jump-start your innovation program by being an entrepreneur · 2019. 12. 20. · this presentation,...

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Jump-start Your Innovation Program By Being An Entrepreneur

Amos Auringer

19 July 2018

1 © 2018 Gartner, Inc. and/or its affiliates. All rights reserved.

Thank you


50% of current work activities are

automatable by currently demonstrable

technologies. AI, automation, and the future of work: Ten things to solve for

McKinsey Global Institute, By James Manyika and Kevin Sneader

https://www.mckinsey.com/our-people/james-manyika

https://www.mckinsey.com/our-people/kevin-sneader


The overarching goal of creating a dedicated innovation center distinct

from other institution departments is typically to provide a physical and

psychological separation from near-term pressures, in order to

encourage creativity and experimentation, and to develop the skills for

effective investigation and evaluation of innovative projects. This session

provides insights in gaining buy-in with stakeholders, collaboration with

sponsors and partners (includes finding the right sponsor), preparing for

cultural adoption and rejection, and understanding risks and using your

super powers.

4 © 2018 Gartner, Inc. and/or its affiliates. All rights reserved.4 © 2018 Gartner, Inc. and/or its affiliates. All rights reserved.

66%

Leaders who thinkthey are transforming.

*Source: Gartner’s 2018 Digital Business Survey

11%

Leaders who aretransforming.


Manufacturing

Government

Financialservices

Education

Services

Retail

Natural resources

Insurance

Healthcare providers

Transportation

Telecom

Utilities

Media

Wholesale trade

Health payers

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Gartner 2018 CIO Agenda – Digital Progress (Calibration)

TOP

TRAILING

Dig

ital

"B

usin

ess"

(Exte

rnally

Facin

g, A

vera

ge R

evenue/T

urn

over)

Digital Processes (Internally Facing, Average Percentage)

Education Globally

18-22% of Revenue is Digital

30-35% of Processes are Digitalized


Short Definitions

Industry Digital Potential: The highest level of digital optimization and digital business achievable with current

technology for your industry. It is an ideal state.

Organization Digital Progress: The current level of level of digital optimization and digital business for your

organization.

Digital Potential Gap: The current gap between your organization digital progress and the industry digital

potential.

Industry Progress Gap: The current gap between your organization digital progress and the industry digital

progress (as measured by Gartner 2018 CIO Agenda data).

Digital Friction: All the factors that reduce the Industry digital potential (these are typically out of your control)

as well as the factors that hinder reaching your organization digital potential (these are typically within your

control).

Organization Digital Potential: The highest level of digital optimization and digital business achievable with

current technology for your organization. It is a real state that reflects the ultimate digital ambition.

Plot of Digital Path With Waypoints: This is a visualization of a timed roadmap to the organization digital

potential with intermediate goals (waypoints representing time-bound digital ambition).


Discussion – What Are Your Innovation Goals?


Adopt a SIMPLE Framework for Innovation


Some of the Companies Most Admired for Superior CEV


Those Most Admired for Superior CEV Focus on ...

Customer Student ExpectationsUnderstanding it or even anticipating and staying ahead

of it — continuously

Customer Student CentricityDriving the enterprise's strategy and decision making around these

expectations and …

Customer Student Experience (CX)Delivering a superior CX as a competitive differentiator


CEV Leaders Outperform Peers in Financial Measures

Understanding and meeting (or exceeding) the expectations of the customer will be the difference

between enterprise success and failure in a digital-business-driven world.

Industry AverageNPS Leader**

5-Y

ear

Reven

ue C

AG

R (

%)

014%

23%

Health Insurance

Kaiser Permanente

-5

32

HomeownersInsurance

USAA

3

38

DepartmentStores

Costco

1

56

Auto Service/Repair

Safelite

62

224

Online Shopping

AmazonNPS — Net Promoter Score

**"Satmetrix" publishes lists of NPS Leaders by industry/region.


What Got You Here, Won't Get You There

"The greatest danger in times of turbulenceis not the turbulence;it is to act with yesterday's logic." Peter Drucker

Digital is rapidly reshaping the leadership context

Context-Specific Capabilities 70% of leadership capabilities are associated with success in

specific situations only.

