Strategic Innovation Management for a Competitive Advantage

Strategic Innovation Strategic Innovation ManagementManagement

Creating a Sustainable Creating a Sustainable Competitive AdvantageCompetitive Advantage

By Dr. Iain SandersBy Dr. Iain Sanders

Design for Innovation Ltd, 2009 1

http://www.designforinnovation.com/

What you don’t know about your What you don’t know about your customers and your business may customers and your business may

be costing you millions! be costing you millions!

For example:

technology,

product &

service

value-creation

urgent needs

For example:

The best

customer

solutions to

maximize your

customers’

profitability

For example:

Your business model is now obsolete, limiting your effectiveness and ability to achieve a sustainable competitive advantage



Business FocusBusiness Focus::Effectiveness –Effectiveness –

BusinessBusinessProactivityProactivity

Business FocusBusiness Focus::Efficiency – Efficiency – Business Business ResponsivenessResponsiveness

31. 1.

Business Model IdeationBusiness Model Ideation

2.2.Business Model OptimizationBusiness Model Optimization

3.3.Customer Solution OptimizationCustomer Solution Optimization

4.4.SolutionSolution--driven Services driven Services

5.5.SolutionSolution--driven Productsdriven Products

6.6.Delivery ProcessesDelivery Processes

7.7.Technology EnablersTechnology Enablers

1. 1. Business Model IdeationBusiness Model Ideation

2.2.Business Model OptimizationBusiness Model Optimization

3.3.Customer Solution OptimizationCustomer Solution Optimization

4.4.SolutionSolution--driven Services driven Services

5.5.SolutionSolution--driven Productsdriven Products

6.6.Delivery ProcessesDelivery Processes

7.7.Technology EnablersTechnology Enablers

7 levels for maximizing potential 7 levels for maximizing potential innovation value-creationinnovation value-creation


FINANCE

INFRASTRUCTURE CUSTOMER

VALUEVALUEPROPOSITIONPROPOSITION

OFFER

gives an overall view of a company's bundle of products and services

PARTNERPARTNERNETWORKNETWORK

portrays the network of cooperative

agreements with other companies

DISTRIBUTIONDISTRIBUTIONCHANNELSCHANNELS

describes the channels to communicate and

get in touch with customers

VALUEVALUECONFIGURATIONCONFIGURATION

describes the arrangement of

activities and resources

CUSTOMERCUSTOMERRELATIONSHIPRELATIONSHIP

explains the relationships a

company establishes with its customers

COSTCOSTSTRUCTURESTRUCTURE

sums up the monetary consequences to run a

business model

REVENUEREVENUESTREAMSSTREAMS

describes the revenue streams through which

money is earned

TARGETTARGETCUSTOMERSCUSTOMERS

describes the customers and

customer segments a company wants to offer

value to

CORECORECAPABILITIESCAPABILITIES

outlines the capabilities required to run a

company's business model

Creating, Defining and Improving a Creating, Defining and Improving a Company’s Business ModelCompany’s Business Model



Improve the Business ModelImprove the Business Model1.1. Customer SegmentsCustomer Segments – who are our customers? – who are our customers?2.2. Value PropositionValue Proposition - what do we offer each of our client - what do we offer each of our client

segments?segments?3.3. ChannelsChannels - how do we reach each of our client segments? - how do we reach each of our client segments?4.4. Customer RelationshipsCustomer Relationships – how do we relate to our clients – how do we relate to our clients

over time?over time?5.5. Revenue StreamsRevenue Streams - how do we earn money? - how do we earn money?6.6. Key ResourcesKey Resources – based on which assets are we running our – based on which assets are we running our

business?business?7.7. Key ActivitiesKey Activities - what key activities do we need to run our - what key activities do we need to run our

business model?business model?8.8. Partner NetworkPartner Network - with which partners do we leverage our - with which partners do we leverage our

business? business? 9.9. Cost StructureCost Structure – where are our most important costs? – where are our most important costs?



Strategies for continually developing a Strategies for continually developing a more profitable business modelmore profitable business model

11stst Stage Stage: Target most productive areas for : Target most productive areas for improving the business modelimproving the business model

22ndnd Stage Stage: Provide sustained benefits for : Provide sustained benefits for all stakeholdersall stakeholders

33rdrd Stage Stage: Expand business model : Expand business model innovationinnovation

44thth Stage Stage: Pursue higher-potential : Pursue higher-potential business model optimizationbusiness model optimization



