How to create strategic innovation in large organisations - process and culture perspective. This is the slide set from my presentation for the Senior Management Forum, GDFSuez.

1. How to achieve strategic innovation?
Process and culture perspective
Jeroen De Flander
Munich, 13 January 2011

2. 1. What is strategic innovation?
2. What kind of processes should we put in place?
3. What kind of cultural change should we promote?
4. Provide input for reflection on growth vectors?
“Don’t measure performance by what you
have accomplished, but by what you should
have accomplished within your capabilities.”

3. A process? A tool? A management style?
A philosophy? A culture? A mystery?

4. What’s the biggest car-renting company in the world?

5. Location Airports Downtown
Marketing Travel Agents Mechanics & insurance
Delivery Airport Parking lots Home pick-up
Drop off Airport Home
Organisation Centralised Decentralised
Segment Business & pleasure travelers Car replacement
Age cars Mainly new High average age
Fee high Low
Within the same industry, Enterprise combines activities in the value chain
in a different way to provide benefits to a different customer segment

6. _ What’s the industry we want to play in?
_ Overall competitive rules?
_ Industry trends?
_ Competitive advantage resides in the value chain
_ Redefine ‘the who’ and ‘the how’ in a certain industry
_ A business model = combination of choices within the value
chain to get and maintain this advantage
_ Ability to find, grow and exploit competitive advantage

7. 1 Split the strategic innovation process in 3
2 Manage conflict with existing strategy
3 Encourage innovation behaviour
4 Create the right environment
5 Demystify strategy
6 Grow leaders and capabilities
7 Get rid of the strategy tourists
8 Don’t loose value

8. 1 Split the strategic innovation process in 3
Search Incubate Execute

9. 1 Split the strategic innovation process in 3 steps
Search Incubate Execute
_ Industry _ Trial & error _ Streamline
_ Business model _ Business case _ Business as usual
_ Find value _ Test value _ Grow value
_ Creativity _ Passion _ Action

10. 1 Split the strategic innovation process in 3 steps
Search Incubate Execute
_ Industry _ Trial & error _ Streamline
_ Business model _ Business case _ Business as usual
_ Find value _ Test value _ Grow value
_ Creativity _ Passion _ Action
“the strategist” “the entrepreneur” “the manager”

11. 2 Manage conflict with the existing strategy
Threat or Threat or Threat or
opportunity? opportunity? opportunity?

12. 2 Manage conflict with the existing strategy
1. A conflict with the current business model:
– Cannibalisation
– Brand identity
– Culture/values
– Distribution
– Incentive system
2. No enthusiasm from existing customers.
“Disruptive strategic innovations offer a different value proposition from what the
established players offer. As a result, they attract customers that are different from the
customers that the established players focus on. As a result, if you ask your own
customers if they want them, they will lead you astray (Christensen, 1997) ”
3. The human side
– Too big: the ego as a strategy killer. Protect domain and power position.
– Too small: don’t get any attention because to small compared to other activities
– No impact on bonus

13. 2 Manage conflict with the existing strategy
Suggestions:
_ Grow to a decent size
_ Test it within desired customer segment
_ Decide pro-actively about possible trade-offs and
communicate heavily
_ Manage integration into regular business
_ …

14. 3 Encourage innovation behaviour
“Don’t tell people to be innovative.
Rather, encourage them to adopt behaviours that
lead to strategic innovation.”
- Costas Markides
Which behaviour creates innovation?

15. 3 Encourage innovation behaviour
_ Debating assumptions
_ Questioning things we take for granted
_ Experimenting & trying unorthodox ideas
_ Looking outside / copying with pride
_ Willingness to stick neck out
_ Taking initiative AND!
Identify & discourage behavior
_ Giving & receiving honest feedback
that does not fit
_ Taking risks
_ Working together
_ Empathy towards customers / listening
“I've missed more than 9000 shots in my career. I've lost almost 300 games. 26
times, I've been trusted to take the game winning shot and missed. I've failed over
and over and over again in my life. And that is why I succeed” Michael Jordan

16. 4 Create the right environment
Search Incubate Execute
_ Industry _ Trial & error _ Streamline
_ Business model _ Business case _ Business as usual
_ Find value _ Test value _ Grow value
_ Creativity _ Passion _ Action
“the strategist” “the entrepreneur” “the manager”
_ Local resources. _ Act like a venture _ Classic budget
Carve out time. capitalist would do approach
_ Selection based on _ Selection based on _ Just do it
rules of competition test and business case
_ Reward trying hard _ Reward ‘intelligent’ _ Reward results
failure
_ Encourage _ Encourage drivers _ Encourage execution
revolutionaries heroes
_ Punish low performers

17. 5 Demystify strategy
_ Remember the old Martini commercial. Ideas can
come from ‘Anybody, Anywhere, Anytime’.
_ Communicate the current strategy
_ Build, communicate and manage an easy strategy
framework stick to it.
_ Avoid strategy ‘blah blah’ and get rid of the strategy
tourists
_ Part of development program
_ But more important: try it / do it. Not wait until you
are...

