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1、FROM GOOD TO GRE AT:ENHANCING INNOVATION PERFORMANCE THROUGH EFFEC TIVE MANAGEMENT PROCES SESResults of the 9th Arthur D.Little Global Innovation Excellence Benchmark2023CONTENTEXECUTIVE SUMMARY 41.STRENGTHEN MANAGEMENT PRACTICES FOR BETTER INNOVATION RESULTS 82.INVESTING IN BREAKTHROUGH INNOVATION

2、TO IMPROVE PORTFOLIO PERFORMANCE 183.BUSINESS MODEL INNOVATION AN UNDEREXPLOITED TOOL 264.INNOVATING FOR VALUE BY ADDRESSING THE GAP IN BU PERFORMANCE 325.THE BENEFITS&PITFALLS OF AGILE INNOVATION 366.EXCELLENCE IN INNOVATION LEADERSHIP PULLING IT ALL TOGETHER 42BENCHMARK YOUR INNOVATION PERFORMANCE

3、 45CONTRIBUTING AUTHORSBEN THURIAUX-ALEMNPartner,LDR.MICHAEL KOLKGlobal Leader&Partner,Amsterdam DR.JAMES SEMPLEConsultant,LDR.HABIB HUSSEINPrincipal,LFREDERIK VAN OENEAssociate Director,BLE AD AUTHORSDR.ARNAUD SIRAUDINAssociate Director,PMARTIN GLAUMANNPartner,SPHILIPP MUDERSBACHPartner,FDR.ALBERT

4、MEIGEDirector of Blue Shift,PATSURO INOUEPrincipal,TKERSTIN WIDMANNConsultant,SRAYHAAN SURVEBusiness Analyst,LRICK EAGARPartner Emeritus,LSHOTA MITSUYAPartner,TBEN VAN DER SCHAAFPartner,New York CRUI IBUKIPrincipal,TSIMON NORMANManager,LELIS WILKINSConsultant,LIGNACIO GARCA ALVESCEO,BPHILIP VAN BAST

5、EN BATENBURGConsultant,Strategy&OrganizationA SALMAN ALIPrincipal,Telecommunications,Information Technology,Media&ElectronicsMTECHNOLOGY&INNOVATION MANAGEMENT PRACTICETECHNOLOGY&INNOVATION MANAGEMENT PRACTICESTRATEGY&ORGANIZATION AND INDUSTRY PRACTICESAVOIDING WASTE IN INNOVATION INVESTMENTInnovatio

6、n is essential for solving todays global challenges and for the creation of differentiated new products and services that lead to profitability and growth.As an example,research carried out by Arthur D.Little(ADL)for the Association of Swedish Engineering Industries in 2023 found that investment in

7、R&D generated a 7x return on innovation investments made by the Swedish state.Analysis comparing total shareholder returns of various types of capital usage has long indicated that over time and on average,R&D provides better shareholder returns than CAPEX,share buybacks,acquisitions,debt reduction,

8、or dividends.1Over the last 10 years,however,returns on and satisfaction with innovation have been in decline.THE BEST INNOVATION MANAGEMENT PRACTICES DELIVER AN AVERAGE 70%MORE PROFIT&30%SHORTER TIME TO BREAKEVENIn fact,a lot of R&D investment is“wasted,”partly because it is in the nature of innova

9、tion to be uncertain and many ideas and projects turn out to be unrealizable.However,much waste is not necessary and is caused by weak innovation management processes.We continue to see:-A clear relationship between measures of innovation management and overall innovation success(measured in terms o

10、f new product or service sales contribution,EBIT margins,and time to breakeven).For most companies,there is clearly a significant payoff to improving innovation management.1 BlackRock Investment Institute,2016.E XECUTIVE SUMMARY4REPORT:FROM GOOD TO GREAT:ENHANCING INNOVATION PERFORMANCE THROUGH EFFE

11、CTIVE MANAGEMENT-Investment in R&D that is not globally correlated with innovation success.Unless your company is the top quartile in terms of innovation management,further investments in R&D and innovation do not appear to pay off.We estimate that it is possible to achieve well in excess of 30%impr