Foundational Capabilities 30% of leadership capabilities are associated with success in

any situation.


Leaders Must Navigate Serial Industry Disruptions

Digitally remastered industries demand bold innovative leadership

Music Industry Example

Digital Business

Optimization

Digital Business

Transformation

Digital Ambition


Digital Business Disrupts Leadership Mindsets

Seeks certainty

Optimizing today's paradigms

Only invest witha solid business case

All projects "green"(never fail)

Industrial-EraIncumbent Mindset

Thrives in uncertainty

Quest to masterthe next paradigms

Portfolio of strategic investment bets

Learn (and fail) fast — to win big

Digital-EraDisruptor Mindset

Overreliance on industrial-era thinking creates dangerous blind spots


Leaders Should Upgrade to a Digital-Era Mindset

Thrive despiteuncertainty

Quest forbreakthrough outcomes

Exploit digital-eracompetitive levers

Start-experiment-learn-iterate

Attract and unleashdigital talent

The art of thedigital possible

Embracing a growth mindset helps leaders augment their current thinking

Seek genuine new customer value

Foster a continuous learning innovation culture

Fuel creativity via inclusive distributed leadership

Adapted from "Reframing Your Mindset to Match Digital-Era Reality,” Graham Waller (G00308557)


Future Success Requires Digital Dexterity

Digital Dexterity — The desire and ability to use

technology to drive business outcomes

... and capable of exploiting technology-enabled competitive levers(i.e., data science/AI or platform-based business models)

Leadership and workforce should be ...

Collaborative Agile Analytical Innovative Creative


Roles Driving AI Projects vs Interested in Leveraging AI Projects

Percentage of Respondents

Base: Answered Artificial Intelligence (AI) Section, n = 890Q. Select ALL functional roles in your organization that are interested in leveraging Artificial Intelligence (AI) projects? Multiple responses allowedQ. And which functional role/area is the PRIMARY driver or initiator of Artificial Intelligence (AI) projects?

Finance – 7%

Marketing – 4%

Human Resources – 4%

R&D/ Product Development – 7%

SC, Procurement, Purchasing – 2%

Legal and Compliance – 2%

Sales – 1%

Field Service – 1%

Information Technology – 36%

Line-of-Business Leadership – 9%

Corporate Leadership – 13%

Drives AI Projects

Interested in Leveraging AI Projects

16%

17%

18%

25%

27%

29%

29%

32%

44%

30%

33%

67%

Customer Service – 14%


Enterprises Underestimate Innovation Scaling Challenges

Scaling occurs when a proven

idea, whether a piece of

software, a new service or a

brand new business, is readied

for and adopted by a large base

of users for some business

benefit.

Scale breakers are forces that

are individually sufficient to derail

the scaling of a proven idea.

Weak

Resistance

Pioneer

Strong

Demand

Professional

Scale Breaker Scale Maker

Ownership

Behavior

Process


Ensure You Have Something Worth Scaling

Un

ce

rta

inty

Time

Risk Tolerance

Identify critical assumptions

Experiment/test/gather data

Experiment/test/gather data

Test commitment

Residual uncertainty meetsrisk tolerance


Big Data is at the Heart of Improved Diagnoses

Opportunity

– Discriminate between two commonly misdiagnosed diseases

• Data and Analytics

– Echocardiograms consisting of 10,000 attributes from 90 metrics in

six different locations of the heart—all produced by a single one-

second heartbeat

– Associative memory engine from Saffron Technology, combining

NoSQL, semantic graph, machine learning and cognitive distance

algorithms based on Kolmogorov complexity

• Results

– Ability to discern cardiomyophathy from pericarditis—both which

cause heart failure but are complex to diagnose and require vastly

different treatments

– Reduced misdiagnoses from 27% to 10%

2


From Weak to Strong Ownership

Weak Strong


Ownership

Unmanaged handoffs to controllers and makers

Insufficient financial and political support from senior management

Dotted-line delivery teams or "20%" time

Handoffs managed deliberately and gradually

Approved funding model for innovation scaling

New unit with committed team members formed around proven idea


Make a Long-Term Commitment


“There's a big difference

between a polite nod and real

commitment”

