Innovation: A business futurists’ tool to manage a complex environment

1. Innovation: A business futurists’ tool to manage a complex environment R. Gayoso WFS Chicago 2009

2. Agenda • Study Background • Challenges & Opportunities • Biz Environment & Futurists • Case for Biz Futurists • Operational definition of Innovation • Innovation as a Business Tool • Methodology • What we learned • Four overarching themes • Q&A WFS Chicago 2009

3. Business Environment Challenges • Cognitive dissonance • Stahl & Grigsby (1992): The external environment is so complex, there are so many stimuli for one to process, it becomes virtually impossible for management to capture the essence of the situation. • Pace of technological change • Drejer (2004): Not only it is difficult to gauge the impact of technological change, but also the pace of change is increasing rapidly (technological turbulence) • Fragmentation • Fletcher (2006): Consumers demand increasingly higher degrees of product customization • Demand uncertainty • McCarthy & Mentzer (2006): The increased market fragmentation led to a situation where there are so many possible product variations to keep track, it is difficult for any one to keep track of all targets • Regulation • Dreyer (2004) and Roney (2003): One of the most important factors of environmental uncertainty is linked to the actions of governments; revival of Sherman Anti Trust Act’s Section II (2009) WFS Chicago 2009

4. Impacts to the organization • Cognition • Surprises • Pace of technological change • Products become obsolete faster • Fragmentation • Too much customization  higher costs and consumer confusion • Demand uncertainty • Too many product lines to track  bureaucracy • Regulation • Increases costs WFS Chicago 2009

5. Biz Futurists: Challenges & Opportunities • Unclear biz process ownership • Market Research, Competitive Intelligence or Strategic Planning? • Silos versus collaborative environment • Value Add • Forecast Value Add (FVA), ROI • Voice & Perspective • Short versus long run view • Access to senior management (visibility) • Credibility is a personal asset, not automatic with your job function/title WFS Chicago 2009

6. Business Process Case for Futurists • Management Dilemma: Creating a sustainable future • MR & CI provide environmental context in which competition will take place • Futuring is the framework upon business analysis takes place • CI: into which Markets, with which Products, against which Player will we be? (Objects of Interest) • MR: which Technology should we pursue in order to have a more competitive offering? How will competitors react? (Management Questions) • Futuring is the analytical method of choice whenever there is decision making under uncertainty • Biz Futurists synthesize the knowledge, add value and project reality into the future WFS Chicago 2009

7. Value Add • Unique skill base • Link alternative realities to strategy • Would existing strategy still work in an alternative reality? • Identify gaps, risks and opportunities • Who benefits from the gaps? • Develop risk mitigation strategies • How to close the gaps? • Financial implications • Opportunities: Hedging, long term contracts and options WFS Chicago 2009

8. Voice & Perspective • Perspective • Labeling: “Rose colored glasses”, “Dr. Doom” • Short run versus Strategic Objectives • Power of voice  Credibility • Personal asset • Emerging versus established profession • Certification, credentials • Validity of our tools • Cling to established methods (i.e. Scenario Planning) • Visibility • Having a regularly scheduled forum populated with critical stakeholders (i.e. strategic planning review) WFS Chicago 2009

9. Biz Futurist’s Success Strategies • Get organized: build your roadmap strategy • Business research process design • Business & Competitive Intelligence: key! • Monitoring today , envisioning tomorrow • Build a strong Forecasting base • Get certified!!! • Explore other Quantitative Methods • Scenario Planning, Game Theory, Decision Trees, Neural Networks, and Prediction Markets • Remain informed • Attend WFS, industry & peer conferences • Read The Futurist, Journal of Forecasting / IBF Materials WFS Chicago 2009

10. What is Innovation? Definition Innovation is an organization's way of implementing new ideas, of turning the creative concepts of its membersinto realities Continuous Improvement Operational Excellence INNOVATION Conventional Innovation Reapplied Innovation Radical Innovation WFS Chicago 2009

11. What is a proven innovation process? ONLY 1-2% of creative ideas result in driving biz value – mass generation of ideas is necessary and such behavior needs to be rewarded 100 IDEAS 20 IDEAS Create: many ideas from diverse sources Advance: Prioritize by objective criteria 5 IDEAS Refine: With BI 1-2 IDEAS Investment Implement:Only high value/impact ones Time VALUE Innovative Culture Cultural Change needed to move along this path and manage to the value curve WFS Chicago 2009

12. Innovention Animal Domestication Miniaturization Compression Wheel Engine WFS Chicago 2009 Is this a by-product of MR , CI or Planning?