12、ovement in terms of innovation success for companies that score outside of the top quartile in innovation management.While the innovation approaches of leading companies,from Apple to Tesla,are held up as role models,their practices may not be applicable to other,very different,organizations and ind

13、ustries.It can therefore be difficult to identify the most relevant best practices and understand what specific changes need to be implemented to help your own organization achieve innovation success.So where should you start?Built on hard empirical evidence of what really works when it comes to man

14、aging innovation,ADLs Global Innovation Excellence Benchmark(GIEB)highlights the innovation management practices that correlate most strongly with innovation success across different industries.Running for more than 25 years and nine editions,the GIEB allows companies to rank and profile themselves

15、versus their peers on their innovation performance.The latest edition provides new insights about the drivers of innovation success and the link between innovation and growth.The Report highlights key trends from ADLs proprietary and proven Innovation Excellence Model as well as data from 2018 onwar

16、d,which point to five specific focus areas to improve innovation management practice.These are the areas in which leading innovation organizations have excelled and which have been demonstrated to reduce investment inefficiency and improve returns:ARTHUR D.LITTLE51.Breakthrough innovation management

17、 practices.ADL analysis shows that those companies that proactively invest more in less certain innovation endeavors,including breakthrough innovation and building out new technologies in new markets,have higher overall innovation success.They generate greater revenues and margins from new products,

18、services,and business models.2.Business model innovation management practices.Business model innovation can drive sustained profitability for businesses of all sizes,delivering productivity and growth opportunities.It is an area that benefits from deploying the power of AI to reconfigure processes a

19、nd value chain positioning.However,it is often overlooked;most organizations struggle with it.ADLs experience shows that companies need to challenge themselves and understand their“nightmare competitors”to disrupt themselves.Implementing this means engaging with multiple stakeholders within and outs

20、ide the business to tackle common barriers that hinder success.3.Closing the gap between business units.ADL research shows that the typical gap in innovation management practices between different business units within the same company is sizable,contributing to lower overall performance and lost re

21、venue and profit.The issue can be addressed by having the right innovation governance strategy,creating common forums and spaces for collaboration,and sharing innovation practices better across the organization.4.Agile innovation management practices.Firms with a capability to execute innovation pro

22、jects in an agile manner with the right tools tend to have overall higher innovation success.Processes must be in place to allow for multidisciplinary teams to be assembled,with iterative working and governance that do not act as a bottleneck.Properly adopted and tailored to the nature of the indust

23、ry,companies can create a competitive advantage by identifying bigger ideas,developing them faster,and executing them better and more efficiently.6REPORT:FROM GOOD TO GREAT:ENHANCING INNOVATION PERFORMANCE THROUGH EFFECTIVE MANAGEMENT5.Leadership.The capabilities and behaviors of those leading innov

24、ation effort have a huge impact on its effectiveness.Innovation leadership is no different than any other form of business leadership;it requires a combination of strategic thinking,strong communication skills,problem-solving abilities,emotional intelligence,and integrity.But innovation has changed.

25、To meet new needs,innovation leadership needs to now focus on five key capabilities:vision belief,meta knowledge,network skills,perspective originality,and a digital-first mindset.Throughout the Report,we provide evidence on innovation management trends and share practical advice on good practices t

26、o address weaknesses.The ADL GIEB is a continuous process,and we would be delighted to receive your contributions either to the survey or to further reporting.We hope that you find it informative and useful for your ongoing innovation management efforts.ADLs 9th edition of the Global Innovation Exce

27、llence Benchmark takes data from 500 benchmark respondents,with analysis contributions from across the practice and beyond Source:Arthur D.LittleARTHUR D.LITTLE71.STRENGTHEN MANAGEMENT PR AC TICES FOR BE T TER INNOVATION RESULT S There is a clear link between good innovation management practices and

28、 innovation success.Previous studies have found a strong positive relationship between the successful deployment of innovation management practices of the Innovation Excellence Model and the innovation success they achieve(see Figure 1).2,3 This correlation holds true across all industries,despite t

29、he huge diversity in terms of products,services,customers,and industry-specific dynamics.Fundamentally,this pattern demonstrates that implementing effective innovation management practices can help companies attain greater success in innovation.The GIEB covers more than 500 organizational units(comp