Jonathan Draper, futures product strategist,

BAE Systems Applied Intelligence


Recommendations

Scale breakers lurk at every turn, ready to derail a proven idea. But CIOs can turn these scale breakers into scale makers by paying attention to critical areas:

1. Reduce handoffs and transfer ownership gradually.

2. Pay special attention to funding commitment.

3. Replace dotted-line teams with something stronger and avoid 20% time.

4. Respect dissonant knowledge.

5. Decide where to hold your nerve and where to be flexible.

6. Cross the credibility and demand thresholds.

7. Recruit experts deliberately.


Test commitment with real money.


Toyota Brings Innovations to Market by Avoiding Handoffs

Zack Hicks became CIO just as Toyota issued the biggest vehicle recalls in its history. The company went from fielding 3,000 phone calls a day to 90,000, and page views on the website exploded. Systems began to break down. But the organization discovered an ability to innovate quickly in response to the crisis. Afterward, Hicks wanted to make innovation a permanent capability.

Solution

Offer many innovation paths — innovation fairs, innovation council, Tech Fest showcase.

The innovator is the CEO of the new idea — increases autonomy and lessens handoffs.

Use agile practices to reduce handoffs, which eases scaling dramatically.

Kill an idea if it has no clear business sponsor — ensures commitment to scaling.

Results

Hicks was given $5 million to start Toyota Connected for using digital technology to create better customer experiences. For example, the unit built a car-sharing platform in six weeks.

Toyota Connected became profitable its first year and now generates $100 million a year in revenue. Hicks was made CEO of the unit.


Case

Main Funding

Source

Funding

Approach Case Study Do's Case Study Don'ts

Toyota Motor North

America

Line of business Project-based,

staged

Do stop projects that don’t have business leaders or

real investment.

Do monitor projects weekly.

Do occasionally bypass the need for approval by using

a small budget to prove an idea.

Don't fund ideas without business sponsorship.

Don't monitor projects monthly or quarterly; monitor them

weekly to show concrete progress to the business funding

the idea.

BAE Systems

Applied Intelligence

Business

innovation team

Staged, internal

venture capital

approach

Do use a staged funding process based on testing

critical assumptions.

Do use different governance than "business as usual"

to fail safely.

Don't guess. Test and get evidence.

Don't develop a minimum viable product until the concept

has been proven.

DBS Bank Mixed — line of

business and

innovation team

Staged, annual

budget cycle

Do stage funding whenever possible. Don't let zombie projects continue, where the need has

changed from time of funding to launch.

DHS Australia IT Annual budget

cycle

Do stage funding whenever possible. Don't overlook funding to facilitate business transformation.

Australia

Department of

Industry, Innovation

and Science

Mixed Project-based Do align the expectations of different user groups.

Do study the risk profiles of the organizations you

partner or work with.

Don't spend money on problems you don't have the

power to solve.

Don't start a project unless it can be supported

throughout its life span.

Funding Sources and Approaches


Transfer Ownership Deliberately


Nine Things You Can Do to Ease Handoffs

1. Raise handoffs as a possible risk. Simply identifying them as risky will help.

2. Define when handoffs are likely to occur and between whom.

3. If scaling a product, use agile, DevOps and other methods that reduce handoffs.

4. Tightly align innovation teams to portfolios or lines of business.

5. Assess whether and how much the innovation will disturb business as usual, and plan accordingly.

6. Understand early the ramifications of the scaling on other parts of the business.

7. Swap people in and out of the team gradually, not all at once.

8. Make employees the "CEOs" of their ideas.

9. Borrow from other disciplines with significant handoffs built in (i.e., product launches).


Replace Dotted-Line Delivery With Something Stronger

Full-time participation.

Other activities may interrupt.

