Innovation Management - A NASSCOM organized session for CXO community of Indian IT services Companies in Pune, India

3. December 17, 2009 Innovation Management Slide Containerisation, Blue-Collar Revolution 540 man days (108 men 5 days) 98.5% factor Industry Vignette 1970 Re-imagine, Tom Peters 8 man days (8 men 1 days) Undercurrents Industry Analysis

4. December 17, 2009 Innovation Management Slide Software development and Offshore revolution 98.5% factor ? What next Industry Vignette Undercurrents Industry Analysis

6. 1. Changing dominant production factors December 17, 2009 Innovation Management Slide Leading for innovation Arie de Geus, A writer and management thought leader information Technology Printing technique Coincidence INNOVATION (Maximize Human Creativity) Dominant Prod. Factor Abundant supply Freely rentable Post modern: New World Maximize remuneration to capital providers move towards democracy Dominant Prod. Factor Increasingly irrelevant 15 th century - 1950 Violence Wars Management Philosophy Slavery/ Feudalistic Labour Non – existent Capital Dominant Prod. Factor Land & Natural resources Pre medieval Undercurrents Industry Analysis

7. 2. Rising speed of change December 17, 2009 Innovation Management Slide Ray Kurzweil Futurist. Kurzweil applied the tools of mathematical modelling to human history for his above argument Re-imagine, Tom Peters Time Paradigm shift > 1000 AD Typically took thousand of years to unfold (remember what you learnt in 5 th grade) 1000 AD Every 100 years 1800 AD More changes than in the previous 900 years 1900 -1920AD More changes than in 1800-1900 AD 1920 -2000 Major paradigm shift every decade 21 st century 1000 times more technological change than in 20 th century Undercurrents Industry Analysis

15. How (ALL) Indian IT services firms are competing December 17, 2009 Innovation Management Slide Strategies Adopted Informed assumption Objectives P= Primary objective; S= Secondary objective Move up the value chain Operational Excellence Labor Arbitrage Mergers and Acquisitions P P Establish Management Consulting Practice P Create vertical industry organization P S Strengthen business process expertise P S Cultivate longer and deeper client relationships S P Innovate strategic engagement models S P Indian employees; foreign clients P Reposition old & Create new service offerings P Offshore Delivery model P P Global Branding P War for Talent (Retention & Attraction) S S Note: Firms also have an objective of gaining economies of scale and scope Undercurrents Industry Analysis

16. Trajectories of Industry Change December 17, 2009 Innovation Management Slide How industries Change Anita M. McGahan Harvard Business Review, Oct 2004 Core Activities Core Assets To identify what transformation your industry is going through – you need to consider whether there are threats to your industry’s core activities (The recurring actions performed that attract and retain supplier and buyers) and core assets (the durable resources, including intangibles, that make your company more efficient at performing core activities.) Threatened Not Threatened Radical Change Everything is up in the air Ex: Makers of landline telephone handsets, overnight letter carriers, and travel agencies Creative Change The industry is constantly redeveloping assets and resources. Ex: the motion picture industry, sports team ownership, and investment banking Threatened Intermediating Change Relationship are fragile Ex: automobile dealerships, investment brokerages, and auction houses Progressive Change Companies implement incremental testing and adopt to feedback Ex: Online auctions, commercial airlines, and long-haul trucking Not Threatened Undercurrents Industry Analysis

18. Threat Analysis Indian IT services December 17, 2009 Innovation Management Slide Informed assumption Core Assets Core Activities Indian Advantage (Cost Arbitrage) Relationship management People/ Institutional knowledge Low end programming skills Resource management Core Technology Skills Processes Project management Institutional Experience Sales and marketing Domain Knowledge IP & patents Threatened Not Sure Not Threatened Undercurrents Industry Analysis

19. Trajectories of Industry Change December 17, 2009 Innovation Management Slide Core Assets Core Activities core activities (The recurring actions performed that attract and retain supplier and buyers) and core assets (the durable resources, including intangibles, that make your company more efficient at performing core activities.) CREATIVE CHANGE: The industry is constantly redeveloping assets and resources. IT Low High Low High Innovation under creative change occurs in fits and starts. Leading companies in these industries tend to spread the risk of new-project development over a portfolio of initiatives. As a result, their returns are less volatile than those of smaller competitors. How industries Change Anita M. McGahan Harvard Business Review, Oct 2004 Threatened Not Threatened Radical Change Creative Change Threatened Intermediating Change Progressive Change Not Threatened Undercurrents Industry Analysis

21. Bragging Innovation or….are they really doing it? December 17, 2009 Innovation Management Slide No of search results for INNOVATION on the leading IT and Consulting firms’ websites Industry Vignette ! Innovation! Oh yeah… we are all for it! Look at our websites, it seems we are already doing a lot of it… ? Indian IT services MNC IT services Infosys 224 14% Accenture 2600 23% Wipro 190 10% IBM Global services 1474 9% TCS 79 5% Deloitte Consulting 1182 11% Satyam 32 6% EDS 423 17% CSC 410 3% Undercurrents Industry Analysis