30、anies and business units),breaking down their activities into the constituent components of the ADL Innovation Excellence Model.4 This established model,validated in a range of peer-reviewed publications,5 provides a framework to examine the different components of the innovation system and the inno

31、vation management best practices companies can adopt to achieve high performance in this area(see“The ADL Innovation Excellence Model”).The model measures:2 Thuriaux-Alemn,Ben,Rick Eagar,and Anders Johansson.“Getting a Better Return on Your Innovation Investment.”Arthur D.Little Prism,2013.3 Tidd,Jo

32、e,and Ben Thuriaux-Alemn.“Innovation Management Practices:Cross-Sectorial Adoption,Variation,and Effectiveness.”R&D Management,Vol.46,Issue S3,October 2016.4 For further information on the Dynamic Innovation Strategy Model,see:Eagar,Rick,Michael Kolk,and Fredrik Hrenstam.“Dynamic Innovation Strategy

33、:How to Develop a Strategy for Innovation in the Fast-Moving Digital World.”Arthur D.Little Viewpoint,2017.5 Tidd and Thuriaux-Alemn,2016.-Innovation management practices how sophisticated your innovation management practices are versus best practices,assessing how well your company has implemented

34、practices that contribute to the nine core elements and four cross-cutting themes of the ADL Innovation Excellence Model.-Innovation success what your innovation effort delivers in terms of business impact.This is a composite score based on sales from new products/services/business models,the earnin

35、gs before interest and taxes(EBIT)from new products/services,the impact of innovation-related process improvements,time to breakeven,revenue generated from breakthrough innovation,and management satisfaction with innovation performance.Importantly,we normalize responses for the different components

36、of innovation success by industry or by peer group because margins and time to breakeven,and so on,vary significantly by industry.by Ben Thuriaux-Alemn,Dr.Habib Hussein,Dr.James Semple,Dr.Michael Kolk,Martin Glaumann,Rick Eagar,and Frederik Van Oene 8REPORT:FROM GOOD TO GREAT:ENHANCING INNOVATION PE

37、RFORMANCE THROUGH EFFECTIVE MANAGEMENTARTHUR D.LITTLEFigure 1.The positive relationship between innovation management practices and innovation success holds across industriesSource:Arthur D.LittleSource:Arthur D.LittleFigure 1.The positive relationship between innovation management practices and inn

38、ovation success0.20.40.60.81200300400500600700800900SuccessInnovation management practicesTop quartileMedianBottom quartileTop quartileMedianBottom quartileTelecommunications,IT/software&mediaChemicalsUtilitiesManufacturing engineering&machineryAutomotive manufacturing&suppliersMedical technology&me

39、dical devices0.20.7200400600800SuccessInnovation management practices0.20.7200400600800SuccessInnovation management practices0.20.7200400600800SuccessInnovation management practices0.20.7200400600800SuccessInnovation management practices0.20.7200400600800SuccessInnovation management practices0.20.72

40、00400600800SuccessInnovation management practices9The ADL Innovation Excellence ModelThe Innovation Excellence Model(see Figure A)is used to calculate a single score on overall company(or business unit)innovation management practices deployment,answering the question,“How sophisticated is your innov

41、ation management approach versus best practice?”The model includes nine elements(A-I in Figure A)and four“hot topics”(1-4)that cross-cut them:A.Innovation strategy,objectives,and governance delivers the companys objectives using a long-term implementation roadmap.Objectives are steps to achieve inno

42、vation goals based on corporate strategy.B.“Push”or technology intelligence reflects a companys ability of to conduct technology intelligence;identify relevant technologies,tools,and trends;and use these insights to push technology adoption.C.“Pull”or market intelligence consists of analyzing market

43、 or operational needs directly or indirectly(e.g.,via the voice of the customer)to develop new innovations(e.g.,products,services,business models),allowing companies to respond to“demand pull.”D.Idea management is the process through which companies encourage creative ideas and develop,enrich,and pr

44、ioritize them to launch innovation projects.E.Innovation project management comprises all steps needed to manage the transformation and launch of an innovation project.F.Portfolio management consists of analyzing,prioritizing,allocating resources to,and terminating projects in the innovation project