Part-time participation.

Focus secondary to other priorities.


No other delivery demands.


Competes with external priorities.

Str

uctu

re

Ownership

Weak Strong

Dotted Line

Dedicated


Eight Ways to Make Multidisciplinary Teams More Effective

1. Push for organizational change that reflects scaling initiative, including secondments and new units.

2. Avoid vague, time-based participation, such as 20% of someone's time on the scaling project. Opt for delivery-based commitment instead.

3. Ensure clear decision-making accountability by the team — what can it decide and what must be escalated?

4. Push for an accelerated decision process for the scaling project.

5. Prepare for individual participation to fluctuate over the life of the initiative.

6. Protect participants from other work during their 100% phase.

7. Define success metrics for team members.

8. For longer secondments, define the re-entry point for team members.


BAE — Innovate the Business, Not Technology

BAE Systems Applied Intelligence, headquartered in Guildford, U.K., offers products and services in national defense, financial services and cybersecurity. In the past, innovation efforts stalled at incubation. Reasons included measuring on profit from Day 1, treating innovation like any other project, having no alternative to that project and too much guesswork.

Solution

The team created an internal venture capital team, including seed funding and a gated process based on testing critical assumptions:

A portfolio council decides what business opportunities to pursue; then it is not allowed to judge or kill a project until an advanced stage of research and testing, so governance is different.

The team has clear parameters and validates concepts via research and testing. For example, if an idea doesn’t have a total potential market share for BAE of £100 million, it's not pursued.

Results

In its first 15 months of operation, BAE Systems' ventures team started 22 concepts, of which nine were failed at concept stage, seven are still in concept evaluation and six have been selected for venture validation.


From Resistance to Demand Behavior

Resistance Demand


Behavior

Dissonant knowledge ignored

Intransigence regarding governance and timing adjustments during scaling

Diluted value in order to ease the change

Special attention paid to aspects of proven ideas that challenge experience

Expectations adjusted and agreed for scaling

Identification of key areas not to be compromised during scaling


Expect Timing and Governance Adjustments

"Workers are often ahead of management on the transformation. Managers ask for documentation, change requests, and they get in the way of what the end users want."

— Nathan Wilson,Gartner analyst

Un

ce

rtain

ty

Time

Dis

turb

an

ce

Time

Risk Tolerance

Proven prototype meets risk tolerance —Script handoff, prep teams, involve experts early, blur moment, swap people on team gradually.

Peak disturbance — maximum rate of organizational change = peak fragility. Hold your nerve!

Reduce disturbance by extending time taken to transfer, seeking out resistance, avoiding dotted-line delivery teams, aligning incentives, business rhythms.

Acceptance and maturity


Hold Your Nerve! Avoid Diluting the Value

Checklist for Delivering Value as the Innovation Scales

Are we still on track to achieve the goal we stated at the outset?

Are we still providing a credible alternative as we scale?

Can the process owners still tell me the benefits?

Do the benefits hold true across the enterprise as we scale?

Is middle management committed to the idea?


Pay Special Attention to Dissonant Knowledge

"We had business users giving us different feedback than what the internal users were giving us. The internal users were more traditional and liked the way things were before. Things were arranged in content terms that made sense to them, but not the public users that we care the most about. People that had been there 10 years and had all their bookmarks just the way they wanted them. They were wedded to how they'd always done things in the past. Suddenly, we were giving them a different look and feel. To get this from POC into beta into live was hard."

— Matthew Boyley, CIO and chief digital officer,Australia Department of Industry, Innovation and Science


DBS Scales Innovation by Failing on Paper First

DBS Bank is the largest bank in Singapore, with a growing presence in Southeast Asia, Greater China and South Asia. DBS embarked on digitalization to increase efficiency and profit margins and needed to scale up innovations to make a material difference to financial performance.