18. 6 Grow leaders and capabilities

19. 7 Get rid of the strategy tourists
PowerPoint fanatic From PowerPoint to practice
Do as I say, not as I do Actions speak louder than words
We need to start from scratch Let’s see what works
I’m too important and don’t do Getting things done is my priority

20. 7 Get rid of the strategy tourists

21. 8 Don’t loose value
1. Did you know that companies loose between 40 to 60% of
their strategy during implementation?
Harvard Business Review
2. Do I know exactly where my company, department or
team is losing value?
3. What can I do to close the execution gap?
“However beautiful the strategy,
you should occasionally look at the results”
- Sir Winston Churchill

22. 8 Don’t loose value

23. 8 Don’t loose value

24. 8 Don’t loose value

25. 8 Don’t loose value
1. Strategy Focus
2. Strategy Communication
3. Initiative Management
4. Individual Objective Setting
5. Skilled Managers
6. Engaged People and Performance-Driven Culture
7. Performance-Related Pay
8. Support for Managers
“Don’t measure performance by what you
have accomplished, but by what you should
have accomplished within your capabilities.”

26. 8 Don’t loose value
Skilled Managers
Engaged People &
Performance-Driven Culture
Strategy Focus
Individual Objective Setting
Support for Managers
Performance-Related Pay
Strategy Communication
Initiative Management
Extract from the Strategy Execution Barometer

27. 8 Don’t loose value
“Initiative management is the spot
where strategy translates into practice
or remains on paper forever”

28. 8 Don’t loose value
1. Strategic initiatives: poorly staffed and budgeted
_ 49% of all strategic initiatives are poorly budgeted and staffed
_ 92% of all managers are unhappy with resource allocation
2. Strategic projects lack transparent accountabilities
_ 1 in 4 managers: responsible for key strategic projects?
_ 79% of all managers find the project accountabilities unclear
3. Mismatch between project portfolio and strategy
_ 1 in 5 projects fail to support the strategy
_ 85%: mismatch between project portfolio and strategy

29. 8 Don’t loose value
1. Strategic initiatives: poorly staffed and budgeted
_ 49% of all strategic initiatives are poorly budgeted and staffed
_ 92% of all managers are unhappy with resource allocation
2. Strategic projects lack transparent accountabilities
_ 1 in 4 managers: responsible for key strategic projects?
_ 79% of all managers find the project accountabilities unclear
3. Mismatch between project portfolio and strategy
_ 1 in 5 projects fail to support the strategy
_ 85%: mismatch between project portfolio and strategy

30. 8 Don’t loose value
1. Strategic initiatives: poorly staffed and budgeted
_ 49% of all strategic initiatives are poorly budgeted and staffed
_ 92% of all managers are unhappy with resource allocation
2. Strategic projects lack transparent accountabilities
_ 1 in 4 managers: responsible for key strategic projects?
_ 79% of all managers find the project accountabilities unclear
3. Mismatch between project portfolio and strategy
_ 1 in 5 projects fail to support the strategy
_ 85%: mismatch between project portfolio and strategy

31. 1. Don’t forget to look for ways to continue to improve the
current value proposition and make the current strategy more
distinctive.
Introduce new technologies, features, products or services that leverage
other part in the value chain and fit with the current strategy.
It works, it’s needed, it’s faster and it’s less disruptive.
2. What combination in my value chain is unique and can I copy
to another business unit?
3. Social value (environment, society,...) is ‘the next big thing’ in
strategic thinking. And it’s much more then CSR.

32. 4. Don’t focus only on the product or service. A risk, especially in
an engineering environment
5. Recapture company heritage
6. Take fast action in times of crisis. What you do during the crisis
determines your strategic position when it’s over
Harvard Management Update (Baveja, Ellis, Rigby March 2008): a study of more
than 700 companies over a six-year period found that “twice as many companies
made the leap from laggards to leaders during the last recession (90-91) as during
surrounding periods of economic calm. And most of these changes lasted long
after the recession was over. “
7. Strategy execution as a competitive advantage

33. 8. Learn to play with the value chain/business model
_ Transactional versus recurring revenues _ Physical versus virtual
_ Niche market versus mass market _ Tailor-made versus mass
_ Capital expenditure versus partnership production
_ Product versus service _ Fixed versus variable costs
_ Direct sales versus indirect sales _ Paid versus free
_ Scale versus scope _ Distributed versus centralised
_ Personal versus automated _ In-sourcing versus out-sourcing
_ Disruptive versus incremental _ Marketing versus sales
_ Acquisition versus retention _ New versus copy-paste
_ Human intensive versus system intensive
_ One customer segment versus another

34. Jeroen De Flander is a seasoned international
Strategy Execution expert, top executive coach,
seminar leader and highly regarded keynote speaker.
Jeroen has helped more than 15,000 managers in 20
countries master the necessary execution skills. His
book, Strategy Execution Heroes, reached the
Amazon bestseller list in 5 countries.
He is co-founder of the performance factory – a
leading research, training and advisory firm which is
solely focused on helping individuals and
organisations increase performance through best-in-
class Strategy Execution.
For several years, he was the responsible manager
worldwide of the Balanced Scorecard product line for
Arthur D. Little – a leading strategy consulting firm.
The 50+ companies he has advised on various
strategy execution topics include Atos Worldline, AXA,
Base, Bridgestone, CEMEX, GDFSuez, Honda, ING,
Johnson & Johnson, Komatsu and Sony.
To book Jeroen to speak at your next event or to run a
strategy execution seminar for your company, please
contact him through his website
www.jeroendeflander.com or
jeroen@jeroen-de-flander.com

35. How to achieve strategic innovation?
Process and culture perspective