45、 portfolio,based on alignment with strategy,resource constraints,risks,and potential ROI.G.The project deployment phase marks the transition from R&D into piloting,scale-up,and product launch and is an integral part of the innovation model,offering the opportunity to gather feedback and thus continu

46、ously improve and adapt an innovation.H.Ecosystem processes are the approaches through which external and internal actors(e.g.,suppliers,customers,joint venture partners)are leveraged to enhance a companys innovation capabilities.I.Resource and competence management is the ability to ensure innovati

47、on projects are efficiently staffed,teams benefit from the right capabilities,and staffing processes offer sufficient flexibility to adapt to a fast-paced environment.Figure A.The ADL Innovation Excellence ModelSource:Arthur D.LittleSource:Arthur D.LittleFigure A.The ADL Innovation Excellence ModelI

48、nnovation strategy,objectives&governance DeploymentIdea managementInnovation project managementPortfolio managementMarket intelligenceTechnology intelligenceABCDFEG100900300500700Resource&competence managementEcosystem processesCross-cutting“hot topics”HIInnovation engineBreakthrough innovationAgile

49、 ways of workingDigitally enabled innovationBusiness model innovation12341 0REPORT:FROM GOOD TO GREAT:ENHANCING INNOVATION PERFORMANCE THROUGH EFFECTIVE MANAGEMENTARTHUR D.LITTLECross-cutting“hot topics”1.Agile ways of working leverage rapid iterative loops to address key uncertainties as early as p

50、ossible in the innovation process.Agile processes typically rely on multidisciplinary teams that adapt their innovation process to the specific innovation challenge at hand.2.Breakthrough innovation is an activity that develops a completely new market space(not only for the firm)or a new business mo

51、del.It could also be an innovation that creates a new set of performance features or significantly improves performance(over 5x)of existing features.It could be product,service,process,or business model innovation or a combination.3.Digitally enabled innovation management reflects the ability of a c

52、ompany to successfully deploy digital technologies to strengthen its innovation capabilities and improve its overall innovation performance.4.Business model innovation(BMI)is the result of a combination of product/service and process innovation along with organizational change or value chain reconfi

53、guration.It includes new ways to reach markets and customers or offers new or enhanced value propositions.It can include using partners and the external ecosystem to deliver customer value.As shown in Figure 2,top-quartile innovation management practitioners realize an average of 9%points difference

54、(56%more)in EBIT from new products and services(3 years on the market)when compared to peers with bottom-quartile innovation management practice scores in the same sector.Top-quartile innovators also realize an average of a 9%point difference(in share of 2.1x more)turnover from new products and serv

55、ices players and use 36%less time to reach breakeven from their investments in business model innovation.This range of performance demonstrates the huge opportunity cost for those not currently in the top quartile.With ample scope to improve on their innovation performance,these practitioners can dr

56、amatically increase their business success,and by learning from their peers and other industries and adopting proven best practices,they can elevate their innovation scores.Figure 2.Better innovation management generates more EBIT and revenue from innovation investmentSource:Arthur D.LittleSource:Ar

57、thur D.LittleFigure 2.Innovation success factors and link to business success17.5%15.8%13.1%8.4%7.5%3.6%Breakthrough revenue%Revenue from new products 3 years on the marketEBIT from new products 3 years on the marketx2.1x2.1Top-quartile innovatorsMiddle halfBottom-quartile innovators25 months39 mont

58、hs36%FasterBMI time to first revenue(months)1 1For example,within the chemical industry benchmarks,the most innovative company achieves a score of 763 out of a possible 900 for innovation excellence,while an average performer will achieve around 513.If that average chemical company improved to achie

59、ve top-quartile innovation returns for products with less than three years on the market,it would improve its EBIT from new products by up to 8%points,assuming it followed the same overall trend we see in responses.When we consider the enormous continued investment required for new products and serv

60、ices,this suggests that a lot of money is being left on the table in terms of improvement potential.The BlackRock Investment Institute did an interesting piece of analysis comparing total shareholder returns of various types of capital usage,including R&D,in the Russell 1000 Index(see Figure 3).In t

