Commentary by Jack Hipple

Front End of Innovation Day 3

Theme for the Day: Moving Beyond the Core: New Business Model Creation, Keynote: Vijay Govindarajan, Professor of International Business and Founding Director of the Tuck Center for Global Leadership, gave a fascinating presentation highlighting the ignorance of many in the West about global markets and totally unique concepts for new businesses that escape the mind of someone trying to do business in India.

He summarized the the basic breakthrough new business thinking process as:

1. Manage the present
2. Selectively forget the past and
3. Create the future.

The future needs to be at least 2030 in the thinking.If #3 is to succeed, it is critical to succeed at box #2. #1 is linear thinking as typified by Six Sigma and operational excellence. #2 and #3 have major discontinuities where the fundamental business model shifts. Box 3 is easier than box 2. It's hard to forget.

Strategy is business model innovation. In emerging markets such as India and China, one can't use US models. He cited a classic example of Ford's first attempt to penetrate the lower cost Indian market by taking a basic $20,000 US car and removing features. One of these was removing the power windows in the passenger seats, forgetting that most Indians who could afford a $20K car had a chauffeur and easily opening the back windows was an essential element. The alternative approach, of scaling up and making a $2,000 car by scaling up two wheelers will disrupt the rest of the world. Strategies such as this will transfer back to the West and cause major disruption.

Change the customer, change the value, and change the architecture. He cited Dell computer as a US example.He emphasized this "doing the impossible" (I.e. $2K car) by reminding the audience of the original goal to get to the moon, originally considered unrealistic. (Note to TRIZniks: the Ideal Final Result!). Without a serious challenge goal, we rarely exceed our ambitions. If we are rewarded for meeting goals, that's what we do. We need to focus on "next practice", not "best practice".

He described another Indian business success where a company was founded whose strategy was to lend to the poor (Another TRIZ note: Do it in reverse). Strict small dollar limits were set, women (vs. men) were the primary borrowers, no collateral was demanded, and the "bank" went out to the people (people did not come to the bank). With no bailout money, they lent over $10B in increments of $15 each along with self help groups. 99% loan repayment was experienced and the concept is being expanded to loan money to beggars after asking them what they need. They can get another $20 by repaying. It is estimated that Mumbai has 500,000 beggars and half are now salesmen. This business opportunity could apply to 130 countries globally.

Vijay also went over the top 11 things to deal with a dead horse (http://vjaygovindiarajan.com/newlsetter.html) as abstracted from his newsletter site. A few were quite humorous:

1. Maybe the horse isn't dead,
2. Hire a consultant to study the horse, and
3. Replace/fire the jockey.

We need the VOO, not the VOC. VOO is the voice of the outside. In the Hindu religion, there is the god of the present, the god of destruction, and finally the god of creation. We have to follow this (be born, be preserved, be destroyed. Doing this in our personal lives has value as well.

Presentation: Deb Mills from Corning discussed their recovery from the "valley of death" in 2002 when their stock price went from $110 to $1 in one year. They started a major new business and innovation effort with the goal of doubling the number of breakthrough products and businesses. These new activities were "fire walled" from the rest of the organization until their revenue stream could be said to be predictable.

Presentation: George Glacking from P&G (85,000 employees, operating in 160 countries with 300 product lines) reviewed their box 2 and 3 successes, including Tide and Pampers. Gillette was added in a major acquisition. In 1996 came Fareze and Swiffer. Many of there new businesses were the result of ad hoc activities where team leaders came and went. Not clear to P&G whether it is better to separate these types of ventures as opposed to embedding them. Many teams has 50% representation from outside the natural business area. Staffing choices are critical. The key early stage question in not whether it is possible to do something, but is there a way to capture value. Without a "yes" to that question, a project does not proceed.

"Fishbowl Commentary" Nine Sigma is working hard to change their business model from a transactional one to one where they take ownership of the goal and result for the client. As an outside resource provider they are free to use all tools (not just the clients' ones) as well as to work with the competition in a way the problem owner cannot. Alcoa commented that they used a joint venture approach when the new opportunity does not align sufficiently with their core business. Corning is looking at contract manufacturing much more than in the past. In general, these firms commented that a shortage of the right people, not money, was the primary barrier.

Keynote: Teresa Amabile (Harvard Business School) presented her latest case study findings on morale within organizations as it related to innovation by contrasting a two company study done on outstanding and poor new product development performance. Her findings bottom line finding was that business issues such as ownership form, incentives, personalities, and whether Stage Gate type processes were used were not the key distinguishing difference--it was quality of work life. This study covered238 professionals, 26 project leaders and the analysis of 12,000 diaries! None of the findings were not new, in my opinion, just further reinforcement fo the things we know we should do, but seldom do. Collaboration is one of these. Joy and pride in one's work vs. a culture of anger and fear coupled with project and personal support for individuals play key roles. Frequently goals change and management does not listen. Desired needs from management (again nothing new here, but certainly reinforcement of what know is critical) include recognition, clear goals, support for progress made, providing mentors, and extra personal support. Mundane events matter to people. One bad day has a much more negative effect than a single good day.

Presentation: Bob Wolf and Sandy Linetta (Glaxo Smith Kline) described their efforts to ignite the innovation fires. These included many fairly convention items including hiring some "weird" people, hiring of expert out side consultants, changing organizational structures, basic creativity training, book reading, etc. They did not set up an "innovation center". They felt that inclusion of marketing people with R&D was a excellent "fusion". They took action to move from a functional to more brand siloed groups, moved to a more ext external focus, and had more face to face vs.virtual interaction with customers. Their building of new facilities with "hubs" that included all functions raised key matrices such as "easy access to colleagues" (50-90%) and "easy access to decision makers" (40-80%)

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