Time for decisions – how to grow again?

January 22, 2013  |  Strategy  |  No Comments

Ever since the economic crisis hit the world, many companies, and individuals for that matter, have been very concerned with their financial well-being. Across different countries there are numerous stories about companies that were forced to dramatically cut back in order to stay profitable.

In recent years most companies have been driving all sorts of programs to improve the bottom line, basically by reducing costs as much as possible.

Both operational costs (working cheaper) and capital expenditure (investments) have been reduced, in some cases to the bare minimum. Today there seem to be hardly any more costs that actually can be cut, so what do we do now?

Before answering that question let’s take a step back and contemplate about the raison-d’etre, reason for being, of companies. Are companies here to put people to work in a fulfilling way? Do they intend to create products and services for other to consume?

Yes. However, the primary objective of any company is to grow its value for the business owner; in some cases stock holders, in other cases entrepreneurs such as your local bakery. Any owner wants to be able to transfer the ownership at a moment in time and make a profit on it.

The value of a business can be quite difficult to determine. Some good indicators are the revenue and profits made. Since the start of the economic crisis, businesses have focused mainly on keeping profits up. Growing the revenue received little priority.

Keeping revenue stable seemed challenging enough to some, under the assumption that markets declined. Effect of this is that many companies today find themselves to be very lean and mean, but with little ideas on how to grow revenue again.

The answer resides in finding the right way to grow again. Growth is always there; you just need to open up to actually see it. Even in declining industries there are companies still growing their market share and the volume of sales they are able to generate.

It is difficult… well, it is not easy, otherwise everybody would be growing. There are a few simple guiding principles to bear in mind:

  • Growth most often comes from outside your company.
    To spot growth opportunities you should look outside of your company. Assess market dynamics and talk to customers to identify what they need.
  • Find pockets of growth.
    In every business the concept of up-currents applies. An up-current occurs when hot air rises. It enables glider pilots to rise high. You should look for the up-currents in your industry and understand what you need to do in order to benefit from them.
  • Shift gears, and make some changes.
    To achieve growth again you will need to make some changes to your business. Changes to the markets you serve, the customers within those markets, the products and services you deliver, the way you collaborate. All of these are worthwhile to consider for change.
  •  Your business model determines your success, not your product.
    As mentioned in a previous post, a great business model trumps a great product. Do not get stuck on the details of your products or service. “Good” is good enough.

Many New Year’s resolutions have already been broken. Now is the ideal time to make a resolution and stick to it. 2013 is the year to grow again!

 

Speed, an overlooked business innovation factor

December 20, 2012  |  Innovation Management, Strategy  |  No Comments

Most companies to whom innovation is one of the top priorities spend a great deal of time and money on their innovations. Especially when creating a new product, it seems that there are always some features to be added to improve a product, or that the product itself should have better specs.

Due to this quite regularly a project does not meet its milestones and deadlines, because the new product is good, but just not good enough. The underlying factor is the urge to make the best product possible.

Making the best product potentially shows tension with reaching break-even. Let’s not forget that innovation is, from a strategic perspective, the best route to achieving sustainable growth.

Now, is trying to create the best product out there a bad thing? In essence: no, as long as it does not cause delays to the launch date. Missing the window of opportunity with regards to market launch is one of the worst things that could happen to any innovation.

Launching early provides a company with the possibility to acquire a larger part of the potential market. Since market share is a relevant factor it is crucial to aim to gain a large market share as early as possible.

In an ideal scenario, an idea quickly transforms into a new product, without excessively high investments. New products are successfully introduced into the market, which, in turn, reach break-even fast.

Reality is often different. It can take a long time to:

  • …reach a new product from an idea…
    Lacking solid market insights, not involving (e.g.) customers, suppliers or other third parties.
  • …launch a new product into the market…
    Taking too much time to perfect products instead of good enough, not having a launching customer, lack of IP protection, etc.
  • … which can cause a delay in reaching the break-even point.
    Due to matters taking longer, higher investments are required which push back the break-even point. Also, the growth curve is likely to slope down due to missing market momentum.

Every innovation project should try to keep a clear view on the end result; that is, generating profitable business. Looking at innovation end to end, there are basically two main factors that could cause a project to be delayed in terms of generating profits.

