Presentation from breakfast seminar given at the Slow Lounge in Sandton, Johannesburg, South Afria on September 11, 2012

1. Innovation Management
Slow in the City lounge, Sandton
11th September 2012
“..because the execution of an idea is always more
important
than the brilliance of the thought..”
(Harvard Business Publishing – Morgan, Levitt & Maleck – INVEST model)
This document is solely for the use of the receiver. No part of it may be circulated, quoted, or
reproduced for
distribution outside the receivers organisation without prior written approval from Bearing Consulting
Ltd.

2. Who we are
Föreläsare
Jörgen is a Swedish
citizen, residing in France and
working internationally. During
the last 15 years, he has led a
large number of projects related
to corporate
Jörgen innovation, innovation
Eriksson systems, corporate restructuring
and R&D in Europe, Africa, the
Middle East and the United
States.
Richard is South African, residing
in South Africa and the United
Kingdom and has a career
Richard Shaw spanning 20 years in international
strategy and management
consulting, often in projects
related to change, finance and
innovation.
2

3. About Bearing Consulting
Bearing Consulting is a management consultancy incorporated in
United Kingdom with offices in London, Stockholm, Basel, Barcelona
and Johannesburg
We work with clients in three focus areas; Over the past 12 years, we have been
engaged in projects across four
continents
Development of Places & Regions
Management Consulting towards
Bank & Finance
Corporate Innovation
3

4. What is innovation?
Litteraturen visar många
There is an vägar...
abundance of
literature
4

5. What is Innovation?
Innovation ?
Innovation can be incremental or disruptive
Train Car Airplane
”Invention” => Innovation => Effect (Globally)
5

6. The official definition
En definition...
―Innovation Management is the
capability to manage an invention/idea
of new
products, services, processes, producti
on methods, organizational forms, or
an elementary improvement of a
business (model) system up to its
successful realization.”
- Definition from the IMP3rove project within
EU Innova, which works toward a
standardization of Innovation Management in 6

7. Innovation
Innovation is creative destruction, where
entrepreneurs combine existing elements in
new ways…
After Joseph Schumpeter (1883 – 1950)
7

8. Drivers of innovation
Business in hypercompetitive markets
This document is solely for the use of the receiver. No part of it may be circulated, quoted, or
reproduced for
distribution outside the receivers organisation without prior written approval from Bearing Consulting
Ltd.

9. World dominance
In the year 1994, Motorola was world leader in (analogue)
mobiles,
seven years later Nokia was world leader in (digital) mobiles
60%
50%
Motorola
40%
30%
20%
10% Nokia
0%
Market shares 1994 Market Shares 2001
9

10. From #1 to crises in less than three years…
Why ?
10

11. Hyper competition
“Either you innovate or you’re in commodity hell. If you
do what everyone else does, you have a low-margin
business. That’s not where you want to be.”
Sam Palmisano, former CEO IBM
11

12. Some drivers of hyper competition
Why hyper competition?
 Globalisation – less trade barriers and efficient transport (e.g. containers)
 Speed of hyper connected communication and the pace of modern
business
 Disruptive Technologies
A new technology that has a serious impact on the
status quo and changes the way people have been
dealing with something, perhaps for decades
12

13. Shift from ―hard‖ to ―soft‖ factors in packaging of products and
brands
13

14. Does Harley-Davidson sell motorcycles?
What does
Harley-Davidson
sell?
14

15. Does Harley-Davidson sell motorcycles?
―…what we sell is the ability
for a 43-year-old accountant
to dress in black
leather, ride through small
towns and have people be
afraid of him―
– an HD executive
15

16. THE LEGO STORY
Y2000 "Toy of the Y2004-03, the
Century" by owner & CEO
Fortune magazine Kjeld Kirk
and the British Kristiansen decide
Association of Toy to go back to
Retailers basic!
Y2003 – 2004 Y2004-10, Jørgen
Huge losses, close Vig Knudstorp
to bankruptcy appointed as new
CEO
16

17. THE LEGO STORY
 The situation 2004
Demand decreasing, competition from
games, movies, merchandising
Poor quality
Poor logistics
Slow in adoption
Simplistic leadership and laid-back
culture
Sources: HBR, DN, Guardian, BBC, Handouts European Offshoring Summit, (2009, Copenhagen) 17

18. THE LEGO STORY
Innovate Execute
Stabilize Deliver what
operations we promise
Improve the Value Creating
business Partnership
Define Rigid Execution
Raison d'être Platform
Organic
growth Differentiated
Value Chain
Offshoring
Consumer Driven
Restore the Value Chain
balance sheet
2200
Operational Profit
1200
MDK
200
-800 2003 2004 2005 2006 2007 2008
-1800 18
Year