Identify and Qualify New OpportunitiesIdentify and Qualify New Opportunities

ExploitedExploitedOpportunitiesOpportunities

UnexploitedUnexploitedOpportunitiesOpportunities



Served Customers Unserved Customers

Unarticulated Needs

Articulated Needs

Articulated-Served Articulated-Served CustomersCustomers: known : known world of customer world of customer

needsneeds

Articulated-Articulated-Unserved Unserved

CustomersCustomers: offerings : offerings developed & developed & perfected for perfected for

existing customers existing customers extended to new extended to new

customers in customers in different marketsdifferent markets

Unarticulated-Unarticulated-Unserved Unserved

CustomersCustomers: : proactive and proactive and

visionary companies visionary companies like Honda seek to like Honda seek to get inside he heads get inside he heads

& experiences of & experiences of unaddressed unaddressed

customerscustomers

Unarticulated-Unarticulated-Served CustomersServed Customers: :

potential for potential for satisfied customers satisfied customers

to become to become frustrated or frustrated or

uninterested if uninterested if unexpressed but felt unexpressed but felt needs not addressedneeds not addressed



Opportunities IdentifiedOpportunities Identified

A.A. Unexpected SuccessesUnexpected SuccessesB.B. Unexpected FailuresUnexpected FailuresC.C. Unexpected External EventsUnexpected External EventsD.D. Process WeaknessesProcess WeaknessesE.E. Industry / Market Structure Industry / Market Structure

ChangesChangesF.F. High-Growth AreasHigh-Growth AreasG.G. Converging TechnologiesConverging TechnologiesH.H. Demographic ChangesDemographic ChangesI.I. Perception ChangesPerception ChangesJ.J. New KnowledgeNew Knowledge

Dimensions AvailableDimensions Available

1.1. OfferingsOfferings2.2. PlatformPlatform3.3. SolutionsSolutions4.4. CustomersCustomers5.5. Customer ExperienceCustomer Experience6.6. Value CaptureValue Capture7.7. ProcessesProcesses8.8. OrganizationOrganization9.9. Supply ChainSupply Chain10.10. PresencePresence11.11. NetworkingNetworking12.12. BrandBrand

Dimensions to Opportunities Available Dimensions to Opportunities Available

Vs.Vs.




DimensionDimension DefinitionDefinition ExamplesExamplesOfferingsOfferings Develop innovative new products or servicesDevelop innovative new products or services Gillette Mach3Turbo razorGillette Mach3Turbo razor

Apple iPod music player & iTunes music serviceApple iPod music player & iTunes music service

PlatformPlatform Use common components or building blocks to Use common components or building blocks to create derivative offeringscreate derivative offerings

General Motors OnStar telematics platformGeneral Motors OnStar telematics platform Disney animated moviesDisney animated movies

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

UPS logistics services Supply Chain SolutionsUPS logistics services Supply Chain Solutions DuPont Building Innovations for constructionDuPont Building Innovations for construction

CustomersCustomers Discover unmet customer needs or identify Discover unmet customer needs or identify underserved customer segmentsunderserved customer segments

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

Customer Customer ExperienceExperience

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

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

Value CaptureValue Capture Redefine how company gets paid or create Redefine how company gets paid or create innovative new revenue streamsinnovative new revenue streams

Google paid searchGoogle paid search Blockbuster revenue-sharing with movie distributorsBlockbuster revenue-sharing with movie distributors

ProcessesProcesses Redesign core operating processes to improve Redesign core operating processes to improve efficiency and effectivenessefficiency and effectiveness

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

OrganizationOrganization Change form, function or activity scope of the Change form, function or activity scope of the firmfirm

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

Supply ChainSupply Chain Think differently about sourcing and fulfillmentThink differently about sourcing and fulfillment Moen ProjectNet for collaborative design with suppliersMoen ProjectNet for collaborative design with suppliers General Motors Celta use of integrated supply and online salesGeneral Motors Celta use of integrated supply and online sales

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

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

NetworkingNetworking Create network-centric intelligent and Create network-centric intelligent and integrated offeringsintegrated offerings

Otis Remote Elevator Monitoring serviceOtis Remote Elevator Monitoring service Department of Defense Network Centric WarfareDepartment of Defense Network Centric Warfare

BrandBrand Leverage a brand into new domainsLeverage a brand into new domains Virgin Group “branded venture capital”Virgin Group “branded venture capital” Yahoo! as a lifestyle brandYahoo! as a lifestyle brand

Dimensions to Opportunities Identified Dimensions to Opportunities Identified



7

REVENUESSTREAMS

COSTSSTRUCTURE

CORECAPABILI-

TIES

VALUECONFIG-URATION

PARTNERNETWORK

CUSTOMERRELATIONS

VALUEPROPOSI-

TION

TARGETCUSTOMERSEGMENTS

DELIVERYCHANNELS

Linking Opportunities

4 5

6

910

4

5

6 8

9

10

Process weaknesses

Industry / Market Structural changes

High-growth areas

Converging technologies

Demographic changes

New knowledge

Perception changes

7

1 1

1

Unexpected successes

1

1

2

2

Unexpected failures

2

2

2

2 2

2

2

2

3

3

Unexpected external events

3

3

3 10

10

5

5

3 10

7

7

8 1

10

10

7

93


Quantify Opportunities with a SWOT analysisQuantify Opportunities with a SWOT analysis

