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Applied Creativity and Value Discipline: The Innovation Cycle

Applied Creativity and Value Discipline: The Innovation Cycle. 1. Innovation: top of mind, why bottom of the list? . Number of articles about innovation:. 16000. 14000. 12000. 10000. 8000. 6000. 4000. 2000. 0. 1995. 1996. 1997. 1998. 1999. 2000. 2001. 2002. 2003. 2004. 2005.

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Applied Creativity and Value Discipline: The Innovation Cycle

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  1. Applied Creativity and Value Discipline:The Innovation Cycle 1

  2. Innovation: top of mind, why bottom of the list? Number of articles about innovation: 16000 14000 12000 10000 8000 6000 4000 2000 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Source: Business Source Elite Database 2

  3. Innovation is a great investment… sometimes. Are you satisfied or not satisfied with the return on your investment in innovation? 100 80 49 44 46 51 60 40 51 56 54 49 20 0 All industries, worldwide Healthcare Financial services Consumer products, retail SOURCE: BCG 2005 ITC Survey 3

  4. Use the innovation approach you know… if it fits your needs. Effective Approaches to Organic Growth ITERATE INVENT • Rapid learning • Sporadic growth • Failure = Commit too soon • Applied radical creativity • Fly or flop • Failure = Don’t try Many, complex or unclear AMBIGUITY OF OPTIONS EXPAND EVALUATE • Leverage experience • Incremental growth • Failure = External surprises • Risks vs. rewards • Step-wise growth • Failure = Poor execution Straight forward choices “Trial and error” Biggest Bets LEVEL OF COMMITMENT 4

  5. Principles for a new model: Managers say: Principles for the Innovation Cycle: Build-in participation from both creative and operational sides of the organization. “I’m uncomfortable when I don’t know exactly where I’m going.” “How do I know when we’ve come up with enough good ideas?” Focus on the solving the highest-value or most difficult parts first. “I get paid for avoiding risk.” Align incentives across the team to support the process, not just results. “I want a process I can depend on in any situation.” Utilize a clear, reliable, and flexible process. “Innovation seems like a fuzzy process – where do I start?” Clearly identify needs/goals and diagnose current state. 5

  6. The Innovation Cycle Growth Opportunities Execution Excellence Value Guidance 6

  7. The Innovation Cycle Respects & nurtures theopen-ended nature of creativity. Applied Creativity Respects & leverages the practicalnature of business analysis. Value Discipline It is a cycle. 7

  8. Innovation Cycle example: The New Mustang Traditional Business Case ‘Design Lead’ Case Wide audience, broad appeal Retro themed, high performance niche Design Approach Low volume, high price High volumes, low price Volume and Price-Point New platform, $$$$ Capital Investment Required Existing platform, $$ Limited production; maintain price premium through lifecycle High volume; heavy discounts over lifecycle to fill capacity Product Demand Cycle 8

  9. Mustang Example More & Better Ideas: Niche vs. broad appeal • New platform vs. current • Long lifecycle vs. quick hit Growth Opportunities Value Guidance Applied Creativity Value Discipline NPV COMPARISON Base Case Expected Value Traditional 10%-ile 90%-ile ‘Design Lead’ Net Present Value 9

  10. Innovation Cycle example: More than bikes • Two potential directions: • Create comfortable and informed staff and customer • Make ideal bikes more attainable Growth Opportunities Value Guidance Applied Creativity Value Discipline Both directions are likely NPV positive 10

  11. More Than Bikes Here is what we can develop: Growth Opportunities Value Guidance Applied Creativity Value Discipline Here is what matters: 11

  12. The Innovation Cycle: Where do we start? Enter cycle at evaluation stage: idea-rich Growth Opportunities Execution Excellence Value Guidance Enter cycle at generation stage: idea-scarce 12

  13. The Innovation Cycle: When do we execute? Exit cycle after idea generation with low-risk or incremental projects. Growth Opportunities Execution Excellence Value Guidance Exit cycle after evaluation of High-risk or complex projects. 13

  14. The Innovation Cycle Flexibility adapts to various situations Respects & leveragesthe practical natureof business analysis Growth Opportunities Cycle builds learnings and buy-in Execution Excellence Respects & nurtures theopen-ended nature of creativity Most valuable in complex, high-value circumstances Value Guidance 14

  15. Thank You! Jeremy Alexis Assistant Professor Institute of Design, IIT alexis@id.iit.edu www.id.iit.edu Cynthia Benjamin Office Director, Senior Engagement Manager Strategic Decisions Group cbenjamin@sdg.com www.sdg.com 15

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