Solution

DBS does not allow its innovation team to innovate by itself. The business must take ownership of every innovation. The innovation team facilitates the work by pairing a business unit with startups, students and government agencies. They start with a hypothesis — for example, "If we add credit card reward redemption into our digital app, customers will spend 10% more on their card." DBS then tests the idea by creating paper prototypes and then wireframes to show clients. The average project goes through 300 prototypes. For the development of DBS digibank, the innovation team ran 500 experiments before launching. They can build paper prototypes or wireframes quickly, so testing cycles occur rapidly, and fixing bugs costs much less than in technical prototypes.

Results

DBS digibank is now a viable digital business. DBS launched digibank in 2016 as a mobile-only bank in India and in Indonesia in 2017. It now has 1.5 million customers.


From Pioneer to Professional Processes

Pioneer Professional


Process

No recognition or explicit shift from pioneer

No formal management of increasing constraints

Experts caught unaware by scaling

Proven ideas hard-wired too early

Explicit shift from exploration to exploitation

Increasing financial and operational constraints defined and agreed

Experts recruited deliberately and early

Iterating stays on paper for as long as possible


Pioneer, Prove, Professionalize, Promote, Profit

Business Ownership

Innovation Ownership

High BusinessConfidence

Low BusinessConfidence

Pioneer

Prove

Professionalize

Promote

Profit

Credibility Threshold

Demand Threshold


Cross the Credibility and Demand Thresholds to Scale

Business Ownership




Pioneer

Prove

Professionalize

Promote

Profit


Demand Threshold

Financial, engineering

and customer data that

is defensible to the

board.

Business ownership of

the scaling journey

exceeds that of the

innovation team.


Useful Tools and Information


Recruit Experts — A Trap and a Tip to Handle Squeezed Resources

Trap: Do not allow experts to send deputies to meetings in their

stead. Often, deputies lack the required expertise or authority to

move things forward.

Tip: Sync with the natural rhythms of the expert team or

department. For example, don't ask the finance team to

participate in scaling at the end of the month, its busiest time.


Use the Theory of Constraints to Unblock Bottlenecks

1. Identify process bottlenecks by analyzing cycle times and queue lengths.

Bottlenecks are often experts whose skills are critical and in high

demand.

2. Optimize throughput of the bottleneck by protecting critical resources.

3. Reduce work in process by synchronizing the rest of the IT organization

to the bottleneck.

4. Increase the capacity of the bottleneck by automation or staff increases.

5. Find the next bottleneck by reanalyzing cycle times and queue lengths.


Appendix: Some Useful Definitions

Idea — A thought, concept or notion that is suspected to be true and valuable but has yet to be proven.

Experiment — A test, procedure or activity that seeks to substantiate an idea in whole or in part.

Proof of concept (POC) — A model or trial process that demonstrates that an idea or hypothesis works in practice and has value.

Pilot — A limited trial or implementation undertaken to stress test a POC prior to full-scale implementation.

Proven idea — An innovation that has been substantiated as a concept but has not yet been tested or readied for scale adoption.

Scaling innovation — The process of readying a proven idea, whether a piece of software, a new way of working or a brand new business, for use by a large base of internal or external users for some business or social benefit.


How to Scale Innovation Beyond Pretty Prototypes

The Stages of Scaling Innovation

Business Ownership




Pioneer

Prove

Professionalize

Promote

Profit


Demand Threshold


Financial Indicators for Innovation PotentialMetric Definition Upside Potential

Customer Churn RateThe percentage of customers that discontinue using the

company’s services per month.

A high customer churn rate indicates that the customers are dissatisfied maybe due to poor customer

responsiveness, lack of innovation, or faulty products.

Working Capital Ratio (WCR) A company’s current assets divided by its current liabilities

A WCR between 1 and 2 may indicate that available funds are invested in research and development.

A WCR less than 1 may indicate that the company lacks funds to invest in research and development

while a WCR over 2 may indicate that the company is not investing its excess assets into research and

development.

EBITDA (Earnings Before Interest,

Taxes, Depreciation and

Amortization)

The amount of profit that a company has made before

taking into account any interest, taxes, depreciation and

amortization that it has to pay off.

A high EBITDA indicates higher profitability and hence more resources in the hands of the company to

allocate to research and development.

