- 23rd CPO Executive Roundtable
Procurement can obtain greater value from the supply base in the IT category by partnering with other internal areas.
- Insurance & Technology, 20 March 2014
The purpose of innovation is to install foresight into operating decisions, proactively addressing industry trends to give renewed nimbleness to insurers.
Quick fixes won't solve the pharmaceutical industry's innovation crisis.
An innovation blitz can help consumer goods firms build momentum for ongoing innovation.
Best Innovators explore how to innovate outside the core, partner with others, manage a diverse portfolio, and create an innovation culture.
Winners of A.T. Kearney's Best Innovator contest have been meeting annually since 2005 to learn from one another and exchange best practices in innovation management. For the September 2012 gathering of the Best Innovator Club, participants selected four topics that they viewed as the most pressing challenges facing even the best innovators today.
On Day 1, executives discussed innovating outside of the core business and partnering effectively with other players. Innovation outside the core business is known to be a key growth driver, but even the best innovators struggle to succeed in new and unfamiliar markets. Likewise, collaborating with external partners is seen as absolutely necessary for innovation today, but innovators face many challenges in finding the right partners and effectively organizing collaboration.
On Day 2, club members turned their attention to innovation portfolio management and innovation culture. Portfolio management—particularly deciding how to winnow the project pipeline and optimally allocate scarce resources—is difficult due to the complexity of project portfolios and competing interests within organizations. The executives considered how best to combine a top-down, structured approach to portfolio management with a more bottom-up approach to innovation enabled by a free-flowing innovation culture.Close
Talk all you want about strategy and operational efficiency—the truth is, firms succeed because they offer something irresistible.
Companies devote a great deal of time, effort, and resources to achieve success, but the bottom line is this: The product or service offered needs to be one that people want above all others. It can be dangerous to assume you know what the customer wants. That is where capturing the voice of the customer (VOC) comes in.
Traditional VOC methods have shortcomings. For example, the information captured often includes several needs, or types of needs, which makes it difficult to compare and prioritize their importance or translate them into product specifications.
Desired outcome–based VOC adopts a different approach. It uses a framework of customer “jobs-to-be-done” and the “desired outcomes” for these jobs. Proposed by Clayton Christensen in his work on innovation at Harvard University and Anthony Ulwick in his book, "What Customers Want," on outcome-driven innovation, the method is based on the assumption that customers buy a product or service to help them accomplish a specific task. Associated with each job-to-be-done is a desired outcome, which is the customer’s ideal result of the job getting done.
The structure and consistency of the outcome-driven customer-needs framework offers four advantages over traditional VOC approaches:
- Directly identifies underlying customer-value drivers
- Ensures innovation efforts that are more focused with clear articulation of required improvements
- Makes it easier to translate customer language to engineering language
- Provides a clear, supportable connection between future marketing messages and customer-value propositions
Innovation is much more than a succession of grand themes and big ideas.
Not long ago, The Accor Group, a European leader in hotels, was looking for a way of distinguishing its brands among travelers by reimagining the decor of its rooms. Instead of a predictable experience, it wanted guests to enjoy almost infinite variation in room design. The challenges were many, not least that the physical layout of the rooms could not be altered. And another thing: The hotel chain wanted to pursue this innovative concept in branding while reducing its costs of construction and refurbishment by 50 percent.
A model existed for such an undertaking, and it came not from the hospitality industry but from the automotive business. Companies such as Volkswagen and PSA Peugeot Citroën are masters at design differentiation on a common platform. The Volkswagen Tiguan, for example, is built on the same platform as the Audi SUV. But the model of a common platform is not restricted to the factory floor. Rather, it is a process that extends across the value chain. It begins with a broad concept, continues with a multifunctional team overseeing design and development, building and testing prototypes, and finally rolling out a new automobile. The result is a kind of plug-and-play approach to building an entire car.
We applied the same approach to hotel rooms. Figure 1 illustrates our hotel value chain—from concept rooms, design, and prototypes to reference rooms and launch. Franchisees use an online room configuration tool to choose room designs and expedite assembly. Rooms are customized using plug-and-play modules of wall treatments, colors, patterns, furniture, accessories, and more.
This innovative approach to room design has been a huge success. We did not look at innovation as a succession of grand themes and big ideas—vision, principles, leadership, or culture—as many people do. Talking about it this way can lead one to pursue the perfect rather than the optimal. Instead, we viewed the project as the "practical work" of innovators as we endeavored to achieve optimal innovation.Close
It is not at all difficult to turn customer dissatisfaction or even mere indifference into pure delight.
Creating a unique customer experience is one of the best ways to achieve sustainable growth, particularly in industries that are stagnating. If a telco, a utility, or an insurance company can create a highly differentiated customer experience that turns dissatisfaction or indifference into delight, it will recruit an army of vocal advocates online and offline, gain market share, and generate revenue growth.
Sound simple? It isn't, especially in sectors where the core product or service is difficult to differentiate. But it is doable, as Disney, IKEA, and ArcelorMittal have demonstrated. These firms are among the 15 Summer Champions identified by A.T. Kearney from an initial list of 500 as companies that outgrew their markets consistently over a five-year period despite being the largest players in their sectors.Close
Superior innovation management is a surefire way to outperform the market.
Indeed, innovation is broadly accepted as an important means of value creation. Yet the value that innovation generates often takes time to materialize, and the business case for innovation is inherently fraught with risk and uncertainty. Frequently, markets are slow to recognize successful innovation, and impatient investors don't always afford executives the luxury of waiting until the market prices in their prescience.
A.T. Kearney has been studying innovative companies from across Europe for the past decade. And we've found that innovation leaders consistently outperform their peers not only in share price but also in revenue and earnings growth—arguably more meaningful indicators of value creation at a time when markets have proved to be extremely fickle. The difference is significant.
