Digitalization and innovation fad or imperative, 20191009 final

© Inlumino Consulting, 2019 | 1
Digitalization and Innovation
Passing Fad or Strategic Imperative?
Jožek Gruškovnjak
Managing Partner
Inlumino Consulting

© Inlumino Consulting, 2019 | 2© Inlumino Consulting, 2019 | 2
≈ 200,000 years ago
Homo Sapiens 6000 BC
Invention of wheel
2800 BC
Invention of plough
Today
Last 200 years: from telegraph to human genome and beyond...
1830s
Invention of
telegraph
1834
1st computer
(analytical engine)
1876
Invention of
telephone
1878
1st
incandescent
light bulb
1,902
1st airplane
1906
Invention of
radio
1913
1st assembly line
1926
Invention of
television
1926
1st transistor
1940s
1st general
purpose
electronic
computer
1953
Discovery of
DNA
1957
1st
satellite
1958
1st
integrated
circuit
1960
1st
laser
1961
1st
manned space
flight
1969
Beginning of
Internet
1970 - 1st
microprocessor
1975
1st personal
computer
1989
Worldwide
Web
2001
iPod &
iTunes
2003
Human genome mapping
completed
2007
iPhone &
Amazon Kindle
2010
Apple iPad
1983
1st 3D Printer
1918
Artificial Fertilizer
1926
1st liquid propelled
rocket flight
1928
Penicillin
1930
Jet engine
1947
Bell Labs
transistor
2008
Bitcoin
2017
D-Wave 2000
Qubit system

Innovation is one of the major pillars of competitiveness
both for countries and businesses.
Sources: WEF Global Competitiveness Index, 2018;
High-leverage innovators significantly outperform
their industry groups in
§ Sales growth 2.6x higher
§ Gross profit growth 2.1x higher
§ Market capitalization growth 2.9x higher
while keeping R&D intensity lower than industry
median.
Only 56 companies have maintained
their position on the Fortune 500 since
initial publication in 1955.
Willingness and ability to innovate is
one of the key reasons for their
success.10
20
30
40
50
60
70
80
30 40 50 60 70 80 90
GlobalInnovationIndex
Global Competitiveness Index
Innovation and Competitiveness of Countries
Slovenia
Switzerland
USA
Sweden
UK
Netherlands
Singapore
Germany
Finland
Japan
Hong Kong
Spain
Australia
Malaysia
China
Iceland
Italy
Slovakia
Hungary
Serbia
Croatia
Austria
Sources: “What the Top Innovators Get Right”, strategy+businesss
https://valuer.ai/blog/how-innovation-helped-fortune-500-companies-remain-relevant/
Canada
Ireland
Estonia
Cyprus
Malta
UAE
Portugal
Poland
Czech

But there is a conundrum…
Large majority of executives
agrees that innovation is critical
for their business…
84%
Innovation is
important to
growth strategy
80%
Business
models are
at risk
...only very few are
satisfied with the
outcome.
6%
Satisfied with
innovation
performance
Source: McKinsey Global Innovation Survey, McKinsey analysis
Very few know what
exactly the problem is
and how to improve in
innovation and R&D.

Discussionthemes
What is innovation? What is digital?
Impact of digital on innovation
How are organizations adjusting and
leveraging digital in innovation?
1
2
3
4 Roadmap for change.

“Innovation is the means by which the entrepreneur
either creates new wealth-producing resources or endows
existing resources with enhanced potential for creating
wealth.”
— Peter F. Drucker
“The Discipline Of Innovation,” Harvard Business Review, December 1998

Core question innovation needs to answer:
how do we add value?
GOL-PACK
Individually Quick
Frozen Products

People
Things Business
Digital
Interacting
Digital
Being
Digital
Operating
Digital (world)
brings together people,
business and things (and
data, and processes, and ...)
creating new capabilities,
richer experiences and
new economic
opportunities.
Digitalized
Processes

Digital
is reshaping
every aspect
of modern
enterprise...
Risk
Optimization
Product and
Service
Innovation
Distribution,
Marketing
and Sales
Digital
Fulfillment
Enhanced
Corporate
Control
Customer
Experience
DECISION
MAKING CONNECTIVITY
AUTOMATION INNOVATION
§ Seamless multichannel experience
§ Wherever, whenever service propositions
§ New digital
products and
services
§ Co-creation of
new products
and services
§ Improved real-time
management
information
systems and
decision making
§ Seamless
integration into
third parties
§ Improved targeting
with customer
insights
§ Embedded /
automated controls
and risk profiling
§ Full straight-through processing and
automatic provisioning
§ Virtual servicing and administration
§ Digital
marketing with
higher ROI
§ Digital
augmentation
of traditional
channels
Source: “Finding your digital sweet spot”, McKinsey & Co.

