The 6P Model for Making Innovation a Core Capability

1. GREG VERDINO | WWW.VERDINOLLC.COM MAKING INNOVATION A CORE CAPABILITY THE 6P MODEL

2. Start? Innovation is the Key to Business Success PETER DRUCKER “Innovation is the specific instrument of entrepreneurship. The act that endows resources with a new capacity to create wealth.” “The business enterprise has two - and only two – basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs.” “An established company which, in an age demanding innovation, is not able to innovate, is doomed to decline and extinction.” HOW WELL DOES YOUR BUSINESS INNOVATE? © VERDIINO LLC. All Rights Reserved. | 1

3. Innovation Upside? It Drives Superior Business Results GROSS PROFIT ENTERPRISE VALUE Innovation isn’t all about starry eyes and unfettered creativity. Indexed mean of normalized 5-year CAGR Indexed mean of normalized 5-year CAGR Average Across All Companies 56 Average Across All Companies It is a business discipline that provides a clear pathway to stronger performance in key business metrics. 51 48 49 45 44 43 42 Companies that both exhibit strong alignment between innovation and business strategy, and possess a supportive innovation culture financially outperform their less innovative peers. Low Moderate High Low Moderate High LEVEL OF STRATEGIC+CULTURAL ALIGNMENT SOURCE: Booz & Company, 2011 “Global Innovation 1000” © VERDIINO LLC. All Rights Reserved. | 2

4. Innovation Roadblocks? Why Do So Many Businesses Get It Wrong? WHY DO INNOVATIONS FAIL? Most senior executives rank innovation among their top business priorities. 63% DON’T MEET CUSTOMER NEEDS Due to: Inability to develop strong, market-relevant ideas Insufficient connection to customers Fear of failure But many have not taken the steps necessary to make innovation a core capability through sustainable programs and repeatable processes. 54% ARE TOO LATE TO MARKET Due to: Too many in-flight innovation projects (lack of focus) Too much innovation risk (unbalanced portfolio) Too much waste (inefficient, low impact process) Underdeveloped innovation capability It’s no surprise that 80% are not satisfied with how their organizations innovate and disappointed with the return on their innovation investments. SOURCE: Accenture Innovation Survey, 2009: Top 2 reasons cited for innovation failure © VERDIINO LLC. All Rights Reserved. | 3

5. Mindset Reset? Rethink the Way You Think About Innovation IT ISN’T OPTIONAL IT’S NOT (JUST) IDEAS IT’S NOT AN EVENT Real results require an always-on approach, sustainable processes and platforms that empower your people to function as a well- tuned innovation capability. Innovation must focus on solving clearly defined challenges with applied creativity, a clear path to implementation, and an eye on accountability. “Innovation is the central job of every leader – business unit managers, functional leaders, and the CEO.” A.G. Lafley, retired Chairman & CEO, P&G IT’S NOT (ALL) iPHONES IT’S NOT (JUST) R&D IT’S NOT OUT OF REACH Differentiate your business across all core areas - from strategy, sales and customer service, to people, product and process (and everything in between.) You don’t need to be a born visionary, and you don’t need a massive budget to win at innovation. You do need the right attitudes, behaviors, strategy, and systems. Success requires leaders to manage a diverse portfolio of radical, substantial and incremental innovations that balance risks with rewards. © VERDIINO LLC. All Rights Reserved. | 4

6. The 6P Model? Make Innovation a Core Capability © VERDIINO LLC. All Rights Reserved. | 5

7. Purpose? Align Innovation With Your Strategy And while a quick, creative approach to some new new thing can sometimes pay-off, the “once is witty, twice is shitty” principle comes on fast, and you’re rarely left with a properly grounded, repeatable process for making magic time and time again. PURPOSE Purpose means starting with why  — why must we innovate in the first place. It means considering what — what do we hope to achieve through innovation. It then uses your overarching corporate strategy as a no- nonsense filter to turn innovation into a how — how will innovation in this area empower us to more effectively deliver upon our top priorities; whether those priorities are revenue generation, top notch service delivery, cost savings, vertical or horizontal expansion, or just about anything else that differentiates your company from its competitors. Innovation must be purpose-driven. In other words, it must be fully aligned with your organization’s overarching business strategy. This sounds obvious, but I’ve worked with enough big brands and inside enough agencies to know that — more often then not — this clear sense of strategic purpose is the exception more often than it is the rule. We have a name for innovation for innovation’s sake — we call that the shiny object syndrome. ARE YOU GROUNDING YOUR CALL FOR INNOVATION WITH A CLEAR SENSE OF PURPOSE? © VERDIINO LLC. All Rights Reserved. | 6

