Innovation, business models and manager’s role as ‘corporate

catalyst’

Stefano Mizio – Management Board Innovits 21 novembre 2013 MIP – Politecnico di Milano

About Innovits

• InnoVitamins (InnoVits) è un’iniziativa non profit fondata con l’obiettivo di catalizzare lo sviluppo della cultura imprenditoriale supportando idee di business innovative, fornendo strumenti professionali e opportunità di business.

• InnoVits gestisce una gara di idee con l’obiettivo di selezionare, fra tutte, la migliore idea innovativa di business.

• InnoVits è un percorso che accompagna e sostiene gli imprenditori consentendogli di sviluppare e “vendere” la propria idea di business in modo professionale, con il supporto di professionisti di esperienza della community AlumniMIP.

• Innovits offre concrete opportunità di networking e, per le idee migliori, l’opportunità di entrare in contatto con Business Angels e Venture Capitalist in occasione della presentazione finale.

Stefano Mizio

Lean

Startup/business

model

canvas/agile

methodologies

We need

innovation

(Business Model

Innovation)

Large Corporation

are not always

too big to

innovate

Corporate

Catalyst

Agenda

Too big to produce game-changing inventions?

Stefano Mizio

innovate?

Large companies:

Performance Engine

Performance engine strives to make every task, every process as

repeatable and predictable as possible .

Innovation is neither repeatable nor predictable; it’s exactly the

opposite: nonroutine and uncertain

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Today – digitally disruptive economy

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A computer;

An internet connection;

A programming language and SDK;

A friction-free digital platform for distributing

and making money from you innovation;

…in few years a 3D-printer

That’s all you need to bring your ideas to the

market!

BUT…

Dozens of copycats

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Startup #1

Startup #1*

Startup #1**

Increasing ease and decreasing cost of innovation -> short-term pressure (startups)

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The new corporate garage?

Big companies have hard-to-replicate advantages

The Challenge

Stefano Mizio Tim Kastelle Blog

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Search for a new business model…

David versus Goliath

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The rise and the fall of…

Blockbuster

this is the end…

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Don’t get Netflixed!

Netflix, netflixed

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Verb:

1.to cause disruption or turmoil to an existing

business model

2.To destroy a previously successful business

model

3.To displace the way value is currently created,

delivered, and captured

4.To be disrupeted, destroyed, or displaced by

new business model.

S. Kaplan

The Challenge

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You must reinvent a business model while the entire

organization is working hard pedaling the bicycle of

the current one.

Even Netflix is in Danger of being

Netflixed…

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The Key Issue:

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Business model innovation is a competency

that doesn’t exist in most companies, since it

never had to… …

The new normal is Amazon

INNOVATOR’S PARADOX

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and your current Business Model? Scott D. Anthony

Kodak acquired OFOTO in 2001

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Imagine if…

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Kodak: “ our tagline is Share memories, share

lives”.

“Why don’t we let people simply share album

pictures?..we can create a feature that allows

people to share news items as well”.

But

Kodak didn’t take those steps….

Facebook in 2001??

Kodak’magnete vs OFOTO: The

current business model

Stefano Mizio

T&C:To maintain free storage, you need to meet the following minimum

purchase requirement within 90 days of first uploading images, and then

every 12 months thereafter ... If you do not purchase the required amount

as set forth above from us for a period of 12 months, we may delete the

images stored in your account.

Your core business is a Magnet!

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It can take the most power idea and turn it into something

that has been done before

Car2Go business model

Company CEO Robert Henrichcan can be

credited with the founding of the services —

while working at Daimler in a division tasked

with exploring next-generation business

models, he developed and championed the idea that grew into Car2Go.

Take a look at Car2Go

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Business Innovation Division The Daimler Lab for new business

models

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The Magnet didn’t work!

Car2Go in Milan: 40,000 clients in

few months Fiat, ENI, Trenitalia

“coming soon”

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Leassons learned

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• Run Experiment (Ulm Germany – internal employees) – Frugal innovation. • Alert to the early warning signs that a business model is facing erosion (car production for Daimler) • Emerging trends : sharing economy + sustainability/green economy. •Organizational Model: Business Innovation Division/ Strong Management Support.

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Large Companies

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Exploitation

Exploration

New Business

Models

Execution Search

Capabilities Resources

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What kind of organization? Spin out organization? Ambidexterity Organization? Partnership?