13. Innovation Framework Market Environment Regulatory/Political Shortened Life Cycles Customer Expectations Drivers of Innovation RadicalInnovation Conventional Innovation OrganizationalImpacts PerformanceResults Innovative Culture ReappliedInnovation Cost Savings Strategic Direction Long Term Cost Savings Productivity Efficiency Enablers/Obstacles Business Intelligence Individual Competencies Organizational Knowledge Management Key Message: many sources of changes, many things to keep up with WFS Chicago 2009

14. Innovation Pipeline Biz Research/ Intelligence Future Expectations CI/Benchmarking Current & historical Innovation Harvesting Suppliers & Customers Business needs Customer/user centered Organization Process generated, drop-box submissions, Planning WFS Chicago 2009

15. Innovation Definition • Broad: Looking at what others looked at and seeing what others didn’t • Narrow: Innovation = new business eco system WFS Chicago 2009

16. Study Methodology • Work sessions (4) • Future Trends (IIR) – 49 • Executive MindXChange (Frost & Sullivan) – 37 • SAS’ f2008 Business Conference - 38 • IBF Roundtable in Phoenix, AZ - 11 • Depth interviews (9) • Market Research roundtable participants • SCIP members • WFS members • Industry • Academia WFS Chicago 2009

17. Study Methodology: Panel Composition • Industry • Consumer goods mfg, retail & services • High Tech, banking • Size • Mostly $1B to $5B in total sales • Profile • Business managers/planners (~50%), MR, CI, forecasters, consultants & academia WFS Chicago 2009

18. Tracking vs. Introducing Innovation • The department mostly associated with tracking innovation is… • Respondents were mostly split between Strategic Planning and Marketing (or MR), • a small minority believed it is mostly the domain of executive office, • others in industry mostly closely associate tracking with a R&D function • The department most capable of introducing innovation is R&D • Product Planning / Development x Business WFS Chicago 2009

19. Tools of the trade • Some of the ways we uncover Innovation are… • First place split • Traditional Market Research techniques (surveys, Delphi Panels) • Social Trend analysis (Consumer trends / preferences, changes in demographics) • In third place • CI and trade shows • In Fifth place the vote was split among Employee suggestions, word of mouth and brainstorming • Futuring (or Scenario Planning) featured in sixth place • The least noted method was structured analysis (War Gaming or Game Theory). WFS Chicago 2009

20. Efficacy • Reflecting on the tools of the trade, which of those do you BELIEVE are the top three ways to capture “Innovation”? • Respondents believe the best way to capture innovation is Social Trend analysis • followed closely by Emerging MR techniques (On Line communities, Social Networks) and CI. • The next mostly often cited categories were Brainstorming and Futuring WFS Chicago 2009

21. BKMs • What are the top three Best Known Methods (BKMs) you use to capture Innovation? • The three most often cited best methods to capture innovation were qualitative analysis, environmental scan and conducting planned / semi-structured meetings. • The second most noted BKMs were quantitative analysis, brainstorming and comparing external sources. • The third most cited BKMs related to holding interdepartmental meetings and other exercises to reduce internal biases and increase creativity while minimizing group think. WFS Chicago 2009

22. Advice • What are the top three best advices YOU would give to a firm just starting to capture Innovation? • Conduct on line surveys • Social and technological trend analysis (highlighted 2nd life) • In-depth interviews and/or ethnography • Exploratory techniques to explore human-machine interface to leverage creativity • On line ideation (popular with industry respondents) • Look at other companies with new eyes • Listen to unexpected sources • Beware of internal biases. WFS Chicago 2009

23. Providers • Which statement best describes your ATTITUDE towards outsourcing Innovation analysis? • Most respondents were open to the idea of outsourcing innovation analysis; • Although they believed innovation is key information for the survival of their respective firms, it can be harnessed by external experts. • Industry example using GDP: although most quantitative analysts could come up with a decent forecast of GDP, it is best performed by specialists and the analytical resources of the firm should be used elsewhere (where they add more value). WFS Chicago 2009

24. Agents • Who do you BELIEVE is best equipped to uncover new trends and Innovation? • Respondents were mostly evenly split between external experts and their own research departments • A minority of respondents believed other information aggregation tools (such as Blogs) would be best equipped to uncover new trends. WFS Chicago 2009

25. Barriers • The main objection I have to our outsourcing of Innovation is … • Lack of budgets or high costs • Own internal limitations: rigid operation models / processes and the fear of losing control over the innovation discovery process • Some cited lack of confidentiality, as their feared competition might find out their plans if vendors leaked the information • Management would not find the information useful and therefore the ideas could not be implemented due to a lack of high level support. • Industry: external providers lack deep understanding of who we are and where we are going. • Industry participants shared information on their experience outsourcing innovation analysis as they were not pleased with the end result of the process. • Post mortem analysis mostly cited a lack of deep understanding of “who we are and where we are going”. WFS Chicago 2009

26. Focus • Which aspect of Innovation / topics should we pursue for next year? • what are the key social trends shaping the next 15-20 years? • What scenarios evolve from these trends? • Implications for what the trends mean for business WFS Chicago 2009

27. Some overarching themes • Bias: respondents seem to believe they need to invest time and effort in order to overcome internal biases, rigid processes and group think. Some suggested inter-departmental meetings, on line ideation sessions and the use of external experts to overcome this danger • Social Trend Analysis: a lot of the discussion revolved around ways to understand social trends. Some believed conventional methods would be best to understand such trends, whereas others resorted to less conventional techniques, even to observing second life • Futuring: Increased popularity of Scenario Planning technique and use of futurists as value-added partners in the supply chain • Trade shows: still one of the best ways to perform a quick environmental scan and get up to date information of what others/peers are considering. Industry participants shared their own observations as firms mostly “have different gadgets, but share the same problems/ challenges” WFS Chicago 2009