Trapped Value Key Findings ANZ

Copyright © 2018 Accenture All rights reserved.
HOW TO
UNLOCK
THE VALUE
OF YOUR
INNOVATION
INVESTMENTS
ANZ Findings

WE LIVE IN A WORLD OF GROWING
TECHNOLOGICAL POSSIBILITIES
2
Combinatorial Innovations
51,000
Autonomous Vehicles expected
to be sold in 2021, based on
company announcements
100,000
Robots working alongside 341,400
humans in Amazon’s warehouses
129 MWh
World’s largest lithium ion battery
plant, constructed by Tesla and
Neoen in South Australia
Logarithmic Cost Reductions Of Advanced Technologies
Cost index, 2002 = 100
Genome sequencing cost ($US/genome)
Electric vehicle battery pack ($US/kWh)
Global bandwidth costs (US$/1000 MBps)
Global PV module prices ($US/W)
Cloud storage costs ($US/GB per month)
100.0
.10
10.10
20.10
30.10
40.10
50.10
60.10
70.10
80.10
90.10
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
10.0
1.0
0.5
Commercial/military drone
minimum prices ($US/unit)
3d printing machines ($US/machine)
Source: Accenture Research estimates; IHS Markit; NY Times; WEF

THE FAILURE TO CONVERT POSSIBILITIES
INTO REALITY RESULTS IN ‘TRAPPED VALUE’
3
Enterprise Trapped Value exists when an economic
opportunity is visible, yet currently unreachable
(i.e., it cannot be unlocked by existing business
models and capabilities).
ENTERPRISE
Consumer Trapped Value exists when there is a
cost burden for the consumer (e.g., international
call costs), or latent consumer surplus (e.g.,
monetising personally owned assets).
CONSUMER
INDUSTRY
Industry Trapped Value exists when a few
companies are reaping rewards where more could
benefit, or where partnerships that accelerate
innovation are not pursued.
Societal Trapped Value exists when commercial
activities fail to create benefits for the general
public (e.g., reduced carbon emissions; job
creation; water and food safety).
SOCIETY

TECHNOLOGY-ENABLED INNOVATIONS CAN HELP
CONVERT POSSIBILITIES INTO REALITY
SoftBank’s Vision Fund, a Japanese Internet group’s technology fund, is targeting
meaningful, long-term investments in companies and foundational platform businesses
that seek to enable the next age of innovation. Their platform is now making it possible
for organisations to build massive agent-based simulations in the cloud to inform and
improve decision making.
Tommy Hilfiger’s runway collections are instantly available through TommyNow, the
company’s “see now, buy now” initiative. This initiative eliminates the standard six-month
wait between the runway and retail. As soon as shows begin, shoppers can order items
through the label’s digital platforms. To enable TommyNow, Hilfiger overhauled its
production and supply chains, restructuring its relationship with global supply chain
manager Li & Fung.
Nike’s supply chains have become increasingly network powered. The company has
been working with global manufacturer Flex since 2015 to automate its shoe
manufacturing processes. By using advanced robotics and digitization, Nike can now
produce a complete pair of uppers in just 30 seconds, with 30 percent fewer steps and
up to 50 percent less labour.
Loss of hearing effects over 3.5 million people in Australia. Cochlear has developed and
is now trialling a fully implantable and waterproof hearing aid, enabling 24 hour hearing
for users with impairments, alongside the ability to engage in activities such as
showering and swimming, a luxury that previous devices have not been able to provide.
Source: Accenture Research analysis, (1) Nike; (2) SoftBank Vision Fund; (3) Tommy Hilfiger; (4) Cochlear, HearNet
4
ENTERPRISE
CONSUMER
INDUSTRY
SOCIETY

