THE NEW AGE OF INNOVATION C.K.PRAHALAD & M.S.KRISHNAN

1. THE NEW AGE OF INNOVATIONC.K.PRAHALAD & M.S.KRISHNAN PREPARED BY ANANG WITJAKSONO

2. INTRODUCTION Three critical aspects of innovation and value creation • Cocreated with consumers. • Access resources from multiple sources. • The emerging markets an be a source of innovation

3. EXAMPLE • iGOOGLE is about cocreation of value & personalization of experience- for fun and learning • The Ponds Institute- measures your skin conditions and seeks your view about how you want look and feel. • Starbucks-pick up your favourite coffee and run, stay and read newpaper, have meeting and do your homework

4. TWO PILLARS OF THE NEXT GENERATION OF INNOVATION N = 1 AND R = G

5. THE NEW HOUSE OF INNOVATION Social architecture of the firm • R=G • Global access to resources and talent N=1 Personalized cocreated experiences Technical architecture of the firm

6. CHAPTER 1 THE TRANSFORMATION OF BUSINESS

7. THE TRANSFORMATION OF BUSINESS, two basic pillars : • Value is based on unique, personalized experiences of consumers- the focus is on the centrality of the individual- N = 1 (one consumers experience at a time) • The focus is on access to resources, not ownership of resources.

8. Example ING, global financing services company • Worked with Unisys, a large IT services firm • For policy processing time from 10 days to 30 seconds • To develop the combination of features that meets specific customer’s needs. • 80 % of its policies are automatically generated this technical platform. • The number of policies written generated has increased by 500%. • Increase cost but revenues per agent and per call also increased (better yield to call ratio)

9. Apple is closer to the n=1 and r= g • Individual users to personalize their experience with their music selection one song at time. • To store of thousand of songs and can listen in a park, gym, at home, cars etc. apple controls over 80% of the $ 4 billion digital music market. • The iPod, as device, is manufactured with partners across the globe. • Disk drive are made by Toshiba, display modules by Matshusita and Toshia Japan, SDRAM by Samsung in Korea and video processors by Broadcom, US firms, final assembly y Taiwanese firm, Inventec, at its facilities in China.

10. The key element of this transformation • Value is shifting from products to solutios to experiences. • No Company has all resources it needs to create unique personalize experiences – from the best source ( R=G) • Flexible systems are a prerequisite and must be developed. • Resources in the ecosystem must be continually configured. • Specific models must be developed to focus on one consumer from the millions.

11. Developing new principles for innovation • Principle 1, N – 1 – • the individual is at the heart of experiences. • Focus on individual consumer • Flexibility, example pricing base on risk assessment for each patient say monthly • Quality, cost and experience, • Collaborative networks, • Complexity, can be managed only through a sophisticated system • Customer interfaces, must be simple and intuititive. • Scability, must be matched with the sheer scale of operation.

12. Developing new principles for innovation - continued • Principle 2, R = G • Resource base of large firms and learning how to access high-quality resources at low cost. • Access resources, move away from vertical integration to access specialized, global suppliers. • Outsourcing is one way to access low cost, high quality talent. • Speed • Scability, continous scaling and downsizing of operation. • Innovation arbitrage, large firms better focus on small firms as sources of innovation.

13. THE N = 1 AND R=G WORLD,unique personalized experiqnces as the basi for value creation and expanding sources of resources

14. THE NEW AGE OF INNOVATION THE N = 1 AND R=G WORLD,unique personalized experiqnces as the basi for value creation and expanding sources of resources

15. CHAPTER 2BUSINESS PROCESSES: THE ENABLERS OF INNOVATION

16. business process • Twin dimension of business process are : • The technical architecture. • Social architecture. • Not just focus on know how but on know why and know what • The bloodstream of an organization. • The link between the business strategy, business models and day to day operation. • The logical relationship among activities within the firm ( and its network collaborators, R=G and its relationship with consumers (N=1)

17. Example business prosess as source of competitive advantage • Wal-Mart, to manage its global chains form China to the US and al places. • FedEx, check on the status of packages. • UPS has partnered with several local PC repair shops and contract technicians in various geographical locations to repair Toshiba PCs (R=G).

18. A list of banking & financial services innovation by icici in india • Internet banking • Microfinance portfolio. • Offering in three market, US, India and Japan. • Doorstep service for home loans. • Bill payment facility on ATMs • Wireless local loop technology. • Solar-powered ATMs. • Nonperforming assets. • Full-fledged statement printing on the ATMs

19. Icici’s core capabilities • Business process flexibility. • Synchronization of strategy, business process and ICT architecture. • Senior management leadership in shaping social structure nd culture.