Organizing an innovation initiative

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Company

Performance Engine

Shared

Staff

Dedicated

Team Partenrship

V. Govindarajan – C. Trimble : The other side od Innovation

TELCO UNDER PRESSURE

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Whatsapp: founded in 2009

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WhatsApp just surpassed 300 million users worldwide.

Telco senior management were worrying about the risk of cannibalizing

SMS revenue.

Always ask the question: “If I don’t do this, will an

existing or new competitor decide to?”

S. Mizio :VODAFONE ENTRY IN THE MOBILE INTERNET MARKET: COMPETITIVE ISSUES, INNOVATION AND CAPABILITIES - March 2010 - Final Thesis 3 EMBA MIP

http://flickr.com/photo_zoom.gne?id=321433870&size=l Darwin Bell

WALLED GARDEN WAS OVER!

High Rivalry among traditional

competitors – efficiency -

mature sector

Online players like Google have

become a driving force in the

industry.

Dumb pipe risk: operators just

building Freeways for

Californian cars.

In 2008 that was the reality

Trying to avoid being a Dumb Pipe Stefano Mizio

Vodafone Internet Services

VF 360 platform

Vodafone Internet Services

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If you look for quick growth, you are forced to

look to what exists

The organizational design seemed a good

fit for the innovation challenge…but

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VIS relied too heavily on its Performance Engine to develop

VF360 infrastructure and APIs -> 1° Risk to overestimate

the capabilities of the Performance Engine.

“ One of the biggest problems is that the company still has a ‘handset & base-

station’ mindset”. mobile industry review: vodafone_360_an_absolute_failure

What kind of competencies Acqui–Hiring and the

“organizational memory”

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To expand a business the company must expand its inventory

skills…skills that you have never needed before.

Twitter 29 acquisitions since 2009 - 9 startups had received a seed

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Develop and act as a venture backed startup with a great

“always beta” culture (Google) implied a different approach (

no waterfall ) -> 2° Risk : different Operating rhythm

…delivering reliable features every 6/8 months costing a lot o

money. That was unfit with Internet time/pace/philosophy

Telco operators are organized to pursue

development effort of different duration

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Using existing processes

Little Performance Engines instead of Dedicated teams

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No custom organizational model in place

Something missing

Stage gate? Agile

approach? What kind of

relationships?

Ongoing Operation

Innovation

Strategy

Organizing

&

Planning

Execution

Committing to

an Innovative

Idea

Making

Innovation

Happen

V. Govindarajan – C. Trimble : The other side od Innovation

?

“Great idea! Go

make it happen”

Fuji Film

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Fuji’s approach: investing in new advantages and

pulling resources from declining ones.

Healthy Disengagement and Resource allocation

The wave of transient advantage

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What to do when you are in the Exploitation phase…

R. Gunther McGrath: The End of Competiitve Advantage

Healthy disengagement

Kodak

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Fuji: 25$ billion

2011 and 377th on

Fortune’s Global

500 list.

Kodak has gone

bankrupt.

Fuji didn’t get trapped by its

past.

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Stage Gate (uber alles) innovation process and the Net

Present Value perspective.

the Risk averse culture

Are Accountants and CFOs Killing

Innovation?

The Accounting Conservatism

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Is it Business Model innovation

really matters?

“Bad things can happen to good technology. And much of what can happen is due to the business model the company uses to commercialize the technology ” H. Chesbrough

Portfolio of Business Models Impact Grid

Stefano Mizio Source: Rethinking Business Model for Innovation

Business Model

B.M. 1

B.M. 2

B.M. 3

Level of

Promise

Risk level (detailed) Risk

Level

(general) Interdependance Technical Risk Financial Risk

Low – Low/Medium – Medium/High – Medium - High

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Balancing Short Term and Long Term

Innovation

Source: Rethinking Business Model for Innovation

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Integrating different “Time – Horizonts” Innovation Portfolio Management

Source:Managing Innovation Portfolios – Strategic Portfolio Management –R. Ohr and K. McFarthing

Innovation initiatives are deliberate

departures from the past

Ongoing operation (90%

data, 10% unknowns):

central focus is to execute

the plan.

Innovation initiative (10%

data, 90% unknown): the

plan is a hypothesis.