Speed
Breadth / scope
Sources
Digital
technologies are
changing
innovation
dynamics
alongside the three key
dimensions.

OPERATING MODEL
BUSINESS MODEL
Explore the
business frontiers
and go beyond
them: new
business models,
products and
services.
Improve customer experience, engage
customers throughout the lifecycle and in all elements
of the value chain
Optimize all
aspects of business
operations. Go
beyond
organizational
boundaries.
Digital is providing numerous opportunities for
innovation and business transformation

New products and
services (HEMS, HiQ
Home, …), token
based energy
markets, …
OPERATING MODEL
BUSINESS MODEL
Optimizing Exploring
Digital is providing numerous opportunities for
innovation and business transformation
Customer Experience
Leverage IoT, cloud,
artificial intelligence,
blockchain etc. to
optimize energy and
facilities management…
Use any communications device to manage your home / building
and analyze performance from any location, provide suggestions, …

Innovation opportunities driven by new technologies and
digital abound in the energy sector
Source: “Energy = innovation: 10 disruptive technologies”, McKinsey & Co.
Grid
Scale
Storage
Digital
Power
Conversion
Compressor
-less air-
conditioning
Electro-
chromic
windows
Clean
Coal
Biofuels
and
Electrofuels
Unconven-
tional Gas
Solar
Photo-
volatics
…
Technology
Innovations
Business Models
Based on Distributed
Generation
Supply of Distributed
Generation Systems
Leasing – Power
Purchase Agreement
Services
Rent-the-Space Model
Business Models
Based on Regional
Aggregation Systems
Virtual Power Plants
Microgrids
Business Models
Based on Demand
Management
Energy Services
Supply of Smart Home
Solutions
Demand Response
Services
Position Along the Electric Power
Industry Value Chain
Generation
BusinessModelsSophisticationLowHigh
Consumption
Business Model Innovations
Source: The Boston Consulting Group and Orkestra

16
Global
NationalRegional Customers Partners
Suppliers
Intra-Organizational
Enterprise Innovation
Inter-Organizational
Open Innovation
Extra-Organizational
Environmental Innovation
Innovative ideas can come from
anywhere. Ability to reach
beyond organizational and
geographical borders is critical.
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
Customers
Business Unit Heads
Employees
In-house R&D
CEO
Business Partners / Suppliers
Other C-Level Employees
Sales
Know Your Sources of Innovation
Global
U.S. only
Sources: Economist Intelligence Unit and Grand Thornton survey of business executives, 2010

Invent new
concept / idea
Adopt the
concept/idea
Execute
Innovation is not just about new ideas...
GenerateSense
Prioritize &
select
Rapid
prototype
Challenge &
improve
Commercialize
& scale
Critical (but often neglected) steps
Sense
Prioritize &
select

GenerateSense Prioritize & select Rapid prototype
Challenge &
improve
Commercialize &
scale
Innovation Strategy and Process
Business Strategy
Enables
Is supported by
Business Processes
Applications and Services
IT Infrastructure
Innovation Strategy and Process are critical
element of business architecture.

A clear innovation strategy
Open innovation platform that
connects people and information
sources across boundaries
Management of the
innovation pipeline
A culture that encourages
innovation – learn to experiment
and experiment to learn
DIFFERENTIATION
GROWTH
Business and
Innovation Strategy
§ Brands
§ Business Models
§ Process
§ …
Innovation
Productivity Technology
§ Communication
§ Collaboration
§ Big data /
analytics
§ Architectures
Open
Innovation
§ Partnerships
§ Customers
§ Consumers
§ Alliances
§ ...
Connected
People
§ Culture
§ Compensation
§ Talent
§ Organization
§ ...
To drive productive innovation a few things are needed.