ExploitExploit SearchSearch

ConfrontConfront Avoid or PrepareAvoid or Prepare

Internal Environment

Strengths

External Environment

Threats

External Environment Opportunities

Opportunity is Opportunity is matched with matched with

strength. Business’s strength. Business’s growing edge – growing edge –

where it can where it can capitalize on areas capitalize on areas

of strategic of strategic advantageadvantage

Opportunity is Opportunity is matched with matched with

weakness. weakness. Opportunities exist Opportunities exist

that the that the organization can organization can

recognize but is not recognize but is not equipped to tackleequipped to tackle

Threat matched with Threat matched with weakness. Some weakness. Some

threats avoidable, threats avoidable, and others are not. and others are not.

Confronting Confronting competitive threats competitive threats

with weakness is not with weakness is not only dangerous but only dangerous but

drains resourcesdrains resources

Threat is matched Threat is matched with organizational with organizational strength – mobilize strength – mobilize to limit and control to limit and control the looming dangerthe looming danger

Internal Environment Weaknesses

11


12

REVENUESSTREAMS

COSTSSTRUCTURE

CORECAPABILI-

TIES

VALUECONFIG-URATION

PARTNERNETWORK

CUSTOMERRELATIONS

VALUEPROPOSI-

TION

TARGETCUSTOMERSEGMENTS

DELIVERYCHANNELS

Improving Opportunities

5

6

5

6

Threats

Opportunities

1 1

1

Weaknesses

1

1

2

2

Strengths

2

2

2

2 2

2

2

2

5

5

6

6

1

2 2

2


RELATIONSPARTNERS

KEY ISSUES

TO SOLVE

ACTIVITIES

COSTS

REVENUES

OFFER CLIENTSCHANNELS

Value Proposition

1

Costing Issue1

Customer Relations 1

Customer Segment 1

Configure Value 3

Core Capability 4

Partner Network 1

Revenues 1

Delivery Channel 1

Configure Value 2

Core Capability 2

Configure Value 1

Core Capability 1

Core Capability 3

Costing Issue 2

Delivery Channel 2

Mapping Opportunities


RELATIONSPARTNERS

KEY ISSUES

TO SOLVE

ACTIVITIES

COSTS

REVENUES

OFFER CLIENTSCHANNELS

Selling Stuff on the Web

IT Infra-structure

Automated CRM

Mass Custom-ization

Data Services

Amazon Data Grid

Partner Network 1

Selling Stuff

Amazon.com

Warehous-ing and

Distribution

Distribution

Content Management

Product Selection

ProductSearch

Marketing

Affiliates

Example:

Amazon.com

What is Missing from this Business What is Missing from this Business Model Framework?Model Framework?


1.1. The ability to learn more about our The ability to learn more about our customers faster than the competition.customers faster than the competition.

2.2. The ability to turn that learning into The ability to turn that learning into action faster than the competition.”action faster than the competition.”

“We have only two sources of competitive advantage:

Jack Welch, former CEO, GE



CUSTOMERCUSTOMERRELATIONSHIPSRELATIONSHIPS


PARTNERPARTNERNETWORKSNETWORKS


COMPETITIVECOMPETITIVESTRATEGYSTRATEGY

KEYKEYCAPABILITIESCAPABILITIES& RESOURCES& RESOURCES

KEY KEY CUSTOMER /CUSTOMER /

MARKETMARKETSEGMENTSSEGMENTS


CASHFLOWCASHFLOWMANAGEMENTMANAGEMENT

DELIVERYDELIVERYCHANNELSCHANNELS

BUSINESSBUSINESS(INVESTOR)(INVESTOR)

VALUEVALUE

COMPETITORSCOMPETITORS

Evaluate Strategic AlternativesEvaluate Strategic AlternativesStrategic alternatives / value propositionStrategic alternatives / value proposition

ValueValue What we are striving forWhat we are striving for

Valuation filter

Operational filter

Strategic filter

Economic filter

SourcesSourcesof valueof value

17

Mapping Problems / OpportunitiesMapping Problems / Opportunities

Target Segments

(TS)

Value Proposition

s

(VP)

Value Configurations

(VC)

Core Capabilities

CustomerDomain

Functional Domain

PhysicalDomain

ResourceDomain

WHAT? HOW?