The first reason is that sometimes a project needs higher investments during the development stage than anticipated upfront.

The second reason is the fact that a project can take much longer due to alignment issues, either internally or externally in case of a collaboration with partners.

Most important is to know there are things that anyone can do in order to accelerate the pace of innovation:

  • First of all, make speed of innovation a strategic objective. Talking about it is one, acting upon it is what is needed.
  • Manage the innovation project based on its merits. Every project should receive the management attention it needs. No more, no less.
  • Ensure that required market insights are available. If not, work with assumptions and validate those as you go along.
  • In case you find a potential partner that can do what needs to be done either better, faster, or cheaper than you can do it, consider hiring them.
  • Drive your projects forward! Find what could give you more speed and what slows you down, and cope with them accordingly.

The points mentioned above are some simple guidelines one could use in order to accelerate innovation.

 

Innovation Leadership Study

April 10, 2012  |  Innovation Management, Strategy  |  No Comments

Guest post by Freek Duppen, Daan Giesen

Last week, IESE Business School and Capgemini Consulting announced the findings of its annual global Innovation Leadership Study, examining innovation management strategies at organizations around the world. The study reveals that innovation leadership is becoming increasingly important, with 43 percent of respondents stating they have a formally accountable innovation executive in place, responsible for driving innovation, compared to just 33 percent last year. This rise of the ‘chief innovation officer’ suggests driving innovation is becoming a key priority for companies everywhere. However, despite this, the majority of companies (58 percent) still do not have an explicit innovation strategy in place, with most companies considered ‘innovation laggards’ (38 percent) and just 7 percent classed as ‘innovation leaders’.

The study, which surveyed over 260 innovation executives globally, suggests that while innovation is an emerging functional area within organizations, limited organizational strategies for driving innovation are impairing growth. Only 30 percent of respondents agree they have an effective organizational structure in place for driving innovation and less than a quarter (24 percent) believe innovation efforts within their companies are effectively aligned. This is mainly due to not having a formal organizational structure for innovation (45 percent) or a well-defined governance structure (45 percent) in place, or a lack of clear roles and responsibilities for innovation (40 percent). 39 percent of respondents also referenced the lack of an effective decision making process for innovation, largely due to not having a well defined process in place to prioritize and allocate time and funding to innovation projects.

The study also reveals that innovation strategy continues to be largely driven from the top-down, with only 11 percent of respondents explicitly involving employees in the strategy development process. Instead, most respondents (30 percent) indicate that innovation is driven by a combination of senior management, business unit heads and internal innovation experts, with the CEO still considered the most important source of an innovation culture (69 percent). This highlights the need for innovation strategy development in a more bottom-up manner, focused on people as the key source of competitive advantage to ensure all insights are taken into consideration.

The study reveals a worrying lack of involvement of non-senior employees in the innovation process within most companies,” said Paddy Miller, Professor of Managing People in Organizations, IESE Business School. “But it is vital to capture all those individual insights from both managers and employees to better incorporate an understanding of the external environment in the development of any innovation strategy.

The study also identifies the absence of a clear, well articulated innovation strategy as the most important constraint for an organization’s ability to achieve its innovation targets (24 percent), followed by a lack of understanding of the external environment (13 percent). However, while most companies lack an explicit innovation strategy, they do recognize the need to create a strong innovation culture that better enables organizational strategy. Building and nurturing an innovation ecosystem (32 percent) and formulating and communicating innovation strategy (31 percent) were cited as the most important responsibilities for innovation leaders. According to the study, for large organizations a lack of innovation governance is also a particular barrier as their size means the innovation function is often spread across the organization. The establishment of a centralized innovation office, together with thorough innovation governance that balances, aligns and enables both short and long term innovation objectives, will help large organizations to focus and streamline their innovation efforts.

There is no one size fits all approach when it comes to organizational design for innovation, but the correlation between having formalized innovation governance in place and the reported innovation success rate suggests that there is much to gain by improving the formal mechanisms for managing innovation,” said Koen Klokgieters, Global Leader R&D and Business Innovation, Capgemini Consulting. “Although there are signs of an increased formalization of the innovation function, such as the increase in the percentage of respondents that have a formally accountable innovation executive, the levers for the formal management of innovation are largely being overlooked or underdeveloped.”