2007 2008 2009 2010 2011
Launch of dedicated
innovation platform
Growth Growth - Breakthrough 1. Foundation of
innovation (ongoing)
2. Crowdsourcing
Open Innovation
Installed shared innovation
platform, replacing Excel
Knock on doors, integrate
product lines, special matter
campaigns
Innovation competition, top
management sponsoring -
increased visibility, idea
managers
Membership in various
innovation forums,
benchmarking, integration of
key success factors for
crowdsourcing
Conduct true open innovation
with the public, first-hand
experience with OI
§ Process: new phase-gate
innovation process
§ 50 platform users
§ Submitted ideas: 70
§ Implementation rate: 0.5%
§ New revenue: in
development
§ Phase-gate innovation
process abolished;
“Managed anarchy” model
§ 200 users
§ Submitted ideas: 400
§ Implementation rate: 2%
§ New revenue: €20M
§ Introducing idea campaigns
§ 5,000 users
§ Submitted ideas: 2,000
§ Implementation rate: 8%
§ New revenue: €170M
§ Platforms strategy
complemented by startup
approach
§ Introduction of Innopoints
§ Implementation rate: > 30%
§ First open innovation
challenge run in Israel
§ Nokia brand gains visibility
as connected with
innovation
Innovation process demands continuous adjustments. Nokia
example…

2012 2013 2014 2015 2016
Customer and Supplier
Innovation (ongoing)
1. Design thinking
2. Nokia Innovation
Award
1. User experience
2. Industrialization of
Open Innovation
Challenge
1. Cultural Change
2. Future Prospection
1. Kickstarter Models
2. Business Modelling
3. Value Webs
4. Digital Ideation
5. Automation
Co-creation process for
customers, partners and
suppliers
Industrialize design thinking
for the innovation process in
Nokia.
Early trend detection through
global capture and sharing of
submitted ideas that apply for
and award.
Improve user experience and
performance of the innovation
platform.
Define key steps for
successful open innovation
challenges.
Change management
methods used to create
innovation culture @ Nokia.
Create cross-industry vision
for 2025 with “Future Agenda”
through several idea
campaigns.
Integration of kickstarter
models and introduction of
business modelling tools.
Use of commercial intelligence
gathered through Nokia Open
Innovation Challenge
Idea generation from data-
mining and improve use of AI
on innovation platform
§ > 25 Think Thanks running
§ Innovation positively
impacts supplier rankings
§ Increased customer
intimacy
§ IMPORTANT LESSONS: do
not fuel customer demands
beyond feasibility, do not
share everything, have
contracts in place to handle
intellectual property issues.
§ Design thinking method
available to Nokia –
opportunity to foster more
radical innovations
§ Increased transparency of
the innovation portfolio
§ Recognition for ideators
§ Keeping track of trends and
developments
§ Raised profile of the
innovation platform
§ User experience met user
expectations
§ Established annual open
innovation challenge, with
top management support,
high-profile promotion and
big celebration event
§ Codified trainings
§ Simplification of innovation
platform
§ Nokia’s vision disseminated
globally
§ Concept development
placed on mid-term
roadmap for GIM platform
§ Start set evolved to fit
largescale deployment
§ New technologies are
incorporate from the
outside into Nokia products
§ Number of submitted ideas
doubled every year
§ …

Research has uncovered that
very successful innovative
companies (“high-leverage
innovators” as per
stragey+business magazine)
share six key
characteristics.
1 They closely align innovation with
business strategy.
2
They create company-wide
cultural support for innovation.
3
4
5
6
Top leadership is highly involved
with the innovation program.
They base innovation on direct insights
from end-users.
They rigorously control project
selection early in the innovation process.
They excel at each of these first five
characteristics.
Source: strategy+bussiness

Lead with a vision…
Who follows a leader that has no vision of where does (s)he wants to go?

Set-up [adjust]
innovation
process and
platform
Define success
metrics and
reward
mechanisms
Mobilize
stakeholders –
manage change
Measure success
and adapt
Define innovation
strategy in alignment
with business.
New products, services,
business models,
operating models,
customer experiences…
Business and
Innovation
Vision
… and follow the five simple steps JJ.

