Highlevel frameworks and teasers for organizing innovation within large companies.

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Where
to Play
How
to Win Governance Capabilities
Define the
Innovation
Mandate
Build a Diversified
Innovation
Portfolio
• Are we balancing risk
and reward in a
diversified portfolio of
Core and New Growth
initiatives?
Sustaining Innovation
• Cost, Process and
Product Improvement
Transformative
Innovation
• Adjacencies
• New Growth Platforms
Disruptive Innovation
• Market Making
Balance the Core
Business vs. New
Growth Platforms
Engage
Leadership to
Drive Innovation
Develop the
Essential
Capabilities for
Innovation
Innovation
Mandate
Innovation Operating Model
• What is the specific
contribution of
innovation to
delivering growth?
• Do we have the
different organizational,
financial and
performance models for
innovation?
• Separate teams for
Transformative &
Disruptive Innovation
• Special funding model to
plan and allocate
investment in innovation
• Dynamic measurement
system balanced between
learning and results
• New IP Management
Strategies
• Is Leadership
actively managing
innovation?
• Are there incentives to
innovate and take risks,
and disincentives
not to?
• Are there clear
decision rights and
accountabilities?
• Are there regular
Innovation Reviews?
• Is the Innovation
Portfolio continually
rebalanced?
• Are we strong in the
following areas?
• Superior Customer
Insights
• Internal Knowledge
Sharing and Learning
• External networks and
ecosystems
• Innovative new business
models
• Finding and acquiring
new talent
•Capital Efficient Innovation
Methods (e.g. Lean)

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Establish Innovation Leadership Team (ILT) & Its Goals
1) Build the ILT, to provide Group-wide leadership and to drive the Innovation
Mandate (e.g.50% net new growth from innovation by 2020)
2) Balance the Core Business and New Growth Platforms, to defend/extend
the current franchise and to diversify the portfolio long-term
3) Develop Adjacencies as the first step in creating New Growth Platforms,
focusing on close-to-the-Core, risk-managed opportunities that leverage existing
assets and knowledge
4) Deploy Innovation Capabilities throughout the organization, to support both
Core and New Growth, in the areas of Cost, Process, Technology, Product and
Business Model Innovation(e.g. Lean Start-up, Design Thinking, etc.)
5) Create an Innovation Culture that can unlock creativity and entrepreneurship

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3
Innovation Portfolio Strategy
Sustaining Transformative Disruptive
Cost
Process
Product
Technology
Business
Model
70% for
established
companies
50% for high
growth
companies 20%
established,
30%
high growth
10%
established,
20%
high growth
Benchmark ratios for innovation investment: 70-20-10 for established companies, 50-30-20 for
high growth companies (e.g., technology sector, developing markets, etc.)

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Sustaining: incremental improvement
to existing products (“er” benefits;
better, easier, cheaper), line extensions
on same product dimensions (efficacy,
convenience, etc.)
• Ultra-concentrated laundry detergent
• Disposable battery-powered toothbrushes
• Universal remote controls for TV
• Form-fitting shoes
• Etc.
Transformative: re-frames
existing categories (order of
magnitude improvements and
fundamental changes to the
category)
• Digital cameras (no film)
• Drinkable yogurt (no spoon)
• Liquid bandages (invisible, no
adhesives)
• Home routers/networks (more
capacity, control)
• Google Apps (no software)
• Etc.
Disruptive: New-to-the-world
businesses with radically new offerings
that disrupt incumbents (there are
clear winners and losers, legacy
companies/brands decline sharply)
• Smart phones disrupt: mobile phone, PC,
music, gaming, and GPS industry (e.g.,
Apple wins, long list of losers includes
Nokia, Blackberry, Dell, EMI, Electronic Arts,
Garmin, et al.)
• Cloud-based storage disrupts hard drive
industry
• Online trading platforms disrupts financial
advisor networks
• Tablets disrupt video players, print media
• Etc.
Governance: Establish Decision Rights
“small i”
“Big I”
4
SBU
Responsibility
ILT
ResponsibilityManaging “small i” vs. “Big I”
Adjacencies, New Growth Platforms, Market Making

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Core SBU Innovation Disruptive Innovation
Type of Innovation Sustaining Transformative
Market Structure Existing Converging
Business Model Contract manufacturing Many alternatives
Customer Habits and preferences well known Doesn’t know what he/she might want
Technology Focused on existing industry methods Discovered in other domains
Competition Established players within industry Non-traditional entrants from different
domains
Partners Customers and suppliers Vast ecosystem, many potential partners
Investment Model Capital allocation based on predictable
cash flows
Futures and options
Success Ratio 3:1 9:1, like venture capital
Process Predictable stage gates Highly iterative, loop backs
Measurement Finite set of variables Large set of variables, highly
interdependent
Practitioner Profile Industry insider Entrepreneur, thinks outside the industry
Outcomes New product, cost or process
improvement
New growth platform, $1B +
Disruptive Innovation vs. Core Innovation
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