The 10 Principles of Good Business Model Design

September 12, 2011  |  Business Model Innovation, Strategy  |  No Comments

Apple’s Jonathan Ive changed the world with his designs. The Apple devices are more known because of their design, rather than the logo they carry. Looking at the device that was the first stepping stone in this for Apple, the iPod 1, many people claim their is a great deal of resemblance with Braun’s T3 pocketradio, launched in 1958 (nrc). This radio was designed by Dieter Ram, head of product design from 1955-1998.

iPods

 

 

 

 

Ram applied ten principles to good design. According to Ram good design:

  • is innovative
  • makes a product useful
  • is aesthetic
  • makes a product understandable
  • is unobtrusive
  • is honest
  • is long-lasting
  • is  thorough down to the last detail
  • is environmentally friendly
  • is as little design as possible

Applying these 10 principles to business model design, the following guidelines are derived:

  • is innovative
    A good business model is unique, and therefore hard to imitate.
  • makes a product useful
    Using the business model, from the company as well as the customer perspective, is easy.
  • is aesthetic
    A good business model does not cause any irritation or confusion. Only well executed business models can be beautiful.
  • makes a business model understandable
    It makes the business model clearly express its function by making use of the user’s intuition. At best, it is self-explanatory.
  • is unobtrusive
    The business model leaves room for the user’s self-expression. Business models fulfilling a purpose are like tools that add to the quality of life of its users.
  • is honest
    An honest business model does not make a product or service seem more valuable than it really is. Influencing and manipulation of customers and users by the business model is not done.
  • is long-lasting
    A good business model avoids being fashionable and therefore never runs the risk of being outdated.
  • is  thorough down to the last detail
    In the design sufficient attention has been paid to the details of the design, creating a true experience for customers and users. In the execution of a good business model these should implemented accurately.
  • is environmentally friendly
    Good business model design is aware of its environmental impact and aims to make an important contribution to the preservation of the environment by conserving resources and minimizing physical and visual pollution.
  • is as little design as possible
    Keeping it pure! Everything that is non-essential to a business model should be kept out of its design.

When designing new business models these 10 principle will help you to focus your effort and flow your creativity accordingly to make beautiful, meaningful new business models.

Business Model Innovation as a Means to Realize Growth

February 24, 2011  |  Business Model Innovation, Strategy  |  No Comments

Business model innovation will be the next big differentiator for companies aspiring innovation leadership. Innovation leaders are breaking away from the pack by allocating increasingly more resources to business model innovation1. And they are right. Research has illustrated that more value is to be expected from business model innovation, than from any other form of innovation. Business model innovation has a higher impact on business results.

Innovation leader versus laggard study

January 5, 2011  |  Strategy  |  No Comments

Guest post by Freek Duppen

As the knowledge partner of the World Innovation Forum, Capgemini Consulting has recently completed its global innovation survey on the current state of innovation. The study offers a unique perspective by looking at the differences in behavior of innovation leaders vis-à-vis laggards across five key areas (strategy, capabilities, technology, innovation function, and spending) in order to identify what drives the success of companies that view themselves as successful innovators.

The study is based on an online survey, generating responses from 375 executives (representing the full range of industries, regions, functional specialties, and seniority) and 13 follow-up interviews – to get a better understanding of the context of the findings and to add depth to the result interpretation.

In summary, this study reveals that:

  • Given the strategic priority companies allocate to innovation and their corresponding spending plans, the maturity of their formal innovation governance structure lags behind considerably. To overcome many of the innovation bottlenecks encountered, it is time to establish an innovation function that is able to deal with this kind of innovation governance and decision-making.
  • Furthermore, there is an enormous unlocked potential for innovation in the involvement of external parties in the innovation process. Innovation leaders may have out-paced their peers by simply being better at involving external parties, leveraging a much broader innovation network and increasing innovation potential.
  • The study also shows that more value, in terms of impact on business results, is to be expected from business model innovation, than from any other form of innovation. Targeting new business opportunities in emerging markets is much more likely to be successful when approached outside of the traditional competitive landscape.