61、he long run and on average,BlackRock found R&D to be a better use of investment than,for instance,CAPEX or acquisitions.For an organization struggling to see returns on innovation investment,allocating additional resources to R&D departments thus may seem like a practical solution.Many studies claim

62、 a clear link between investing in R&D and firm performance.However,ADLs latest analysis shows that this is not as straightforward as previously thought.Across industries,the data shows no significant correlation between R&D intensity and innovation success.The view changes when we focus on the orga

63、nizations with the best innovation management practices(see Figure 4).These companies,which display top-quartile innovation management practices,show a clear relationship between the level of investment and the companys return(innovation success);a pattern that holds true across industries but impor

64、tantly does not hold true for companies outside the top quartile that would waste any increased investment in further R&D.BEST PRACTICES DIFFER BY INDUSTRY The relative importance of the elements behind innovation success clearly vary among industries.You cannot expect innovation processes within a

65、food and beverage company to be identical to those of a heavy industrial company,for example.ADLs model takes these differences into account using an approach based on sector data to normalize performance between sectors and to provide peer-to-peer comparisons.While the model is relevant across all

66、industries,there are some differences between sectors in terms of the elements of the model that are most important and have the highest impact on innovation success.To understand these differences,we asked benchmark participants to rate the relative importance of a variety of elements(see Figure 5)

67、.In analyzing these responses,it becomes clearer which elements are perceived to be most significant as well as how their relative importance relates to the nature and dynamics of the industry.Findings included:-For virtually all industries,technology and market intelligence are highly valued.In par

68、ticular,telecoms highly value technology intelligence,reflecting the transformative nature of fast-moving technology trends within these two sectors(notably digital technologies and a shift toward sustainability).-Automotive,electrical engineering,and food and beverage rate innovation project manage

69、ment most highly.This corresponds to the broader importance of process and efficiencies in these industries,which typically use tools such as Lean Six Sigma,Kaizen,and Total Quality Management and focus on innovating for value.-Food and beverage companies also attach high importance to deployment an

70、d rollout.Given that product development cycles in this sector can be less than three months,Figure 3.US shareholder returns(Russell 1000 Index,1985-2015),5-year period,difference to averageSource:BlackRock Investment Institute,2016Source:Arthur D.LittleFigure 3.US shareholder returns(Russell 1000 I

71、ndex,1985-2015),5-year period,difference to average45.75.61.4-2.7-3.9-7.2Debt reductionR&DShare buybacksCAPEXAcquisitionsDividends1 2REPORT:FROM GOOD TO GREAT:ENHANCING INNOVATION PERFORMANCE THROUGH EFFECTIVE MANAGEMENTARTHUR D.LITTLEmarketing innovation is often more important than technological i

72、nnovation,and time to market is critical.This all reinforces the importance of fast rollout to innovation success.-The automotive sector rates portfolio management as an important element,reflecting the significance of product platforms in the industry,the focus on creating dedicated portfolios of p

73、roducts to meet fast-evolving customer needs,and the complex technologies required to support product development.-The chemicals sector places a relatively strong emphasis on idea management,reflecting the importance of end-to-end product development in the sector and the adaptability needed to supp

74、ly a diverse and dynamic customer base.Pull,or market intelligence,is also valued,particularly around customer willingness to switch supplier/product and to pay more for innovation.OUTSIDE OF TOP QUARTILE,A BETTER INVESTMENT WOULD BE TO IMPROVE HOW YOU MANAGE INNOVATION UNLESS YOU ARE IN THE TOP QUA

75、RTILE,INVESTING MORE IN R&D DOES NOT LEAD TO AN INCREASE IN INNOVATION SUCCESSFigure 4.Innovation investment vs.return,by management performanceSource:Arthur D.LittleInnovation success increase per 1%increase in R&D intensitySource:Arthur D.LittleFigure 4.Innovation investment vs.return,by managemen

76、t performance50.30.40.50.60.70.80.9012345SuccessR&D intensity(%)OtherTopquartile0.0230.002Top-quartile innovation mgmtRest0.30.50.70.9024SuccessR&D intensity(%)Chemicals0.30.8012SuccessR&D intensity(%)Automotive0.30.802SuccessR&D intensity(%)Food&beverageSELECTED INDUSTRIES1 3Figure 5.Variations in