If innovation, then, is critical to resilience during economic downturns and an unmistakable path to long-term value creation, the question then is: What makes a company a Best Innovator?
- A clear innovation strategy provides a "compass" for innovation.
- A well-rounded approach to innovation goes beyond products to focus on innovation in processes, services, and business models.
- Leaders quickly distinguish high-potential ideas and weed out less promising concepts as early as possible.
- Involving innovation partners from all along the value chain broadens the scope of ideas.
- Best Innovators have simple yet robust innovation development processes to govern all development activities.
- Companies that excel at innovation conduct rigorous portfolio management.
- Best Innovators form interdisciplinary, high-performance teams that work in project mode.
- All innovation leaders emphasize the importance of building and nurturing an innovation culture.
High-growth companies are often ahead of the curve when it comes to IT innovation.
For more than a decade, A.T. Kearney has studied clients and organizations worldwide to determine what drives innovation in IT and how to realize the benefits. Our studies of technological innovation began during the go-go days of the Internet boom and continue to this day. We have seen IT innovation as a standalone industry killer and as an integrated tool that helps orchestrate and enable strategic shifts. One thing that has not changed is the belief among executives that more aggressive technology adoption and investment is a clear path toward growth and profits: A.T. Kearney's 2012 study finds that high-growth companies are frequently ahead of the curve when it comes to IT innovation.
A.T. Kearney defines IT innovation as game-shifting, technology-enabled strategies—the kind that creates sustainable competitive advantage or leads to significant cost reductions. A common goal of IT innovation is the delivery of new solutions to customers, products, or supply chains—for example, analytics that predict customers' needs or off er new ways for customers to find and order products or services. Innovation in products includes how automakers design vehicles to improve lifestyles by integrating cars with drivers' mobile devices, homes, and off ices. Other examples include supply chains that are continually being transformed by IT as forecasting and tracking improves both the delivery of goods and the monitoring of assets.
Our 2012 study yields several noteworthy findings. For one, executives at major global companies continue to recognize the value of IT innovation and believe they should allocate a larger portion of their IT budgets to innovation. Yet most do not, especially when compared with high-growth companies that invest more in technology innovation and do so earlier in the technology life cycle. These companies rely less on large service providers for innovation than their medium- and low-growth counterparts, and instead build internal IT processes and operating structures to develop their own IT innovation capabilities. Indeed, they look to their IT organizations to drive revenue, not just to reduce costs or streamline operations.
What do these findings mean for the average company? That growth and innovation can be generated in the IT organization, but only if the IT organization gets the necessary funding and resources and steps up to the challenge.Close
- Innovation Management, 19 December 2012
A.T. Kearney's comprehensive approach to innovation helps small and medium-sized enterprises successfully manage their new products or services.
Entrepreneurs, investors, and academics discuss how Mexico can build an innovative business culture.
A.T. Kearney and the United States-Mexico Chamber of Commerce Northeast Chapter (USMCOCNE) recently hosted a conference to discuss the current platform for innovation and entrepreneurship in Mexico. The one-day symposium provided an opportunity for open dialogue about Mexico’s progress in creating an entrepreneurial culture and environment—one that can become a significant source of wealth creation through improved productivity and economic growth. More than 80 attendees heard from a distinguished group of professionals—entrepreneurs, investors, and academics—who represent the main stakeholders in the Mexican entrepreneurial ecosystem. In two panel discussions, the speakers shared their experiences and opinions about opportunities for further advancement of Mexican business.Close
How can the average company use innovation to stand out from the crowd?
In a series of studies, A.T. Kearney is examining the drivers of sustained innovation success. In our last study, we focused on innovation management and found that leading companies place three times more emphasis than followers on the front end of their innovation funnels—developing an innovation strategy, generating ideas, and screening ideas. And these same leaders place six times more emphasis than followers on developing an innovation strategy.
In this study, we analyze a cross section of companies and interview executives to understand how to build a successful innovation strategy. Based on the media attention given to innovation, you might expect that the path to success would involve something like a unique brainstorming process that generates unique ideas or a Jobs-like leadership figure who can predict what customers want and shepherd this vision to fruition. However, the primary findings of our current study are far more fundamental:
- Leaders have an explicitly defined and tested innovation strategy and governance process
- Growth, not profits, is the primary reason to pursue innovation
- Innovation is too often led by business unit leaders who may compromise the needed firewall between today's needs and tomorrow's plans
- Sustainable innovation requires identifying and monitoring specific success metrics to enable corrective action
A sound innovation strategy ensures that innovation doesn't get subjugated to the pressures of today's business needs. In simple terms, great innovators do not permit the present to crowd out the future. The leaders in our study create separate engines for managing today's business versus planning for tomorrow—pursuing an immediate impact while expecting to capitalize on a longer-term growth advantage. For example, longtime innovator IBM dedicates three teams to drive the company's innovation agenda by focusing separately on innovation strategy, technology trends, and innovation operations. To ensure an emphasis on both current and future priorities, IBM organizes business opportunities across three different time frames: short-term core business opportunities, medium-term growth opportunities, and long-term emerging opportunities. IBM made a conscious decision to maintain a set portion of funding (about 10 to 15 percent) for longer-term opportunities so they are not sacrificed to immediate priorities—or the infamous fire drills.Close
More people today are downloading e-books. As the trend accelerates, it is reshaping the publishing industry.
More people today are downloading e-books, a trend that will only accelerate in the next decade and undoubtedly change the publishing value chain. Core industry participants—printing companies, distributors, and book retailers—will find it difficult to adapt.Close
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