Copyright © 2018 Accenture All rights reserved. 5
A SMALL GROUP OF COMPANIES CONSISTENTLY
RELEASE VALUE AHEAD OF THEIR PEERS
Source: Accenture Research analysis, Trapped Value Survey. 1Respondents were asked ‘What do you expect the CAGR to be for Market Cap and NOPLAT, over time?’ This was intended to act as a proxy for
Current and Future Value. We calculated the average CAGR for respondents from each industry. We then calculated the percentage of respondents that selected an option above their industry average.
Companies that have grown and expect to grow Profits and Market Cap above their industry average
% respondents, n=110 in Australia; n=840 globally
OTHERS
Self-reported growth of both
NOPLAT and Market Cap at a CAGR
in line with or below the industry
average from 2012-17, and
expected for 2017-22
HIGH GROWTH COMPANIES1
Self-reported growth of both
NOPLAT and Market Cap at a CAGR
above the industry average from
2012-17, and expected for 2017-22
6%
94%
14%
86%
AUSTRALIA GLOBAL

HIGH-GROWTH COMPANIES
ADOPT A DISTINCT APPROACH TO INNOVATION
6
Committing to invest
more aggressively,
over time, in truly
disruptive innovation
initiatives that have the
potential to create
entirely new markets.
CHANGE
ORIENTED
Having the courage to
apply innovation with
greater intensity to
reinvent existing ways
of working, and thus
achieve deep
organizational change.
OUTCOME
LED
Fostering innovation
efforts across the
business, and having the
discipline to tie them
rigorously to financial
performance.
DISRUPTION
MINDED
Their approach is:

AUSTRALIAN COMPANIES PLAN TO INCREASE THEIR
UPTAKE OF INNOVATION PRACTICES CAUTIOUSLY
7
• The use of design thinking to develop products
and services that revolve around customer
experience
• The creation of a virtualized workplace, adopting
tools to ‘work anywhere’
• The use of strategic cost management techniques
such as Zero Based Budgeting
• Offer bespoke products and services at a
significantly lower cost
• Establish and work closely with network partners
to develop a responsible supply chain
10%
Australian companies most notably plan to
adopt the following innovation practices
We found that Australian companies apply – and plan to apply – less than half of them on average
% of 49 practices that companies1 agreed will describe their organization “to a significant extent”
44%
49%
Past 5 Years Next 5 Years
Source: Accenture Research analysis, Trapped Value Survey. 1We identified Australian (n=110) respondents that agreed ‘To a significant extent’ to the majority of innovation practices
that were mapped to a characteristic. For reference, global (n=840) respondents indicate a 42% adoption rate in the past (2012-17), alongside a 51% rate in the future (2017-22).

INNOVATION PRACTICES ENABLE HIGH GROWTH
COMPANIES TO CHANGE HOW THEY DO BUSINESS
8
High-growth companies apply innovation practices to change their way
of doing business more fundamentally, so they can become:
TALENT
RICH
Creating new, modern
forms of workforces
(flexible, augmented
and adaptive) to gain a
competitive advantage
in fast-changing
markets.
HYPER
RELEVANT
Knowing how to be and
stay relevant by sensing
and addressing
customers’ changing
needs.
INCLUSIVE
Adopting an inclusive
approach to
innovation and
governance that
incorporates a
broader range of
stakeholders.
ASSET
SMART
Adopting intelligent asset
and operations
management to run
businesses as efficiently
as possible, and to free
up the capacity for other
innovative efforts.
TECHNOLOGY
PROPELLED
Mastering leading-edge
technologies that
enable business
innovation.
DATA
DRIVEN
Generating, sharing
and deploying data
to deliver new
product and service
innovations safely
and securely.
NETWORK
POWERED
Harnessing the power of
a carefully managed
ecosystem of partners,
to bring the best
innovations to your
customers.
Discover the seven characteristics