77、importance of different innovation management practices between industriesSource:Arthur D.LittleSource:Arthur D.LittleFigure 5.Variations in the importance of different innovation management practices between industries6Electrical engineeringPortfolio managementInnovation project management Deployme

78、ntIdea managementInnovation strategy,objectives&governance Market intelligenceResource&competence managementTechnology intelligenceEcosystem processesABCDFHIEGPortfolio managementInnovation project management DeploymentIdea managementInnovation strategy,objectives&governance Market intelligenceResou

79、rce&competence managementTechnology intelligenceEcosystem processesABCDFHIEGFood&beverageChemicalsPortfolio managementInnovation project management DeploymentIdea managementInnovation strategy,objectives&governance Market intelligenceResource&competence managementTechnology intelligenceEcosystem pro

80、cessesABCDFHIEGAutomotivePortfolio managementInnovation project management DeploymentIdea managementInnovation strategy,objectives&governance Market intelligenceResource&competence managementTechnology intelligenceEcosystem processesABCDFHIEGTelecommunications,IT/software&mediaPortfolio managementIn

81、novation project management DeploymentIdea managementInnovation strategy,objectives&governance Market intelligenceResource&competence managementTechnology intelligenceEcosystem processesABCDFHIEGIndustrialsPortfolio managementInnovation project management DeploymentIdea managementInnovation strategy

82、,objectives&governance Market intelligenceResource&competence managementTechnology intelligenceEcosystem processesABCDFHIEGLowestHighest1 4REPORT:FROM GOOD TO GREAT:ENHANCING INNOVATION PERFORMANCE THROUGH EFFECTIVE MANAGEMENTARTHUR D.LITTLETECHNOLOGY AND MARKET INTELLIGENCE PROCESSES ARE EQUALLY IM

83、PORTANT TO ALL INDUSTRIESDespite the differences,some categories of innovation management processes are equally important to all industries.Many of these practices,such as ecosystem approaches and business model innovation,remain underused across industries,as illustrated in Figure 6,providing a cle

84、ar opportunity for deploying these to increase performance.ECOSYSTEM PROCESSES AND IDEA MANAGEMENT UNDERPERFORM OR ARE NOT WIDELY ADOPTEDINNOVATION PERFORMANCE SATISFACTION DECLINES Reported financial returns from innovation have fallen across a range of business metrics since 2012,as illustrated in

85、 Figure 7.This drop,combined with other factors such as digitalization and technology convergence,is driving increased complexity and making innovation beyond the core harder.This has led to a corresponding increase in the number of companies reporting an average or low level of satisfaction with th

86、eir innovation investments(see Figure 7).In fact,just over a quarter(29%)of recent respondents say they are satisfied with their innovation performance,falling from 62%in 2012.According to ADL analysis,factors impacting innovation success include the increasing cost of innovation,lower risk appetite

87、s(leading to a higher focus on incremental innovation instead of transformative breakthrough innovation),and the maturation of many markets.The failure to fully engage with customers,suppliers,start-ups,universities,and the wider ecosystem of innovators to drive growth is especially noteworthy.Figur

88、e 6.Areas of innovation management underperformance across industries Source:Arthur D.LittleSource:Arthur D.LittleFigure 6.Areas of innovation management underperformance across industries 7Portfolio managementDeploymentInnovation project management Idea managementInnovation strategy,objectives&gove

89、rnance Market intelligenceResource&competence managementTechnologyintelligenceEcosystem processesABCDFHIEGRelatively low performance and adoptionHigh adoption and performance1 5Altogether,the GIEB data suggests that traditional innovation practices are not delivering the same benefits as they provid

90、ed in the past.There is a clear need for new practices to meet the requirements of a changing,evolving world.Importantly,this downward satisfaction trend can be reversed because underperforming practices across industries(refer back to Figure 6)can be targeted to increase R&D efficiency.TRADITIONAL

91、INNOVATION PRACTICES ARE NOT DELIVERING THE SAME BENEFITS AS THEY PROVIDED IN THE PASTThe ADL model highlights the benefits of taking an integral view of innovation management to realize growth and value creation.Figure 8 summarizes the main five options in two main areas of innovation:1.Innovate fo