8. People? Build an Innovation Program of Substance and the authority to make it happen, or might be disengaged or disenfranchised. All of that said, these people may be very good at what they do and incredibly valuable to the company. But they’re not the right people to drive an innovation effort. PURPOSE This doesn’t mean you need to restock your company with Steve Jobsian innovation super-humans. So who do you need? People with the right mindset, for starters — individuals committed to the challenge of change; who are well aware of the world outside your walls; who can view your business challenges through a series of new lenses, apply solutions from beyond your team, department, company, industry or even the business world itself. You’ve already got people, right? But have you got the right people? If you’re like many companies I’ve worked with over the years, you probably have senior leaders on the wrong side of the digital divide, too vested in the status quo, too resistant to change (or scared of the repercussion), or too beholden to this quarter’s P&L. You probably have staffers too tapped with their current workload, who mean well but lack the charter to drive change from within And then you need to guide them, support them, and give them permission to fail. DO YOUR PEOPLE BRING UNCOMMON, OUTSIDE PERSPECTIVES & APPROACHES TO WORK DAILY? © VERDIINO LLC. All Rights Reserved. | 7

9. Process? Build an Innovation Program of Substance ideas die on the vine? We all have. A true, sustained innovation capability is governed by clearly defined processes that govern how ideas get surfaced, how they get evaluated, what criteria they must meet to advance to the next stage, and what happens when the company commits to testing the idea in the market. PROCESS OK, so now you’ve got your free spirits and free thinkers — set them loose, right? Well, not exactly. Sustainable innovation, done right, means you’ll capture new ideas from all corners of your company. All. The. Time. Process may not be sexy, but it’s necessary if you want your innovation efforts to succeed. You know how you’ve gone into all those standalone brainstorms, spent an inspiring hour batting about cool new concepts, then went back to your workaday world as your new HAVE YOU DEFINED & COMMUNICATED CLEAR PROCESSES TO GUIDE YOUR INNOVATION PLAN? © VERDIINO LLC. All Rights Reserved. | 8

10. Platforms? Build an Innovation Program of Substance PLATFORMS Systems and software go hand-in- hand with old fashioned process, making it easier - and at scale, possible - to move ideas to execution efficiently, cost effectively, and with the right number of checks and balances. My purpose here isn’t to promote specific platforms; there are lots to choose from. They make your life as an innovator easier and the output of your process more viable. Without them, even the best innovation intentions will give way to chaos over time. DO YOU HAVE INNOVATION PLATFORMS IN PLACE IN YOUR ORGANIZATION TODAY? © VERDIINO LLC. All Rights Reserved. | 9

11. Partners? Build an Innovation Program of Substance consider ways to bring nimble upstarts into the fold in order to up the fresh ideas quotient, while leading edge start-ups might consider how well resourced multinationals could fund edgy new ideas. Public sector and private sector can work together. PARTNERS The possibilities for partnership are limited only by your willingness to collaborate with others. You didn’t think you could do it all yourself now, did you? If you truly intend to innovate (to create new value for customers in order to realize new value for the company) you might want to think of your customers themselves as your partners in innovation. You may know this as crowdsourcing… But as much as the lines are blurring between company and customer, the lines are also blurring between company and company (even company and competitor). Large corporations might DO YOU INVOLVE YOUR CUSTOMERS, COMPETITORS, COLLABORATORS & OTHER COMPANIES IN YOUR INNOVATION APPROACH TODAY? © VERDIINO LLC. All Rights Reserved. | 10

12. Performance? Define, Measure & Reward Innovation Success core capability (much less a cornerstone of a company’s culture) when the only measures of performance relate to near term profits, successful completion of day-to-day tasks, and other measures of the here-and-now. Of course those things are important - there’s no sense in prepping your business for tomorrow while you run the risk of going out of business today. PERFORMANCE Way back at the First P, I wrote that everything starts with purpose. But, truth be told, performance is as good a place to begin and one of the most critical components for innovation success. Let’s be frank — it feels good to talk about innovation, but it’s a different matter to rework the way we incentivize our people to make it worth their while to bring new ideas, process improvements and more to the table on a routine basis. Simply put, innovation will never become a But a truly innovative organization knows that the right incentives, rewards, and recognition systems are necessary conditions for innovation excellence. Think intrinsic rewards (status, recognition) as well as extrinsic rewards (prizes, money). Think beyond the check box on the performance appraisal… HOW DO YOU MEASURE THE IMPACT OF INNOVATION AND REWARD THE PEOPLE WHO MAKE IT HAPPEN? © VERDIINO LLC. All Rights Reserved. | 11

13. Work LEARN MORE ABOUT HOW GREG CAN HELP YOU GREG VERDINO MARKETING STRATEGY & INNOVATION GREG@VERDINOLLC.COM 631.747.1451 WWW.VERDINOLLC.COM CONSULTING ADVISORY SPEAKING