy of the Century" by

Fortune magazine and the BriGsh

AssociaGon of Toy Retailers

Y2003 – 2004 Huge losses, close to bankruptcy

Y2004-‐03, the owner & CEO Kjeld Kirk

KrisGansen decide to go back to

basic!

Y2004-‐10, Jørgen Vig Knudstorp

appointed as new CEO

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THE LEGO STORY

§  The situation 2004 § Demand decreasing, competition from games, movies, merchandising § Poor quality § Poor logistics § Slow in adoption § Simplistic leadership and laid-back culture

Sources: HBR, DN, Guardian, BBC, Handouts European Offshoring Summit, (2009, Copenhagen)

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THE LEGO STORY

Improve the business

Stabilize operations

Organic growth

Restore the balance sheet

Define Raison d'être

Value Creating Partnership

Deliver what we promise

Differentiated Value Chain

Consumer Driven Value Chain

Rigid Execution Platform

-‐1800

-‐800

200

1200

2200

2003 2004 2005 2006 2007 2008

Ope

ra&o

nal Profit

MDK

Year

Innovate Execute

Offshoring

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KEY ACHIEVEMENTS

§ Clear Raison d'être: “we help children learn systematic and creative problem solving—a crucial twenty-first-century skill” § Gained consumer insights through “direct sales to consumers” through BuiltByMe without competing with existing distribution channel § Co-Branding with strong and selected partners such as Star wars and Harry Potter

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KEY ACHIEVEMENTS

§ Reduced lead time, 45 to 3 days to store § Cost saving through offshoring non-core competencies § A new supplier interface § QA system in place § Open Innovation, 120,000 persons involved in external innovation work – DesignByMe, DreamtByMe, BuildByMe § Community driven approach; the open platform Mindstorm encouraging customers to design and develop their own LEGO-robots systems

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LEGO TOTAL INNOVATION MAKEOVER

Supply Chain

Business Model

Marketing

Customer Engagement

Services Brand

Product Partner Model

...and LEGO continue to deliver exceptional profitable growth on an oligopolistic/niched and international toy market...

Internal Innovation

External Innovation

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THE S-CURVE

Emergent Growth Mature

Perf

orm

ance

/ Va

lue

offe

ring

Effort / Time

Business of the future (EXPLORATORY)

Ongoing business (EXPLOITATIVE)

The real challenge, LEGO managed, lies in achieving a strategically balanced portfolio that between exploitative and the exploratory

Source: Tovstiga (2007)

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“Either you innovate or you’re in commodity hell. If you do what everyone else does, you have a low-margin business. That’s not where you want to be.”

Sam Palmisano, CEO IBM

HYPER COMPETITION

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DOES HARLEY-DAVIDSON SELL MOTOR CYCLES?

“…what we sell is the ability for a 43-year-old accountant to dress in black leather, ride through small towns and have people be afraid of him“

– an HD executive

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EXCERSICE

§  What do you sell? §  5 minutes in groups

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MARKET EQUILIBRUM

• 3 Billion consumers in BRIC • Growing middle class in BRIC, 300M Chinese live on western standard

• Global talent market • Low cost production of services and products

• Open communities and crowedsourcing

• Instant communication access • Online universities

Demand Supply

Hyper competision - > Temporarily competetive advantages

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INNOVATE – EXECUTE™

… the world will never be the same

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INNOVATION FRAMEWORK

Why

Strategic ques&on Company Strategy • Incremental/ DisrupGve

• Need seekers • Market readers • Technology drivers

Wha

t Type of innova&on Product InnovaGon Process InnovaGon OrganisaGonal InnovaGon Management InnovaGon ProducGon InnovaGon Commercial/MarkeGng InnovaGon Service InnovaGon

How

Style • Cauldron • Spirale • FerGle • PacMan • Explorer People • 10 Faces of InnovaGon Capability & Process • IdeaGon • Project selecGon • Product development • CommercialisaGon

Where

When

Source: Penker (2011)

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WHY – STRATEGIC QUESTION

? Strategic Question

Increase barriers to enter or copy

Differentiation and neutralization of competitors

Focus on competitive advantages

Building the capabilities to increase the internal efficiency

Cost savings

Disruptive opportunities

To keep competitors out keeping/gaining

market shares? To increase the profit ?

Source: Penker (2011)

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WHY – STRATEGY

Need seekers •  look for potenGal opportuniGes by applying superior understanding of the market and rapid go-‐to-‐markets

Market readers •  capitalise on exisGng trends and understanding of markets

Technology drivers •  drive for breakthrough innovaGons based on new technology

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WHAT – TYPE OF INNOVATION

Source: Trott (2008)

• The development of a new or improved product. Product Innova&on

• The development of a new manufacturing process. Process Innova&on

• A new venture division; a new internal communicaGon system; introducGon of a new accounGng procedure

Organisa&onal Innova&on

• TQM (total quality management) systems; BPR (business processes re-‐engineering).

Management Innova&on

• Quality circles; just-‐in-‐Gme (JIT) manufacturing systems; new producGon planning soiware. Produc&on Innova&on

• New financing arrangements; new sales, Delivery innovaGons in sales, market approaches, e.g. direct markeGng.