Mindsets
Outcomes
Practices
Behaviors
Bottom-quartile
innovation and
learning
Little to no
knowledge sharing
No asking for help;
reinventing solutions
locally
Information is power
Avoid challenges
Give up easily
Protect our legacy
Value harmony
Work hard and
complete tasks
…
Sharing magnifies power
Embrace challenges
Persist in face of setbacks
Shape the future
Value excellence
Work intelligently and
deliver outcomes
…
Performance-limiting
mind-sets
Performance-
accelerating mind-sets
Top-quartile innovation
and learning
Knowledge sharing is
part of the culture
Active documentation,
seeking advice
The real difficulty is changing
the attitudes, mindsets, … In short,
changing the culture.
0% 10% 20% 30% 40% 50% 60% 70%
Innovation enthusiasts
The engaged
The watchers
The unaware
Innovation skeptics
Attitudes towards Innovation
(distribution in typical organization)
Source: HYPE Innovation, McKinsey

0% 10% 20% 30% 40% 50% 60% 70%
The engaged
The watchers
The unaware
Innovation skeptics
Mindsets
Outcomes
Practices
Behaviors
Bottom-quartile
innovation and
learning
Little to no
knowledge sharing
No asking for help;
locally
Avoid challenges
Give up easily
Protect our legacy
Value harmony
Work hard and
complete tasks
…
Embrace challenges
Shape the future
Value excellence
deliver outcomes
…
mind-sets
Performance-
and learning
part of the culture
seeking advice
Assessment of
the innovation
program
participation
and attitude few
months after
introduction.

0% 10% 20% 30% 40% 50% 60% 70%
The engaged
The watchers
The unaware
Innovation skeptics
Mindsets
Outcomes
Practices
Behaviors
Bottom-quartile
innovation and
learning
Little to no
knowledge sharing
No asking for help;
locally
Avoid challenges
Give up easily
Protect our legacy
Value harmony
Work hard and
complete tasks
…
Embrace challenges
Shape the future
Value excellence
deliver outcomes
…
mind-sets
Performance-
and learning
part of the culture
seeking advice
Significant
improvement in
participation
and attitude
after relaunch.

Change management
is one of the critical capabilities
needed for successful introduction
and execution of the innovation
process.
IMPLEMENT
PREPARE
MANAGE
Change Roadmap
LinkageswithotherGroups
StakeholderManagement
Identify the Need for Change
Build Core Team

Innovative minds and
innovation
champions exist in
almost every
organization, but so
do the organizational
”antibodies” that kill
new thinking. To let
innovative
thinking
prevail,
executives and
managers must:
Recognize that innovation is a process, not an event.1
Stop skipping the sensing part of innovation process.
(idea-first vs. need first2
Stop cobbling together incompatible innovation
methods and tools.
Involve and commit executives and budget time,
finances and other resources to execute the innovation
process in the right way.
4
5
Recognize that change is the only constant and manage
it appropriately.
3

In conclusion…

Mega-Trends Mega-Challenges
© Inluceo Consulting, 2016 31
Today’s challenges definitely seem like a perfect storm
Increased
Competition
Internet-of-Things
& Data Deluge
Urbanization
Aging Population
Rapid Customer
Adoption of New
Technologies
Economic and
Environmental
Sustainability
Personalization
Globalization Digitalization
Innovation
Productivity

© Inlumino Consulting, 2019 | 32Photo: HBR
What should energy companies focus on?
There are plenty of opportunities…
Digital
Transformation

© Inlumino Consulting, 2019 | 33© Inlumino Consulting, 2019 | 33© Jozek Gruskovnjak 33
Innovating in the
digital world
requires agility,
new skills,
discipline and a
technology
platform.
True benefits of open innovation in the
digital world can only be realized by
connecting employees, partners,
customers and other stakeholders and
integrating all relevant data sources
into an open innovation platform.
The open innovation platform enables
the scale both within the organization
and across organizational and
geographic boundaries.
To succeed, organizations need to develop an
adequate business framework and support it by
underlying technology platform.

© Inlumino Consulting, 2019 | 34© Inluceo Consulting, 2016 34
“If you dislike change,
you will dislike
irrelevance
even more.”
− General Eric Shineski
Change is not optional.

“Be strong to stand alone,
smart enough to know
when you need help and
brave enough to ask for it.”
− Multiple authors cited

Digitalization and innovation fad or imperative, 20191009 final

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Digitalization and innovation fad or imperative, 20191009 final