19. KEY ACHIEVEMENTS
Clear Raison d'être: ―we help children learn systematic and creative
problem solving—a crucial twenty-first-century skill‖
Gained consumer insights through ―direct sales to consumers‖
through BuiltByMe without competing with existing distribution
channel
Co-Branding with strong and selected partners such as Star wars
and Harry Potter
19

20. KEY ACHIEVEMENTS
Reduced lead time, 45 to 3 days to
store
Cost saving through offshoring non-
core competencies
A new supplier interface
QA system in place
Open Innovation, 120,000 people
involved in external innovation work –
DesignByMe, DreamtByMe, BuildByM
e
Community driven approach; the open
platform Mindstorm encouraging
customers to design and develop their
own LEGO-robots systems
20

21. LEGO TOTAL INNOVATION MAKEOVER
Customer External Innovation
Engagement
Internal Innovation
Brand Services
Supply Chain
Business Model
Partner Model Product
Marketing
...and LEGO continue to deliver exceptional profitable growth on
an oligopolistic/niched and international toy market...
21

22. THE S-CURVE
The real challenge, LEGO managed, lies in achieving a strategically
balanced portfolio that between exploitative and the exploratory
Emergent Growth Mature
Performance / Value offering
Ongoing business Business of the future
(EXPLOITATIVE) (EXPLORATORY)
Source: Tovstiga (2007) Effort / Time
22

23. VALUE IS CREATED ON THE ”EDGE” OF YOUR BUSINESS
Business Product & Sales & Delivery &
Operation
Model Services Marketing Consumption
23

24. CULTURE IS KEY
―Kulturens‖
betydelse
BRA att
LYCKAS
”Hylla
hjältarna”
”man skall
inte förhäva sig”
KULTUR
Påverkan
”borde
skämmas”
KRAV … ”Bra försök …
OK att till och med …nästa gång så ”
Miss-LYCKAS
24

25. Open Innovation
ESADE Creapolis is a joint
venture between
ESADE, a consortium of
Spanish financial
institutions, local
government institutions
and business associations.
The organisation manages
a technology and
innovation park on the
ESADE campus in Sant
Cugat outside Barcelona.
25

26. IDEO´s method for creativity
‖Method to our madness‖
1. Understand the market, the client, the technology and percieved
constraints
2. Observe real people in real life situations
3. Visualize new-to-the-world concepts
4. Evaluate and refine the prototypes
5. Implement the new concept for commercialisation
26

27. Ten steps to innovation management
Föreläsare
1. Adopt a disciplined method for innovation management including project
management, focus on customer needs and alignment of research and development to
marketing plans.
2. Use advisers and collaborators to obtain resources which are non-core, vital or of
superior quality to resources available in-house.
3. Identify customer needs in market segments.
4. Identify the differentiation of your innovative offering (goods, services, systems or a
combination of them) to meet those customer needs.
5. Develop the offering for the identified differentiation.
6. Secure intellectual property protection.
7. Use the differentiation as a component of the competitive advantage
8. Refine the positioning of the offering at either the offerings, operations or
organisational structure level.
9. Monitor, anticipate and respond to competition against or relevant to the offering.
27
10. Monitor and respond to the market performance and feedback for the offering.

28. BEARING INNOVATION NAVIGATOR™
“..because the execution of an idea is always more
important
than the brilliance of the thought..”
(Harvard Business Publishing – Morgan, Levitt & Maleck – INVEST model)
This document is solely for the use of the receiver. No part of it may be circulated, quoted, or
reproduced for
distribution outside the receivers organisation without prior written approval from Bearing Consulting
Ltd.

29. BEARING INNOVATION NAVIGATOR™
...within a hypercompetitive market
How can you
measure, improve and
What is your invent new competitive
future competitive advantages?
advantage?
Where is your
value created?
29

30. YOUR SWEET SPOT DEFINES YOUR FUTURE SUCESS
Where your firm meets What?
customers needs in a Where?
way in which your Why?
Competitors’ Customers’ competitors cannot How?
offerings needs
3
1
Sweet
Spot Sweet spot = unique spot
2 How to protect/define boundary 1,2,3
Company’s
capabilities Context
(technology, industry, regulat
ory, etc.)
30
llis & Rukstad (2008). Can You Say What Your Strategy Is?, HBR (April 2008)

31. INNOVATION FRAMEWORK
Strategic question Type of innovation Style
Why
How
What
Product Innovation • Cauldron
Company Strategy Process Innovation • Spirale
• Incremental/ Organisational Innovation • Fertile
Disruptive • PacMan
Management Innovation
• Need seekers • Explorer
Production Innovation
• Market readers
• Technology drivers Commercial/Marketing People
Innovation
• 10 Faces of Innovation
Service Innovation
Capability & Process
• Ideation
• Project selection
• Product development
• Commercialisation
Source: Penker (2011) 31