Commercial/Marke&ng Innova&on

• Internet-‐based financial services. Service Innova&on

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HOW - STYLE & PEPOLE

“The Devil´s Advocate may never go away, but on a good day, the ten personas can keep him in place” (Kelly & Littman, 2005)

Source: Kelly & Littman (2005)

Learning personas

Anthropologist

Experimenter

Cross-‐Pollinator

OrganisaGonal personas

Hurdler

Collaborator

Director

Building personas

Experience Architect

Set Designer

Storyteller

Caregiver

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HOW - STYLE & PEPOLE

The Cauldron

• An entrepreneurial style where the business model is frequently challenged.

The Spiral Staircase

• A style where you climb upwards without losing the over-‐all goal.

The Fer&le Field

• A style where the organisaGon tries to use exisGng capabiliGes and resources in a new way.

The PacMan

• A style where you invent, outsource and finance start-‐ups.

The Explorer

• A style where you explore possibiliGes and invest Gme and money in them without demanding short-‐term profit.

Source: Loewe, Williamson, & Wood (2001)

Leadership and style

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HOW - CAPABILITIES & PROCESS

Ideation

Supplier and distributor engagement in ideation

process

Independent competitive insights

from the marketplace

Open innovation/capturing ideas at any point in the process

Detailed understanding of emerging

technologies and trends

Deep consumer and customer insights and

analytics

Project Selection

Strategic disruption decision making and

transition plan

Technical risk assessment/management

Rigorous decision making around

portfolio trade-offs

Project resource requirement forecasting

and planning

Ongoing assessment of market potential

Product Development

Reverse engineering

Supplier–partner engagement in product

development

Design for specific goals

Product platform management

Engagement with customers to prove real-world feasibility

Commercialization

Diverse user group management

Production ramp-up

Regulatory/government relationship management

Global, enterprise-wide product launch

Product life-cycle management

Pilot-user selection/controlled rollouts

Source: Jaruzelski & Dehoff (2010)

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WHEN - SERVICE VALUE WEB

Customer Engagement

Service Co-‐creaGon

Elicit Tacit Knowledge

Design Experience

Point

Service Offering

Boundary of the Company

Surrounding Environment Includes customers; may also include partners, competitors or other third parties

The key to competitive advantage is to understand the service value web where the company and the market interact creating value’ (Chesbrough, 2011).

Source: Adopted from Chesbrough (2011)

This document is solely for the use of the receiver. No part of it may be circulated, quoted, or reproduced for distribution outside the receivers organisation without prior written approval from Bearing Consulting Ltd. 2009 Bearing Consulting Ltd. Proprietary and Confidential. All Rights Reserved

BEARING INNOVATION NAVIGATOR™ Stockholm – London – Barcelona – Johannesburg

“..because the execution of an idea is always more important than the brilliance of the thought..”

(Harvard Business Publishing – Morgan, Levitt & Maleck – INVEST model)

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ABOUT BEARING CONSULTING

We work with clients in three focus areas;

Ø  Places & Regions

Ø  Bank & Finance

Ø  Corporate Innovation

Through a resource pool of more than 60 expert consultants, we are currently engaged in projects across four continents.

“..because the execution of an idea is always more important than the

brilliance of the thought..” Morgan, Levitt & Maleck

Harvard Business Publishing

Bearing develops methodology and publish books

Bearing Consulting is a management consultancy incorporated in United Kingdom with local offices in London, Stockholm, Barcelona, Geneva and Johannesburg

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Where is your value created?

What is your future compeGGve advantage?

How can you measure, improve and invent new compeGGve advantages?

BEARING INNOVATION NAVIGATOR™

...within a hypercompetitive market

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YOUR SWEET SPOT DEFINES YOUR FUTURE SUCESSE

Customers’ needs

Competitors’ offerings

Company’s capabilities

Sweet Spot

Context (technology, industry, regulatory, etc.)

Where your firm meets customers needs in a way in which your competitors cannot

What? Where? Why? How?

1

2

3

Sweet spot = unique spot How to protect/define boundary 1,2,3

Source: Collis & Rukstad (2008). Can You Say What Your Strategy Is?, HBR (April 2008)

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VALUE IS CREATED ON THE ”EDGE” OF YOUR BUSINESS

Product & Services

Business Model

Delivery & Consumptio

Operation

Sales & Marketing

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EXAMPLES FROM THE LUXURY GOODS INDUSTRY

§ 3 and 3, 10 minutes

§ Identify 2 examples where new business models or delivery / consumption formats scoped out competitors

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Bearing Innovation Navigator


THE STORY

•  The Model was originally invented by an occasion when trying to understand why some firms did success with profitable business development while other did not -‐ the insights were found in the linkages between capabiliGes, market structure and customer behaviour.

