Innovation and Strategic Growth

Customer Experience Innovation Summit 2006

Customer Experience Innovation
and Strategic Growth

Idris Mootee
SVP Strategy and Innovation Blast Radius Inc.

Les Vegas
All Rights Reserved 2006 Idris Mootee

Growth
Innovation
Strategy


Which is the oldest
company in the world ?


Build to Last: Kongo Gumi

Kongo Gumi, started more than 1,410
years ago, is believed to be the oldest
family-run enterprise in the world.


Which is the oldest
company in the US ?


Build to Last: Avedis Zildijian

Avedis Zildjian celebrates 380th birthday and
honored as oldest business in U.S.
according to Dun & Bradstreet formally.


What Do They Have In Common?

What you are
deeply passionate
about?

What you can What drives
be the best in your economic
the world at? engine?

Jim Collins, Good to Great


Built to last
Built for growth
Built for sale


Dr. John S. Pemberton


Steve Job and Steven Wozniak


Larry Page and Sergey Brin


Growth. How achievable?


In general, only 1/3 companies
managed to grow their revenues at a rate
faster that the growth of GDP from 1995-
2005 while at the same time delivering
shareholder returns above those of the
S&P 500 index.


Warren Buffett on Growth:

“Growth benefits investors only when a
business can invest when each dollar used to
finance the growth creates over a dollar of
long term market value.
In the case of a low-return business requiring
incremental funds, growth hurts the investor.”


Constraints on Growth

Competitive environment 77%
73%
Cost / availability of talent
Increasingly sophisticated customers 64%
Innovation by competitors 60%
Excess regulations 52%
Less of access to capital 37%
Inadequate legal protection 33%
Rising health care costs 32%
Rising natural resource costs 31%

McKinsey & Co.


How fast does Sony to
produce and launch new
products?


Every 20 minutes.

Elizabeth Debold, What is Enlightenment?


What Capabilities Will Be Most Important for Growth

Ability to innovate 43%
Ability to allocate best talent 25%
Ability to manage globally 17%
Ability to allocate capital 10%
Ability to manage costs 4%

McKinsey & Co.


Can Large Companies Innovate?

Game-changing innovations that
produce a competitive advantage or
drive new business models are unusual
for large corporations.


How Large Companies Innovate?

According to IBM’s “Global CEO Study 2006,” 76%
of the 750 of CEOs and business leaders
interviewed for the study ranked business partner
and customer collaboration as top sources for new
ideas. This greatly contrasts with internal R&D,
which ranked eighth as a source for new ideas —
cited by only 14% of CEOs. However, only 51% say
their organizations currently collaborate extensively.


Why?

Understanding what is necessary to stay
ahead is one thing, very few have the
conviction and discipline to act on it.

Myths about innovation.


Let’s spend more on R&D


Innovation Performance

100%
Y=0.0112x+0.0852 R=0.0073
Apple
75%

25%
Topline Growth %

0%
0 1 2 3 4 5 6
Xerox
-25%

-50%

-75%
Indexed R&D/Sales Ratio

Apple’s R&D 5.9% vs. Industry Average 7.6%


We should do better market forecast


“This ‘telephone’ has too many shortcomings
to be seriously considered as a means of
communications. The device is inherently of
no value to us.”
- Western Union, 1876


It is not how much you spend on R&D
It is not about the number of patents
It is not about accurate market forecast


So what is it about?


Only 25% extended the scope of their
business boundaries for growth. 83% of
those used acquisitions to enter those
new markets


A Dell for every industry

Fortune Magazine Oct 1998


Be Careful About Consultants

There’s always desires to imitate the strategies that
makes the most successful companies successful.

The nonintegrated business model of Dell is held
up as a model for all to emulate. If it’s good for
Dell, it must be good for everyone.


It’s Really a Revolution of One

Dell invented a business model that was widely
admired and everyone wanted to copy.

After 10 years, almost
nobody has.


Why? Two Vital Pre-Conditions:

Standardized Component
No Legacy Channel


Where is Dell going next?

It’s competitive advantage is eroding and
soon they will struggle with growth.

By 2007 they will need some serious
rethinking about their business strategy


Strategy Is Not A Product

Many did not think about under what
conditions cause certain factor to be a
competitive advantage
How and why do competitive actions
erode the underpinnings of those
advantages?
So everyone wanted to be Dell,
Amazon and most recently Apple.

The Problem Is…..

Suddenly everyone was obsessed
about (at best) yesterday’s
competitive advantage.


What about competitive
advantages for tomorrow?

