Fragility, Anti-Fragility and Innovation

1. Fragility, Anti-Fragility and Innovation Bill Wade wade-partners.com

2. We’ve Been Discovered !

3. Complete Surprise: The Black Swan

4. What is the opposite of “Fragile”?

5. What is the opposite of “Fragile”?

7. an·ti·frag·ile: something that benefits from stress, harm, chaos, events, disorder, unforeseen consequences, uncertainty, time • English • Latin • Greek • Italian • French • Spanish • Portuguese • Russian • Polish • Serbian • German • Dutch • Afrikaans • Hindi • Urdu • Farsi • Arabic • Hebrew • Aramaic • Turkish

8. Astronaut Atrophy

9. Tourist Trophy Hunt AirTravel

10. Mithridates VI

11. Humans are antifragile. Human systems are antifragile.

12. Removing stress doesn’t make us stronger.

13. Removing skin from the game.

14. Making everything bigger.

15. Stifling freedom of everything.

16. Risk Forecasting

17. Trains Will Haul Bulk Power Plant Fuel

18. Trains Will Haul Bulk Power Plant Fuel OOOPS !

19. Major Structural Trends (Threats?) In the Ag Equipment, Parts and Service Markets • OEM Component Integration • OEM Vocational Standardization • Design for Recycle- ability • Supplier System Partnership • Death of Diagnose andRepair… Severe Technician Shortage

20. Anti-Fragile Strategies… John Deere to Titan to Ralph’s Farm Supply Size alone is not a strategy… nor is a footprint Fee follows function… discounts become discriminate Information is the ultimate pop code ‘A’ VIN tyranny splinters War declared by European (and Domestic) OEMs Tuángòu explodes Net conquers gross… and CASH conquers all!

21. Innovation…All that distinguishes leaders from followers… S. Jobs Offense or Defense… What does this really mean to you?

22. Is Your ‘Model’ Sustainable… Machines, Markets, Distribution • Facing the ‘Great Moderation’ • Define the ‘New Normal’ • Indefinite Warranty • Permanent World Maps ? • Guessing the Future…Economic Cycles • Market has called 9 of the last 5 downturns

23. Innovation The only net creator of new wealth.

24. Innovation is all that foiled Malthus. Global warming next ?

25. Innovation The only net creator of new wealth. • Something newly tried. • New combinations. • Creating a portfolio of options to achieve substantial, profitable and sustainable growth. • Other activity is caretaking, improvement at the margin or rearranging the deck chairs.

26. Fortification vs Exploration • Tension between defending existing dominance and creating new growth paths • Chance favors the prepared mind… or company

27. Innovation… How to? • Be absolutely clear about the mission to everyone. • Create just enough structure. • Match people and horizons.

28. Innovation… How to? • Think businesses… beyond product or technology. • Innovate on behalf of your customers … not your existing position. • Diverge early… converge late.

29. Things I’ve Noticed • Iterate and communicate • Don’t try to predict… buy options • Runway…. electric cars vs. newspapers

30. Business Innovation Radar • Creation of radical new value for customers • In the beginning, all you have is data and intuition • Almost never just product

31. Create Insight, Avoid Reflection • Industry mirrors ? • Best Practices Kill! • Which industry orthodoxy can be challenged? • We only see things for which we are looking. • Mission Focus: Target Definition • Mission Clarity: Organization Understanding

32. Periphery Is Your Preferred Frontier • It is where to look first, but not exclusively • Avoid the Success Trap • Chaos vs. Structure • The better we are at ‘this’, the tougher it is to try ‘that’ • Define ‘Factors of Merit’… Speak multiple languages in multiple worlds.

33. Perspective is everything 10 Ways to Slice It….

34. Offering-Creating new product or SERVICES Significant Augmentation • Toyota Hybrids • Apple Ipod • Sony 4 generations and 150 variations of Walkman • Merrill Lynch Cash Management Account

35. Platform- Exploiting commonality Common components as building blocks • Airbus common cockpits • GM OnStar • Disney animation • Microsoft Suites

36. Solution- Solve complete problems Customized combinations • UPS complete 3PL • DuPont selling painted bodies to Ford • IBM bundling of hardware, service and financing

37. Customer- Serving unmet needs Identify unarticulated latent needs and resegment markets • Chrysler minivan • Home Depot ‘almost pro’ • FedEx segmenting by time instead of volume

38. Customer – Redesign interface Broaden touch points and life cycle interface • Saturn no haggle pricing • Cabela’s store as entertainment • Amazon returns handling • Everything about ‘American Girl’

39. Value Capture- Changing how you get paid Changing yield management or position in the value chain • Google paid search • GE time in air • Progressive utility pricing

40. Organization and Process Design for internal improvement and process streamlining • Boeing 787 • 3M Slack Day • Google 20% program • Cisco partner centered network

41. Supply Chain Flow Primarily increased communication within channels • Walmart VMI • Dell user-direct one-off manufacturing design • Home Depot/GE appliance floor plan

42. Presence- How customers access you Augmenting channel mix, including self service • Enterprise in repair shops • Netflix • McDonald's and BOA • Diebold remote teller

43. Networks-Exploit network intelligence Leverage network connectivity • Otis elevator • Electrolux auto replenished refrig • Peapod edible billboards • Microsoft Xbox Live channel

44. Brand Leverage Co-Branding into new product classes • Virgin Mobile, Air, etc • Cat Boots • Intel Inside • Yahoo as a lifestyle brand • (not Champion filters!)

45. Drivers of Service / Dealer Affinity • Accelerating Regulation (i.e.. OSHA) • Extended Trade Cycles (new normal) • Vehicle Economy • Refurb Economics • Warranty Control • Proprietary Information • Labor Shortage

46. Fuels… It is all about the juice! Ethanol (17) Westport Engine Biodiesel (19) Electrics / Hybrids Hydrogen (21) ‘Green’ Issues… CNG (23) LNG (23) Synthetic Diesel (26) Methanol (27) DME (29)

47. Innovation Boosters: Adaption and Aliens 2014…Labor Shortage and the Agent Economy Outsourcing… and Aliens Ferguson/Wolseley, Grainger, HD Supply, MRC Global Corp. (formerly McJunkin-RedMan), Airgas, Motion Industries, Fastenal Company, McMaster Carr, Applied Industrial Technologies, MSC Industrial Direct, Wurth (North America), Kaman Industrial Technologies, BDI, Barnes Distribution Industrial Distribution Group, SunSource, Lawson Products, BlackHawk Industrial Distribution

48. B-to-B from the B-to-C • Lowe’s has launched their Lowe’s ProServices • Ace Hardware has The Supply Place • Staples has a strong B-to-B component that now includes medical supplies. • Home Depot ‘On Set’

49. Distribution Trend - Service Overtakes ‘Box Pushers’ Services • Emergency Services • Energy Services • Grainger TripleGuard Repair • Inventory Management • Online Purchasing Solutions • Product Services • Products Beyond the Catalog • Safety Services

50. Technician Training • Who do you expect to provide this and who should bear the cost? • Delivery… Let’s discuss the different possibilities. • Technician shortage… How concerned are you? • What is your strategy for recruiting?