20. CHAPTER 3analytics:insights for innovation.

21. Analytical tools provide business insights • “Gut feel”, if you will. • Foresight, not hindsight, is of value. • The importance of analytics for actionable insights, but insight must be built on a platform of clear strategic direction. • Analytics must be driven by strategy. • Insight also result from consumer concerns and comments.

22. Global resources access (r=g) • Visible global supply chain. • Dynamic real-time reconfiguration of resources.

23. COCREATION OF VALUE: N=1 The capacity to serve individual customers – that is, personalization and cocreation of value – will demand capabilities to work with customers to anticipate and predict their preferences on a continous basis

24. Building the analytics capability • Competitive landspace : N=1, R=G Structured and unstructured databases Analytics and actionable insights Computing and telecom network Clarity to business process

25. CHAPTER 4it matters:technical architecture for innovation.

26. Business specification for the new ict architecture • Confronting reality. • Compliance and change. • Evolving capabilities. • Enabling foundations.

27. Confronting reality • Capacity to link large systems and multiple databases. • Proprietary system and transparency. • Legacy assets and new applications

28. Compliance and change • Regulatory compliance and change. • Complexity and cost of change. • Quality and speed of change.

29. Evolving capabilities • Secutiry and privacy of data. • Complexity and user-friendliness. • Knowledge management anf knowledge creation.

30. the minimum requirement of an ict platform capabilities for innovation • A component-based design of business process. • Ubiquitous access through a corporate intranet and internet. • Open interfaces to data and external systems. • Integrated capability for analytics.

31. CHAPTER5organizational legacies:impediments to value creation

32. The evolution of dominant logic Success srystallizes business model Development of a new business model Behaviors, skills, analytical tool refelct business model Business model embedded in organizationn System, business process, ict capabilities reflect business model inability to see new opportunities and act on them; inability to build new business models Dominat logic becomes the lens through which new data is interpreted Recipe become dogms: dominant logic

33. Social architecture & dominant logic • The dominant logic becomes the lens through that firm see the world. • What is cool, children don’t pay, but they influence. • New capabilities is not just investment, it is about the way of thingking. • Partnertship with universities to leverage raw talent (in India). • The major pharmaceutical firmas are so focused on intellectual property.

34. CHAPTER 6efficiency and flexibiliti: managing the tension

35. efficiency and flexibiliti: managing the tension • Business process are flexible and can accommodate continuous innovation. • Business process is the mediating glue. • Business process portfolio ; direct to customers, to vendors etc. • No firm can ignore business process governance. • Elasticity of business process. • Example cable TV offers prepaid cards and digital accounts, they pay per use, not per month.

36. CHAPTER 7dynamic reconfiguration of talent

37. Mobilizing talent, not outsourcing • Mobilizing talent – within and outside the firm. • GE, microsoft, siemens, philips, cisco, intel, texasintruments, motorolla, have significant R & D facilities in China and India. • Philips innovation campus in India is Philips’s largest R & D center outside Holland. • The dominance of Taiwan and other Asian countries in semiconductor manufacturing. • Globalization is creating a new dynamic. • Not about exporting job but importing competitiveness.

38. Mobilizing talent, not outsourcing • Implemented in multilocations and around the world. • Expertise is geographically distributed. • Task from new and complex activities to routine. • No fixed patterns in the migration of jobs. • Talent arbitrage not just cost arbitrage. • Velcro organization, come together temporarly to perform a task a related.

39. Three levels for talent of employee • Formal hierarchical structure. • Business process and analytics. • Personal attitudes and skills.

40. CHAPTER 8an agenda for managers : focus on the essence of innovation.

41. THE NEW HOUSE OF INNOVATION Social architecture of the firm • R=G • Global access to resources and talent N=1 Personalized cocreated experiences Technical architecture of the firm

42. The approach to migration depend on : • Starts with a distinct and clear point, value creation depend on N=1 and R=G in the future, • A clear articulation of the current capabilities • Cannot get us to where we want to go • Broken down into smaller milestones and critical double steps. • Can not know all the detail of the journey. • Sense of urgency and stamina.

43. The approach to migration depend on : (continued) • Develop detail metrics. • A long term focus with short term action. • Have to perform during transformation. • Capability building is an arduous process. • Capability building must focus on technical and social infrastructure. • Bound to be time lags between efforts and results.