Shifting attention from

data to assumptions

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Run disciplined exp.

Companies need to

be learning-

focused and failure

tolerant.

Building a culture

of

experimentation

Or better … disciplined experimentation

Innovations as experiments

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Run Disciplined Experiment

V. Govindarajan –C. Trimble – The other side of innovation

Learning :

the process

of turning

speculative

predictions

into reliable

predictions

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Modern Day (management)

Neologisms

CORPORATE ENTREPRENURSHIP

ENTREPRENEURIAL ORIENTATION

INTRAPRENEURSHIP

LEAN ENTERPRISE

INTERNAL CORPORATE VENTURING

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Intrapreneurship/Corporate

Entrepreneuship Intrapreneurship can be defined as

using entrepreneurial skills without

taking on the risks or accountability

associated with starting your own

business. Instead, intrapreneurs are

employees in larger organizations,

who act as entrepreneurs while

having the resources and

capabilities of the larger firm to

draw upon

Corporate Entrepreneurship: is the

process by which individuals inside

organizations pursue opportunities

without regard to the resources they

currently control (Stevenson) Stefano Mizio

Why startup???

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Search for a business model… sound interesting if

you are an established company!

Steve Blank – Customer Development Manifesto

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Startup and established company

Steve Blank

55 images by JAM

customer

segments

key

partners

cost

structure

revenue

streams

channels

customer

relationships

key activities

key

resources

value

proposition

Business Model Canvas Stefano Mizio

Product/Market fit

Stefano Mizio IBM’ s global CEO report 2006: business model innovation matters

B Model structure

9 Guesses

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Guess Guess

Guess

Guess

Guess

Guess

Guess

Guess Guess

Customer Development Model or How we search for the business Model

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Learning and Discovering

Design experiments, start

listening

testing your hypotheses outside the building

Pivot

Search Execution

Steve Blank – Customer Development Manifesto

Holistic Focus on three things

Agile Coaching Blog – David Bland Stefano Mizio

Heart disease is the number one killer in India, accounting for a quarter of

deaths among those aged 25 to 69. Millions are dying due to lack of access to

treatments.

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Medical Device Manufacturer

Healthy Hearth model

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Innovation commitment

Bring

pacemakerk

tech. to

Indians who

desperately

need it

People who

are unable to

obtain

pacemakers

and other

cardiac

products

External

Partner:

Ashoka (to back

social

entrepreneurs and

support and

finance plan for

pacemakers)

Patient

education

activities

through local

events, text

messaging and

social media.

Hospitals

Internal

partners

Do you believe B. Model is a

tool for startups?

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Entrepreneurial

approach/method

Experimentation/ get out of the

building : diagnostic camps to

identify potential patients.

Business Model Validation

Open minded

Observation

( Aravind Eye Care System)

Humility

Unique capabilities

Partner relationships

Strong Brand Reputation: local

doctors/ Regulatory approval/…

“Last mile” distribution

channels

Process and internal resources:

design, staffing and execute

pilots and expanding programs

Recombining existing

capabilities

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Managing the Partnership

Dedicated

Team

Performance

Engine

You need the Performance Engine!

Conflicts must be anticipated, mitigated or neutralized

Innovation and Corporation in Italy

what managers say about innovation

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WOBI (World of Business Ideas) indagine presentata al World Business Forum di Milano (5-

6 novembre) – 3500 dirigenti di azienda intervistati: WBF L'Italia chiede più innovazione

• la scarsa propensione all’innovazione dimostrata dai manager (40,48%).

• il 49,6% degli intervistati ritiene prioritario per stimolare l’innovazione il giusto approccio

dei manager.

• Solo il 9,9% dei manager pensa che le aziende con una lunga storia siano le più

disposte a innovarsi

Complacency and Fear

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In 2001 Nokia engineers about iPod: “ It’s just a hard drive built on

older technology in a fancy case.”

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A new Breed of manager

Organizations need a structure and a corresponding culture where

accelerated change is the new normal. It requires an environment, a

strategy in which experimentation and pioneering is the most common

thing to do in order to be able to innovate.

It’s a matter of Perpective

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Curiosity + Diversity + Method

The key Point

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The limits to innovation in large organization have nothing to do with creativity and nothing to do with technology. They have everything to do with management

capability. Ray Stata – founder and chairman of Analog Devices