23. MONOPOLY December 17, 2009 Innovation Management Slide Death by a thousand cuts Don Moyer – Harvard Business Review Feb 2005 Definition & Scope Thought leadership Principles

24. End of MONOPOLY December 17, 2009 Innovation Management Slide Death by a thousand cuts Don Moyer – Harvard Business Review Feb 2005 Definition & Scope Thought leadership Principles

25. Competition December 17, 2009 Innovation Management Slide Death by a thousand cuts Don Moyer – Harvard Business Review Feb 2005 Definition & Scope Thought leadership Principles

26. Cut - Throat Competition December 17, 2009 Innovation Management Slide Death by a thousand cuts Don Moyer – Harvard Business Review Feb 2005 Definition & Scope Thought leadership Principles

27. INNOVATION December 17, 2009 Innovation Management Slide Death by a thousand cuts Don Moyer – Harvard Business Review Feb 2005 Definition & Scope Thought leadership Principles

29. Theory often bangs in to reality… December 17, 2009 Innovation Management Slide Because evidence from the past can be such misleading guide to the future, the only way to see accurately what the future will bring is to use theory The innovator’s Solution Clayton M Christensen Gravity !! Oh its just a theory Definition & Scope Thought leadership Principles

30. … Curves of innovation December 17, 2009 Innovation Management Slide Sigmoid Curve (a typical life cycle of almost anything): invention continuity The prescription to success: Blend of continuity with invention Charles Handy Professor at London business school Definition & Scope Thought leadership Principles Novel Design (invention/ innovation) Dominant Design (no product innovation) Adaptive Designs (marginal innovation) Redesign (invention/ innovation) Niche Designs (some innovation) Continuous Redesign (innovation) Stages of Design Henry Mintzberg Professor, Management, McGill Univ. & INSEAD

31. Forms of innovation December 17, 2009 Innovation Management Slide Product & services Operational & admin. Business Strategy Structural Social Radical Incremental Ambiguous Unfamiliar Categories Transformation Type Market Acquaintance Familiar Conservative Sales & Marketing Definition & Scope Thought leadership Principles

32. Forms of Innovation: Disruptive Vs Sustaining December 17, 2009 Innovation Management Slide The Innovator’s Solution Clayton M. Christensen & Michael E. Raynor Low end disruption Address over-served customer with a lower –cost business model Sustaining Strategy Bring a better product into an established market Performance Time New Market disruption Compete against non-consumption Non-consumers / Non–consuming occasions Different measure of Performance Time Definition & Scope Thought leadership Principles

33. Forms of Innovation: Disruptive Vs Sustaining December 17, 2009 Innovation Management Slide The Innovator’s Solution Clayton M. Christensen & Michael E. Raynor A company that finds itself in more than good enough circumstances simple can’t win: Either disruption will steal its market or commoditisation will steal its profits The innovator’s Solution Clayton M Christensen Definition & Scope Thought leadership Principles

34. Blue Ocean Strategy December 17, 2009 Innovation Management Slide Blue Ocean Strategy W. Chan Kim; Renee Mauborgne, Insead Harvard Business Review, Oct 2004 Characteristics Red ocean Strategy Blue Ocean Strategy Compete in existing market Create uncontested market space Beat the competition Make the competition irrelevant Exploit existing demand Create and capture new demand Make the Value/ cost trade off Break the value/cost trade-off Align whole system of company’s activities with its strategic choice of differentiation or low cost Align whole system of company’s activities in pursuit of differentiation and low cost Definition & Scope Thought leadership Principles

35. Blue Ocean Strategy December 17, 2009 Innovation Management Slide Some empirical evidence In a study of business launches in 108 companies Blue Ocean Strategy W. Chan Kim; Renee Mauborgne, Insead Harvard Business Review, Oct 2004 Examples Red Ocean Strategy Incremental improvement to existing products Blue ocean Strategy Attempts to create new markets Total Ventures 86% 14% Total Revenue 62% 38% Total profits 39% 61% Definition & Scope Thought leadership Principles In 2002, just 12 of Procter & Gamble’s 250-odd brands generated half of its sales and an even bigger share of net profits.