Free Cash FlowA company's operating cash flow minus its capital

expenditures.

A high free cash flow indicates a company's ability to invest in new product and research and

development.

Net Profit allocated to R&DThe percentage of net profit allocated to research and

development.

A high percentage of profit allocated to research and development indicates that the company plans to

develop new products or services.

New Product Release Rate

The percentage of new products or services (including

new versions and upgrades) developed and released in

the past 12 months as a percentage of the entire product

or service portfolio.

A high new product release rate indicates that the company is intrinsically innovative and consistently

responds to customers' needs.

Revenue Generated From New

Products

The amount of revenue generated from new products and

services developed in the past 12 months as a percentage

of the total revenue.

A high revenue generated from new products indicates that the company's produces a significant

number of new products that are widely accepted and used by its customers.

Burn RateThe rate at which a company uses up capital to finance

overheads.

A high burn rate, i.e. more money spent on overheads may indicate that the company is spending more

on research and development.

Gross MarginA company's total sales minus its cost of good sold divided

by the total sales revenue, expressed as a percentage.A high gross margin indicates more funds available with the company to invest in innovation.

Revenue ForecastA 3 to 5 year revenue projection prepared by a company

based on its existing revenue and its growth plans.

A growing revenue forecast indicates that going forward the company will have more funds in its hands

to invest in innovation.


Qualitative Measures for Innovation Potential

Climate of Openness

Do your employee performance metrics emphasize speed and adaptability? If yes, how is it measured?

Do you encourage employees to pursue risky ideas without penalizing them for failure? Give examples.

Have you provided your employees with the necessary resources (e.g., information, networks) to help them adapt to change independently?

Have you built networks throughout your organization to drive collaboration? Please describe.

Corporate Strategy

What is the strategic vision of the vendor?

What is the vendor's take on Threat of Obsolescence i.e. the risk that their product or technology will become obsolete, and will no longer be competitive in the

marketplace?

What is the vendor's strategy for customer service and responsiveness?

How good is the vendor's engagement level with customers?

Is the vendor’s strategy based around the technology they currently offer, or around business expertise they possess in a particular area?

Management Team

Quality

Who are the founders and what are their backgrounds?

How long have the CEO and top management served the vendor organization?

Does the management team have any prior experience in expanding a small organization to a larger one? How many times have they succeeded in the past?

How much business knowledge does the management team possess (in terms of the industry domain, sales and marketing, team management, etc.)?

What critical resources in terms of capital and strategic partnerships does the management team have access to?

What was the attrition rate at the management level ?

Market Potential

What is the market size for the vendor?

What advantages does the vendor possess compared to its competitors?

What intellectual property or other barriers to entry will keep you ahead of the competition?

What is the customer adoption rate?

Product Strategy

What unique product technology and/or knowledge does the vendor

have? Is it IP protected?

Does the vendor have existing strategic relationships (i.e., agreements between two or more entities to conduct specified activities or processes, to achieve

specified objectives such as product development or distribution)?

Are the product features customizable for customer needs?

What other product versions are in the pipeline?

Which new offerings are they planning to bring in?

Does the vendor’s product vision align with the future of the technology space the product competes in?

How does the company plan to grow the product?

What kind of traction have they received so far from customers?


Gartner Research

1. Best Practices for Developing a Digital Innovation Playbook

2. Seven Best Practices to Create an Innovation Center

3. Digital Disruption and Innovation Primer for 2018

4. How to Scale Innovation Beyond Pretty Prototypes

5. Best Practices in Staffing for Technology Innovation

6. Market Guide for Innovation Management Tools

7. Balance Distributed and Centralized Innovation for Engagement and Outcomes

8. Accelerate Your Journey to Innovation Excellence With a

CustomizableInnovation Framework

https://www.gartner.com/document/3880365?ref=solrAll&refval=206274608&qid=4ad250c3026ceb262d8c8e14fbaaee5f








jump-start your innovation program by being an entrepreneur · 2019. 12. 20. · this presentation,...

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