32. BEARING INNOVATION NAVIGATOR™
...the navigator
Initiated by the work of Sawhney, M., Wolcott, R. C., & Arroniz, I. (2006). The 12 Differetnt Ways for Companies to
Innovate. MIT Sloan Management Review , 75-81.
32

33. CASE STUDY
Situation Perceived Solution
• Fast growing awarded Complication • Nine generated
e-commerce fashion • Growth pain recommendations
company • New competitors
• Entrepreneur of the entering the scene
year, A Great Place To • Lost the battle in
Work, AAA rated, Super Denmark
Gazell
• Perceived quality issues
in deliveries
• Lack of capitalization of
innovation initiatives
33

34. CASE STUDY
Recommendation; Strategy Alignment
• The IT department adjust its leadership style toward that of the company, i.e. fertility
field—meaning a style where the organisation tries to use existing capabilities and
resources in a new way, focusing on sales and profit.
• Make clear—within the organisation—where the company is going for growth or
profit as main objective, enrol all stakeholders.
Recommendation; Recruiting
• Employ Hurdlers, Cross Pollinators, Anthropologists and Experience Architects
Recommendation; Leadership
• Today, the customer service department, according to itself, has a non-goal-oriented
leadership. This must be addressed, as the customer service function is vital to
adjusting the lacking capabilities pointed out in the analysis. It is imperative that this
be addressed appropriately.
Recommendation; Product Development
• Launch more new products to keep up the pace in the market, especially considering
that the other kind of innovation is low.
34

35. CASE STUDY
Recommendation; Involvement
• Engage the company’s customers, suppliers and partners in the development
• Establish a reward system internally and eventually externally, using both extrinsic
(monetary) as well as intrinsic (acknowledgment, involvement, competence
development, etc.).
Recommendation; Organisation & Systems
• Test pilots and learn from them
• Undertake frequent independent market research
• Make systematic risk assessments
• Put an effective product management system in place
Recommendation; Enlarged scope
• The type of innovation that the company is engaged in is product innovation, typically for
retail-oriented companies.
• However, service innovations, delivery innovations and business model innovations are
getting more and more important and the company scores very low here.
• Keeping in mind that the company is technology-driven and fertile field, there are many
more opportunities to use existing customers, consumers, capabilities, systems, products
and technology to innovate for more profit and market shares by applying business model
innovation, service innovation and delivery innovation.
35

36. Bearing on the web
Read more about what we
do on the Bearing homepage
www.bearing-consulting.com
Bearing has a blog with
an active debate
blog.bearing-consulting.com
36

37. END.
INNOVATE - EXECUTE™
37

38. ABOUT BEARING CONSULTING
Bearing Consulting is a management consultancy incorporated in United
Kingdom with local offices in London, Stockholm, Barcelona, Basel and
Johannesburg
We work with clients in three focus areas;
Places & Regions
Bank & Finance
Corporate Innovation
Through a resource pool of more than 60 expert
consultants, we are currently engaged in projects
across four continents.
Bearing develops methodologies and publishes
books “..because the execution of an idea is
always more important than the brilliance
of the thought..”
•Morgan, Levitt & Maleck, Harvard Business 38
Publishing

39. Places where we have worked
39

40. Ten steps to innovation management
Föreläsare
1. Adopt a disciplined method for innovation management including project management, focus on customer
needs and alignment of research and development to marketing plans.
2. Use advisers and collaborators (eg joint venturers, licensors and colleagues in your networks) to obtain resources
which are non-core, vital or of superior quality to resources available in-house.
3. Identify customer needs in market segments.
4. Identify the differentiation of your innovative offering (goods, services, systems or a combination of them) to meet
those customer needs.
5. Develop the offering for the identified differentiation.
6. Secure intellectual property protection. This includes:
1. obtaining signature of agreements; and
2. obtaining appropriate registrations of any patent, trade mark, design, domain name or other registrable
property to ensure protection of the differentiation and gain exclusive or superior rights ownership or control.
7. Use the differentiation as a component of the competitive advantage of the offering for market or financial
goals, eg creating brand awareness, building market share, and obtaining premium pricing.
8. Refine the positioning of the offering at either the offerings, operations or organisational structure level. This
is a complex concept. Briefly, each level involves a bigger impact and generally higher levels of intellectual property
or intellectual capital monopoly. The level you target to reach may seal the fate of the offering in terms of determining
if:
1. it merely serves a current market, or
2. does better by extending the to a new market, or
3. does best by creating a market.
9. Monitor, anticipate and respond to competition against or relevant to the offering.
40
10. Monitor and respond to the market performance and feedback for the offering.