Here’s the answer…


is now the “tool” for Disruption
Experience Design is the “soul”
of Customer Value


In the last 30 years the concepts of
competitive advantage were based
upon steep scale economics (high
fixed costs vs. variable costs)
Then technology allows us to flatten
the scale economics.


The other source of competitive advantage is
economies of scope (large enough to absorb
the complexity-driven overhead costs of
developing, manufacturing or distributing of full
product line)
The power of data networks changes this
economics.
The emergence of social networks changes the
bargaining power of customers.


In The Past….

By bringing scale, scope, control and
discipline to what had been fragmented
and chaotic industries, Du Pont, GM,
Shell and a handful of others invented the
modern corporation.


We now live in a world where
everything is becoming better …
they are also increasingly the same.

What happened to differentiation?


The Sigmoid Curve
Frog in the Kettle

Difficult to abandon Hard to mobilize
the first curve the resources
A B

Charles Handy, The Age of Paradox


The Sigmoid Curve
Those who lead the first
curve is not the one who
lead the second curve

A B

Keep the first curve going
long enough to support to
the second curve


INNOVATION: Defenders see
future as more of the same but
better. Attackers see future means
a new world. Few defenders
survive.


DEFENDERS: Think Kodak.
Think Polaroid. Think Xerox. Think
Sony. Think Disney. Think Lego.
Think Siebel. Think HP. Think
Microsoft. Think Blockbuster.
Think ToyRUs. etc…


Here we are….


It’s blurring…


Internet

A byproduct of
Social social applications
Networks such as e-mail, SMS
and photo sharing
etc.

Wireless

Media


Customer
Experience
Innovation

Convergence
of Infotech and
Sociotech

Disruptive
Business
Models


Convergence of Socialtech
IMAGINE: MSN preserves, for the first time, everything
we’ve ever typed. Gmailers are all bloggers who don’t
know it. Next, some of us will store everything we’ve
ever said. Then everything we’ve ever seen. This
storage (and processing, and bandwidth) will continue to
make us all networkable in ways and at a level we never
imagined. Lifeblog, SenseCam are early examples of
“LifeLogs” or “LifeStories” Systems for auto-archiving
and auto-indexing all life experience.
What will this turn into?


Convergence of Gadgets


The future is exciting….


From open source
software to open
source branding


From voice over IP to
everything over IP

A world of billions of chattering devices and gadgets


From mass
amateurization to mass
professionaliztion


Demand side begin
to supply itself

The Sims’ User-Created Ikea Furniture Users actually living off their game income in Second Life


Red Ocean Strategy Blue Ocean Strategy


Compete in existing market Create uncontested market
space space
Beat the competition Make the competition irrelevant
Exploit existing demand Create n capture new demand
Make the value-cost trade-off Break the value-cost trade-off

Chan Kim and Renée Maub, Blue Ocean Strategy


These are only half truths…


Two Reasons:

They are not mutually exclusive
The big wins mostly happen in the
red ocean


Microsoft Webvan
Dell Iridium
Pixar Kozmo
Virgin Flexplay
Google N-Gage
iPod Segway


Blue Ocean Players…


Compete in existing market Create uncontested market
space space

The Paradox: To invite an energizing, disparate,
invigorating, unpredictable force into you
organization so that you can use its chaotic
energy to direct continuous renewal.


Advancement Activities
Survival Activities

Manage volume growth, Explore new opportunities,
repetitive operational tasks develop new
and maximum efficiencies competencies and
in a deeply conservatory challenge industry rules
and tightly controlled while relentlessly pushing
fashion. for adoption.

Between the two extremes lies the art of
strategy. Here one is simultaneously
conservative and radical.
Idris Mootee, Escape Velocity


Survival Activities Advancement Activities



CX Innovation Impact Scoring (Illustrative)
5
Disruptive
Opportunities to improve
New Business
brand relevance
4
Models
Brand Impact Score

3

2
Opportunities to
Opportunities for
improve business
service enhancement
1
economics

0
0 1 2 3 4 5
Business Impact Score

Bubble indicates relative size of customer experience innovation opportunity


Key takeaways…


happens at the intersections of
customer unmet needs, technology
discontinuities and market
opportunities.


occurs not only as a top-down process
shaped by corporate decision makers
…..

It is also a bottom-up process shaped by
consumer participations.


Customer Experience Innovation are
made, not born.
It is the art and science of making luck.
Every once in a while you walk down
that path and it opens up into huge huge
avenue. That makes it all worthwhile.


Danke
Gracias
Merci
Thank you
Grazie
Arigatou-Gozaimasita

Visit my blog at: mootee.typepad.com


Innovation and Strategic Growth

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