AUSTRALIAN COMPANIES APPLY INNOVATION
WITH LESS INTENSITY COMPARED TO OTHERS
9
Innovation practice intensity1 by characteristic, 2017-22
Australia (n=110) All Companies (Global; n=840)
Source: Accenture Research analysis, Trapped Value Survey. 1We identified Australian (n=110) respondents that agreed ‘To a significant extent’ to the majority of innovation practices that were mapped to a characteristic.
37%
41%
32%
29%
33%
46%
52%
38%
50%
41%
38% 39%
53% 51%
Hyper Relevant Network Powered Technology Propelled Talent Rich Data Driven Inclusive Asset Smart
The survey tested for 49 innovation practices that underpin 7 key characteristics
-9%
-9%
-9%
+1%

60% 59%
55%
5%
17%
12%
Australia (n=110) High Growth Companies (Global) (n=118) All Companies (Global) (n=840)
AUSTRALIAN COMPANIES APPLY INNOVATION
LESS COMPREHENSIVELY THAN OTHERS
10
Number of characteristics companies expect to master1, 2017-22
Master all 7
Master 2-6
Master >1
Source: Accenture Research Analysis, Trapped Value Survey. 1We identified respondents that agreed ‘To a significant extent’ to the majority of innovation practices that were mapped to a
characteristic; 2High growth companies self-report growth in Market Cap and NOPLAT at a CAGR above the industry median over 2012-17 and expect this continue from 2017-22.
65% 76% 68%

AUSTRALIAN COMPANIES THAT APPLY INNOVATION
COMPREHENSIVELY EXPECT STRONG GROWTH
11
Number of characteristics high growth companies expect
to master1 and expected profit (NOPLAT) growth2, 2017-22
NOPLAT:
% CAGR
2017-22
Accenture Research Analysis, Trapped Value Survey. 1We identified respondents that agreed ‘To a significant extent’ to the majority of innovation practices that were mapped to a characteristic;
2Respondents were asked ‘What do you expect the CAGR to be for Market Cap and NOPLAT, over time?’ They were given options in ranges (0%; 1-5%; 6-10%; 11-15%; 16%+). For each of the two
groups, we determined what the most common response was (e.g. most of the companies that expect to master all 7 characteristics, self-reported expected NOPLAT as 6-10%).
6-10%
Australia (n=110) All Companies (Global; n=840)
1-5%
83%
5%
72%
12%
Between 1 and 6 Characteristics 7 Characteristics
1-5% 6-10%

~20% OF AUSTRALIAN COMPANIES EXPECT TO
AGGRESSIVELY INCREASE INNOVATION SPEND
12
Increase in financial investments in innovation; Australian companies vs. Global Sample
No increase
<25%
25-49%
50-74%
75% or more
Source: Accenture Research analysis, Trapped Value Survey.
Australian Companies (n=110)
56%
39%
35%
41%
7%
16%
2% 3%
Past Future
2012-17 2017-22
Δ +10%
(Future vs. Past)
All Companies (n=840)
43%
27%
40%
43%
14%
22%
2% 7%
Past Future
2012-17 2017-22
Δ +13%
(Future vs. Past)

ALMOST HALF OF AUSTRALIAN COMPANIES FOCUS
THEIR INVESTMENTS ON DISRUPTIVE INNOVATION
13
Focus of investment1
% respondents, (n=110 in Australia; n=840 globally)
INCREMENTAL
INNOVATION
(50% or more
of innovation
investment)
▪ Focused on significantly enhancing features of an existing
product or service
▪ Examples include , Coca-Cola and the relaunch of Diet
Coke (with new flavours and packaging)
DISRUPTIVE
INNOVATION
(60% or more
of innovation
investment)
▪ Focused on new commercial or scientific advances that
create entirely new markets, with the potential to disrupt
entire industries
▪ Examples include electric vehicles aimed at the mass
market (rather than only the premium market)
51%
62%
49%
38%
Australia All Companies (Global)
Source: Accenture Research analysis, Trapped Value Survey. 1Respondents were asked: ‘What percentage of your investment is directed towards incremental vs. disruptive innovation?’ They provided responses in 10% increments,
between 100% incremental innovation, and 100% disruptive innovation. We then aggregated the responses for those that directed 60% or more to disruptive innovation, and 50% or more to incremental innovation.