•  It is based on year of research and pracGGoners work

•  The approach is very hands-‐on and provide you with pracGcal steps to execute

•  The Navigator is from year 2012 codified and implemented as a web-‐enabled mulG-‐lingual system

•  All projects are executed based on an extensive and real-‐world-‐experience-‐oriented process, system and templates

•  All consultants are accredited with +15 years experience of driving innovaGon as consultants and execuGves

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•  Situation: Need of capturing and highlighting your imperative capabilities for success

•  Complication: Possible lack of capability insights/foresights and unique sweet spot

•  Resolution: 1. Collect, analyse and benchmark your innovation capabilities, strategy, leadership, culture in a 360 degree analysis 2. Define possible opportunities, weaknesses 3. Discover possible misalignments in the strategy work 4. Analyse whether needed capabilities, culture and leadership style is in place, or not, in order to carry out the innovation strategy of the firm 3. Align innovation strategy, capabilities, leadership style and culture with corporate and functional goals and over all strategies 4. Outline a game plan

Bearing Innovation Navigator™

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Client Involvement • CEO Interview, in-‐depth interviews interviews with key stakeholders • Survey: Capturing imperaGves of the business, scoping the case • Survey: Capture strategies, weaknesses, market structures, key drivers • Internal and external communicaGon / enrolment • Analysis walk through • PresentaGon with recommendaGons

Analysis process • Hypothesis • Internal and external data collecGon (survey) • GeneraGng relevant benchmark data and innovaGon parerns • Analysis • Strategic opGons generaGon • EvaluaGon and conclusions • RecommendaGons


...the process of innovation X-raying

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...the navigator


Initiated by the work of Sawhney, M., Wolcott, R. C., & Arroniz, I. (2006). The 12 Differetnt Ways for Companies to Innovate. MIT Sloan Management Review , 75-81.

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THE SYSTEM

• Internet based, work on all standard devices

• Highly user friendly • Client tracking possible • Multilingual • Customizable, robust scalable database design and system architecture

• High Security, fast access • Work trough firewalls, spamfilters • All data anonymous

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CEO MeeGng

InnovaGon Audit (4 weeks)

PresentaGon & RecommendaGon

(1/2 day)

Implement InnovaGon Game Plan

(30-‐60 weeks)


...the project time line

6-8 weeks

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Deliveries • Analysis: Levels, GAPs/Misalignments, CorrelaGons/ ConjuncGons within the organisaGon/Industry

• Strategic quesGon • Strategies • Leadership • Personas • CapabiliGes

• Report with recommendaGons • PotenGal InnovaGon Game Plan • InnovaGon objecGves • InnovaGon strategy • Cost/benefit analysis • InnovaGon process • InnovaGon plan • InnovaGon team • KPIs (for Navigator Tracking)


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THE REPORT – 420 DIFFERENT BASIC INNOVATION ORGANISATIONAL PROFILES

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CASE STUDY

SituaGon • Fast growing awarded e-‐commerce fashion company

• Entrepreneur of the year, A Great Place To Work, AAA rated, Super Gazell

Perceived ComplicaGon • Growth pain • New compeGtors entering the scene

• Lost the barle in on country

• Perceived quality issues in deliveries

• Lack of capitalizaGon of innovaGon iniGaGves

SoluGon • Nine generated recommendaGons

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CASE STUDY

• The IT department adjust its leadership style toward that of the company, i.e. ferGlity field—meaning a style where the organisaGon tries to use exisGng capabiliGes and resources in a new way, focusing on sales and profit.

• Make clear—within the organisaGon—where the company is going for growth or profit as main objecGve, enrol all stakeholders.

Recommenda&on; Strategy Alignment

• Employ Hurdlers, Cross Pollinators, Anthropologists and Experience Architects

Recommenda&on; Recrui&ng

• Today, the customer service department, according to itself, has a non-‐goal-‐oriented leadership. This must be addressed, as the customer service funcGon is vital to adjusGng the lacking capabiliGes pointed out in the analysis. It is imperaGve that this be addressed appropriately.

Recommenda&on; Leadership

• Launch more new products to keep up the pace in the market, especially considering that the other kind of innovaGon is low.

Recommenda&on; Product Development

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CASE STUDY

• Engage the company’s customers, suppliers and partners in the development • Establish a reward system internally and eventually externally, using both extrinsic (monetary) as well as intrinsic (acknowledgment, involvement, competence development, etc).

Recommenda&on; Involvement

• Test pilots and learn from them • Undertake frequent independent market research • Make systemaGc risk assessments • Put an effecGve product management system in place

Recommenda&on; Organisa&on & Systems

• The type of innovaGon that the company is engaged in is product innovaGon, typically for retail-‐oriented companies.

• However, service innovaGons, delivery innovaGons and business model innovaGons are gevng more and more important and the company scores very low here.

• Keeping in mind that the company is technology-‐driven and ferGle field, there are many more opportuniGes to use exisGng customers, consumers, capabiliGes, systems, products and technology to innovate for more profit and market shares by applying business model innovaGon, service innovaGon and delivery innovaGon.

Recommenda&on; Enlarged scope

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END.

INNOVATE - EXECUTE™

Innovation management university of monaco luxury goods program 2012

Business

Transcript of Innovation management university of monaco luxury goods program 2012