Vision DesignPhase:

Customerwants & needs

WHAT? HOW?

Mission DesignPhase:

Strategies tosatisfy needs

WHAT? HOW?

ImplementationDesign Phase:

Processes toexecute strategies

(CC)

Strategy Formulation & ImplementationStrategy Formulation & Implementation 18

[1]CUSTOMER

WANTS & NEEDSFOR PROVIDINGCONTRIBUTIONS

[2]STRATEGIES TO

SATISFY KEYCUSTOMER

WANTS & NEEDS

[3]CRITICAL

PROCESSESTO EXECUTESTRATEGIES

[4]CAPABILITES TO OPERATE & ENHANCEPROCESSES

[5]CUSTOMER

CONTRIBUTIONSTO SUSTAIN

CAPABILITIES

Target key stakeholders’ unmet wants

and needs

WhereWhere [are our customers going]? [are our customers going]?

19

Customer Contributions – what contributions do we – what contributions do we require from our customers if we are to maintain and require from our customers if we are to maintain and

develop our capabilities?develop our capabilities?







Customer Satisfaction – who are our customers and – who are our customers and what do they want and need?what do they want and need?







Other Stakeholder Contributions – what contributions do – what contributions do we require from our other stakeholders if we are to we require from our other stakeholders if we are to

maintain and develop our capabilities?maintain and develop our capabilities?







Other Stakeholder Satisfaction – who are our other – who are our other stakeholders and what do they want and need?stakeholders and what do they want and need?







Strategies – what strategies do we have to put in place – what strategies do we have to put in place to satisfy the wants and needs of our key stakeholders? to satisfy the wants and needs of our key stakeholders?





VALUEVALUEPROPOSITONPROPOSITON REVENUEREVENUE

STREAMSSTREAMS




Explore:

1. Corporate strategy

2. Business unit strategy

3. Brand, product & service strategy

4. Operating strategy


Processes – what critical processes do we require if we – what critical processes do we require if we are to execute these strategies? are to execute these strategies?





VALUEVALUEPROPOSITONPROPOSITON REVENUEREVENUE

STREAMSSTREAMS




Explore:

1. Developing products & services

2. Generating demand

3. Fulfilling demand

4. Planning & managing the enterprise


Capabilities – what capabilities do we need to operate – what capabilities do we need to operate and enhance these processes? and enhance these processes?





CORECORECAPABILITIESCAPABILITIES REVENUEREVENUE

STREAMSSTREAMS




Explore:

1. Infrastructure

2. People

3. Best practices

4. Technology


CUSTOMER VALUE-DRIVEN STRATEGIESCUSTOMER VALUE-DRIVEN STRATEGIES

CUSTOMER PROCESS-DRIVEN CAPABILITIESCUSTOMER PROCESS-DRIVEN CAPABILITIES

CUSTOMER STRATEGY-DRIVEN PROCESSESCUSTOMER STRATEGY-DRIVEN PROCESSES

CUSTOMER CONTRIBUTIONCUSTOMER CONTRIBUTION

CUSTOMER SATISFACTIONCUSTOMER SATISFACTION

FastFast RightRight AffordableAffordable EasyEasy

ProfitProfit GrowthGrowth FeedbackFeedback TrustTrust

Extend / renew Extend / renew products and products and

services offeredservices offered

Attract potentially Attract potentially profitable new profitable new

customerscustomersRetain profitable Retain profitable

existing customersexisting customersGrow share of Grow share of target market target market

segmentssegments

Develop Develop products and products and

servicesservices

Build market Build market offering offering alliancesalliances

Generate Generate demanddemand Fulfill demandFulfill demand

Plan and Plan and manage manage

enterpriseenterprise

Research and D

evelopment

Research and D

evelopment

Merchandising / product range

Merchandising / product range

Pricing managem

entPricing m

anagement

Marketing cam

paigns and brand mgt.

Marketing cam

paigns and brand mgt.

Alliance m

anagement

Alliance m

anagement

Sales and distribution channel mgt.

Sales and distribution channel mgt.

Salesforce effectivenessSalesforce effectiveness

Technical servicesTechnical services

Order fulfillm

ent operations O

rder fulfillment operations

After-sales service

After-sales service

Custom

er relationship managem

entC

ustomer relationship m

anagement

Quality m

anagement (etc.)

Quality m

anagement (etc.)

E.G…E.G…


Thank you for your time!Thank you for your time!

For more information please visit:For more information please visit:http://www.designforinnovation.comhttp://www.designforinnovation.com

Tel: +64(273)566-401Tel: +64(273)566-401Email: [email protected]: [email protected]



Strategic Innovation Management for a Competitive Advantage

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