CHANGE-ORIENTED DISRUPTION-MINDED
Tesla and Neoen have constructed
the world’s largest lithium ion
battery plant in South Australia,
which will be used to provide reliable
energy in an area inhabited by 1.7
million people where power outages
and shortages have been the norm.
OUTCOME-LED
Nike has invested in a new internal
structure as part of its Consumer
Direct Offense strategy, creating an
integrated design-to-delivery
organisation that consolidates
Categories, Design, Product &
Merchandising.
Source: Accenture Research analysis, (1) Ramsay Health Care & Vitalic Medical; (2) Nike; (3) Tesla and Neoen
PUTTING INNOVATION TO WORK
EXAMPLES
Ramsay Health Care and Vitalic
Medical have developed a non-
invasive monitoring system that
supports nurses and staff in hospitals
by detecting early signs of patient
deterioration and alerting staff of
potential patient falls.

HOW TO PUT INNOVATION TO WORK
ACTIONS TO TAKE NOW
15
Aggressively direct your investment
capacity to innovations that help
expand your footprint into new
markets (e.g., using Blockchain to
improve women inclusion in
insurance).
Organise differently for disruptive
innovation initiatives (e.g., go
beyond experiments, and turn those
initiatives with the highest disruption
potential – or your ‘moon shots’ -
into new businesses).
Identify which target
characteristics (e.g., becoming
hyper-relevant) are central to your
growth strategy, and how intensely
you are prepared to drive change
across the organisation.
Test and embrace multiple
innovation practices to redefine the
most established ways of doing
business (e.g., automated legal
contract preparation).
Prioritise investments in those
capabilities (e.g., acquisition of
artificial intelligence companies)
that you can bring back into your
‘core’ to help modernise the existing
ways of working.
Tie your innovation investments to
the desired long-term performance
(i.e., growth in revenue, profit,
customer base etc.), not only to
short-term efficiency benefits.
BE DISRUPTION-MINDED…BE CHANGE-ORIENTED… BE OUTCOME-LED…
TARGET
ENTERPRISE
TRAPPED
VALUE
RELEASE
ENTERPRISE
TRAPPED
VALUE

ABOUT THE RESEARCH
16
STEP ONE: Financial Analysis
14 Industries
• Life Sciences
• Chemicals
• Electronics & High Tech
• Software & Platforms
• Media & Entertainment
• Consumer Goods & Services
• Retail
• Construction &
Engineering Products
• Automotive
• Industrial Equipment & Machinery
• Telecom
• Utilities
• Energy
• Metals & Mining
Australian Sample Characteristics
COMPANY SIZE BY REVENUE RESPONDENTS’ ROLE1
To understand the characteristics of companies
that successfully release Trapped Value, we
fielded a survey in September and October
2017. The survey was sent to executives at 840
of the world’s largest multinationals, and was
grouped into three parts: the first gathered
demographic and financial information on the
sample; the second tested their approaches to
innovation; and the third tested the extent to
which they applied 49 innovation practices,
identified as underpinning Trapped Value
release based on an extensive literature review.
We analysed the growth of current operations
(Current Value) and investor expectations
(Future Value) of 995 of the largest companies
by revenues across 14 industries form 2000-16.
This analysis showed that few companies
successfully release Trapped Value.
STEP TWO: Survey Analysis
2%
11%
28%
57%
2%
$50b+ 30-50bn 10-30bn 1-10bn 0.5-1bn
23%
47%
19%
11%
Innovation Operations Strategy Finance

TELL ME MORE
17
Omar Abbosh
Group Chief Executive
Communications, Media and Technology
omar.abbosh@accenture.com
Paul Nunes
Global Managing Director of
Thought Leadership Accenture Research
paul.f.nunes@accenture.com
Dr. Vedrana Savic
Managing Director of Thought
Leadership Accenture Research
vedrana.savic@accenture.com
Michael Moore
Senior Principal, Thought
Leadership Accenture Research
m.p.moore@accenture.com
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