36. Weird ideas for managing creativity (innovation) December 17, 2009 Innovation Management Slide Conventional ideas that work Weird ideas that work Weird Ideas that work Robert. I. Sutton Prof. of Mgmt. Science and Engineering, Stanford University Decide to do something that will probably… Succeed, then convince yourself and everyone else that success is certain Fail then convince yourself and everyone else that success is certain Reward… Succeed; punish failure and inaction Success and failure; punish inaction Find some happy people… And make sure they don’t fight And get them to fight Hire… “ Fast learners” of the organization code “ Slow learners” of the organization code People you (probably) need People you (probably) don’t need Take your past success And replicate them And forget them Encourage people… That are obedient followers That are mavericks Make sure you… play by the rules of the game change the rules of the game Stay within the industry boundaries Go across the industry boundaries Focus on competition Focus on ecosystem Definition & Scope Thought leadership Principles

37. December 17, 2009 Innovation Management Slide Summary Efficiency indicates effectiveness in the implementation and use of proven ideas Creative companies and teams are inefficient and (often annoying) places to work Conventional ideas that work Weird ideas that work Weird ideas for managing creativity Weird Ideas that work Robert. I. Sutton Prof. of Mgmt. Science and Engineering, Stanford University Definition & Scope Thought leadership Principles

38. December 17, 2009 Innovation Management Slide Today’s Problems come from yesterdays ‘Solutions’. The Fifth Discipline Peter M. Senge Director, Centre for organisational learning, MIT Sloan school of management Definition & Scope Thought leadership Principles

40. Trimurti of the modern INNOVATIVE organisation (Do we have the right Balance?) December 17, 2009 Innovation Management Slide Building Breakthrough Businesses Within Established Organizations. Source: Harvard Business Review; May2005 Circle of innovation, Tom Peters ? Brahma = Creator = Learning Strategic experiments are highly uncertain endeavours. Regardless of the level of prior research and analysis, new co will face several critical unknowns. Vishnu = Preserver = Borrowing NewCo forgets most easily if it is isolated from the CoreCo. But Complete separation is impractical. CoreCo’s tremendous resources are too valuable to ignore Mahesh = Destroyer = Forgetting To build a foundation for success, NewCo must forget CoreCo’s business model. NewCo’s answer to the fundamental question that defines a business - Customer, value and channel needs to be answered Definition & Scope Thought leadership Principles

42. Fitting an Innovation's requirements with the organisation’s capability December 17, 2009 Innovation Management Slide Innovator’s Solution, Clayton M. Christensen Poor Fit (Disruptive) Strong Fit (Sustaining) Fit with Values Autonomous Org. Mainstream Org. Position of responsibility Customary New Fit with Processes Heavyweight Teams Lightweight Teams Functional Teams Structure development team Definition & Scope Thought leadership Principles

43. Seven Myths of Innovation December 17, 2009 Innovation Management Slide Building Breakthrough Businesses Within Established Organizations. Source: Harvard Business Review; May2005 Circle of innovation, Tom Peters Definition & Scope Thought leadership Principles Myth Reality You need more new ideas. You need more homes for ideas. Let people loose to innovate. Enable people through structure and process. Innovation is a department. Innovation is a company-wide competency. Innovation is a radical departure from the past Innovation often creatively combines pieces of the past. Mistakes are costly. Early mistakes are profitable Avoid the detours Detours may be the destination Innovation is about creating new things. There are many paths to innovation.

45. James March, an organizational theorist December 17, 2009 Innovation Management Slide “ Unfortunately the difference between the visionary genius and delusional madness is much clearer in the history books than in experience” Definition & Scope Thought leadership Principles

49. Systems Thinking: Building blocks December 17, 2009 Innovation Management Slide Delay Reinforcing Feedback Balancing Feedback Too HOT Too COLD Too HOT Too COLD HOT COLD The Fifth Discipline Peter M. Senge Director, Centre for organisational learning, MIT Sloan school of management Sales Satisfied Customer Positive word of mouth Body Temperature Temp. Gap Adjust Clothing Desired Body Temperature Goal Analysis Recommended Strategy

55. Innovation Factory: December 17, 2009 Innovation Management Slide John Kao, Founder and CEO The idea factory INNOVATION SYSTEM: An integrated set of processes, policies, and tools that link corporate strategy to new sources of value (products, services and processes) in order to create sustainable competitive advantage Innovation Factory = Innovation Culture + Innovation System INNOVATION CULTURE : A set of values and behavioural factors that are designed to bring out the tremendous curiosity, creativity and human urge to experiment and improve things. It ensures collaboration, team work, and motivation. Key Attributes Architecture Valuation

56. Pillars of organizational innovation December 17, 2009 Innovation Management Slide The Seeds of Innovation Elaine Dundon Shared Innovation vision and Strategy Innovation Environment Support Innovation Resource Allocation Innovation Process Networks Innovation Programs Innovation Skills Development Innovation Rewards and Recognition External Stakeholder Innovation INNOVATION Key Attributes Architecture Valuation

