Overview

1. Overview • Introduction • Disruptive innovations • Disruptive IT innovation • CIO responses • Conclusion

2. Most critical forces changing global marketplaces over next 3 years? Advances in IT 58% Outsourcing & off-shoring 57% Customer pressures 52% Increased competition 48% Globalization of supply chains 44%

3. Most important IT to achieve your strategic goals over next 3 years? Internet 79% Business Intelligence / Knowledge Mgmt 63% Mobile / Wireless 52% New Customer Relationship Mgmt (CRM) 51% Risk Management solutions 46%

4. Starting point ... • Being a CIO used to be about control. Now it’s about responding to and managing change.” • “CIOs need to understand their company’s business, and they require strong competencies in delivery (program & process management). You can pay someone else to keep the PCs running cheaply, but getting value from the IT department is about leveraging business process knowledge.” CIO, Campbell Soup Company, 2003 • Do you agree or disagree? Why?

5. Definitions & categories Innovation is not Invention: • Invention is the process of discovering new things • Innovation is the discovery of new ways of creating value Types of Innovation - based on impact • Sustaining - maintain competitive status quo of a market by enhancing existing products or services according to traditional measures of performance valued by customers • Disruptive - upset the status quo by fundamentally altering ways customers think about product or service performance Sources of innovation • Sustaining innovations often pioneered by established companies • Disruptive innovations usually come from newcomers — posing a mortal threat to even the most dominant of industry leaders (Christensen C. (1997) The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail Harvard Business School Press)

6. Categories of Disruptive Innovation Bottom-Up Innovations • initially very undemanding applications • underperform established products in mainstream markets • sell for less money than current offerings • tend to be ignored by the majority of buyers & traditional suppliers • gain footholds in lower part of market • as performance steadily improves, rise to redefine entire market, displacing industry incumbents • Opportunity – newcomers, Threat - incumbents • eg steel minimills during the 1970s and 1980s

7. Categories of Disruptive Innovation Top-Down Innovations • outperform existing products when introduced • sell for a premium price rather than at a discount • initially purchased by the most discriminating & least price-sensitive buyers • move steadily to transform the mainstream • Opportunity – newcomers & incumbents • Threat – incumbents & competitors • eg FedEx delivery speed & service, Wang word processors(Carr, Top-Down disruptions 2005)

8. Disruptive InnovationsExamples • Penta IPS • Moth • EEC • iPod

9. Volvo’s Penta IPS Inboard Performance System for motor boats Challenge: Aeroplane engines pull. Why do boat engines push? • € Multi-million investment & five-year R&D project • Launched December 2004 Result: Rear-mounted, standard engines with twin counter-rotating forward facing propellers that turn with the steering wheel Impact: Revolution in motorboat propulsion & design • Most important development in propulsion since invention of outboard motor (MBY magazine UK 2004) • Drive shafts & rudders obsolete! • Acceleration ↑ 15%, Top speed ↑ 20%, Fuel economy ↑ 30% • More than 40 patents granted for the IPS system

10. Volvo Penta Volvo Penta IPS