57. Innovation DNA December 17, 2009 Innovation Management Slide Diversity Organized Forgetfulness Co-evolutionary collaboration Velcro Organisation Meaningful Organisational Vocabulary Rapid Experimentation & prototyping Inspirational Trust & transparency Motivating incentive system/ Recognition for Personal Accomplishment Key Attributes Architecture Valuation

58. Context Diagram December 17, 2009 Innovation Management Slide Information Engineering System Culture Engineering System LEADERSHIP VALUES MISSION Innovation System A systems that creates a desired behavioural response that induces innovation A system that manages the organisational innovation portfolio Key Attributes Architecture Valuation

59. December 17, 2009 Innovation Management Slide Employee groups, buyers, suppliers, experts, and competitors Innovation system architecture Innovation System Integrator A tool that would integrate innovation systems to other enterprise applications i.e.: CRM, ERP, and Delivery systems Idea mgmt tool INSPIRE LEARN CREATE MANAGE bQ Business quotient Innovation School An online education centre B-Plan Business planning tools iM Innovation Monitor Innovation tracking dashboard Talent Zone Skill assessment, capturing &trading system COI Communities of innovation HCL garage An internal VC firm Strategizer A collaborative ecosystem wide corporate strategy portal and A nalyst Portal LEADERSHIP INSPIRE LEARN CREATE VALUES MISSION CONNECT & COLLABORATE MANAGE RISK ENLIGHTENED EXPERIMENTATION STRUCTURED CHAOS Key Attributes Architecture Externalities

61. Innovation factory – a real option valuation December 17, 2009 Innovation Management Slide A team with a Strong understanding of innovation theory Time (Years) Innovation Consulting Enterprise Innovation Sys. $ 6 MM NPV of Potential profits from operational efficiencies and revenue enhancements is hugely positive Option Space 2005 2010 2006 2007 2008 2009 YES NO YES NO YES NO YES NO YES NO YES NO Key Attributes Architecture Valuation

64. December 17, 2009 Innovation Management Slide Building organisation wide innovation will be the only sustainable growth strategy of the future, any success NOT driven by organizational innovation capacity will either be a lucky coincidence or a temporary arbitrage opportunity

65. You must be the change you wish to see in the world. Mohandas Karamchand Gandhi December 17, 2009 Innovation Management Slide If you have enough information to make a business case, you're too late Bill Gates

66. Thanks [email_address] , [email_address] P: 9818094464, 11-51436730 Don’t wait until the change in the market surprises you Presentation by abhishek breja manager strategy planning

68. Sustainable competitive advantage December 17, 2009 Innovation Management Slide Sustainable Competitive Advantage: Occurs when a firm develops a strategy that competitors are not simultaneously implementing and Provides benefits which current and potential competitors are unable to duplicate Strategic Competitiveness: Achieved when a firm successfully formulates and implements a value-creating strategy Competitive advantage to have any strategic meaning, three things must happen. 1. Customers must perceive a consistent difference between a company’s product or service and those of its competition, and that difference must occur in one or more key buying criteria. 2. The difference must come from a capability gap between the favored company and its competitors. 3. The product difference and the capability gap must endure over time . What is Strategy, Michel E Porter, Harvard Business Review Nov 1996

69. Blue Ocean Strategy December 17, 2009 Innovation Management Slide Blue Ocean Strategy W. Chan Kim; Renee Mauborgne, Insead Harvard Business Review, Oct 2004 Examples Automobiles industry Key blue ocean creation Creator Technology Vs Value pioneering Industry attractiveness Ford Model T 1908, First mass produced car New Entrant Value Pioneering Unattractive GM’s Car 1924- Fun and fashion Incumbent Value Pioneering (Some new Tech.) Attractive Japanese Cars 1970: small reliable fuel efficient autos Incumbent Value Pioneering (Some new Tech.) Unattractive Chrysler Minivan 1984: Ease of a car, space of a van Incumbent Value Pioneering Unattractive

70. Blue Ocean Strategy December 17, 2009 Innovation Management Slide Blue Ocean Strategy W. Chan Kim; Renee Mauborgne, Insead Harvard Business Review, Oct 2004 Computer industry Examples Key blue ocean creation Creator Technology Vs Value pioneering Industry attractiveness CTR’s (IBM) tabulating machine 1914, modularizing & leasing tabulating machine Incumbent Value Pioneering Unattractive IBM 650 electronic computer & System 360 1952, business computer industry: by reducing & simplifying the power & price of existing tech. Incumbent System 650: Value Pioneering System 360 : Value & Tech. pioneering Nonexistent Apple Personal Computer 1978: All in one simple to use Apple II New entrant Value Pioneering Unattractive Compaq PC Server 1992: ProSignia server, twice the and print capability of a minicomputer at 1/3 rd the price Incumbent Value Pioneering Nonexistent Dell Built to order Mid 1990s: New purchase and delivery experience for buyers New entrant Value Pioneering Unattractive