92、r growth focusing on profitability through defense,enhancement,or transformation.Approaches include new products,services,and business model creation;the development of the innovation ecosystem;solving challenging problems;and developing entirely new businesses via breakthrough innovation.Breakthrou

93、gh innovation(described in Chapter 2)and Agile innovation(see Chapter 5)are two practices organizations can adopt to focus on innovating for growth.Figure 7.Innovation returns and satisfaction with innovation performance,20122022Source:Arthur D.LittleSource:Arthur D.LittleFigure 7.Innovation returns

94、 and satisfaction with innovation performance,201220228Very satisfiedQuite satisfiedNeither satisfied nor dissatisfiedQuite dissatisfiedProportion of revenue from new productsProportion of EBIT from new productsFrom products 3 years on the marketFrom products 1 year on the marketOverall decreasing s

95、atisfaction(33%drop)Overall increasing dissatisfaction(8%rise)Very dissatisfied3%3%2%8%14%17%28%38%52%43%34%27%19%12%2%20122013-20172018-20230%5%10%15%20%20122013-20172018-202320122013201720182023201220132017201820231 6REPORT:FROM GOOD TO GREAT:ENHANCING INNOVATION PERFORMANCE THROUGH EFFECTIVE MANA

96、GEMENTARTHUR D.LITTLE2.Innovate for value focusing on core growth,productivity,or decreasing resource intensity.Approaches include understanding technology needs and designing dynamic innovation strategies,optimizing productivity,and delivering cutting-edge innovation capabilities.The simplest way f

97、or large organizations to innovate for value is to isolate areas of good practice internally,via cross-business unit innovation analysis and harmonizing/optimizing innovation management practices(see Chapter 4).Alongside these approaches,business model innovation(see Chapter 3)spans both growth and

98、value.BUSINESS MODEL INNOVATION SPANS BOTH GROWTH AND VALUEFigure 8.Managing for business impact in innovationSource:Arthur D.LittleSource:Arthur D.LittleFigure 8.Managing for business impact in innovation9Current stateRaw material&energycostsOperating costsEBITDepreciationRevenues cost breakdown134

99、52Transform(transformational growth)Enhance(adjacent growth)Defend(core growth)Increase asset/employee productivityDecrease resource intensity132Innovate for growthInnovate for value54Post-transformation1 7It is widely acknowledged that successful organizations use a well-balanced innovation portfol

100、io to drive future growth(see Figure 9).However,short-term targets,poor innovation management processes,risk-averse senior management,and other factors mean that many companies still heavily weigh their innovation portfolio toward incremental or step-change innovations with very little emphasis on b

101、reakthrough innovation as a growth lever.Many executives fail to properly balance the notion that disruptive innovation endeavors are more likely to fail against the upside that they may provide a new space for the company to thrive,fostering long-term success and survival.Unfortunately,cognitive bi

102、as toward near-term,less risky,smaller returns has the tendency to win out,and unless significant effort is applied,CTOs often find themselves overprioritizing incremental innovations with more reliable returns in the short term.In fact,ADLs latest research shows that those companies that proactivel

103、y invest more on“riskier”innovation endeavors,building out new technologies in new markets,have higher company innovation success scores.Breakthrough innovation is often closely tied to the new technology-new market quadrant shown in Figure 9.Breakthrough innovation can be defined as an activity tha

104、t develops a completely new market space(not just new for the firm)or a completely new business model.It could also be an innovation that creates an entirely new set of performance features,significantly improves performance by over five times compared to existing features,or reduces costs by more t

105、han 30%.Breakthrough innovation spans all innovation categories it can be a product,service,process,or business model innovation,or a combination of these.There is a myth that breakthrough projects have higher risk.In fact,this depends on your perspective.If risk=uncertainty x cash flow exposure,the

106、n there is limited risk in breakthrough projects because the downside is limited to the innovation project cost.The real source of risk is missing out on the upside of a market opportunity.But it is true that breakthrough projects have inherently higher uncertainty(and higher rewards).As a result,th

107、ey require a different set of innovation management processes,a different set of stakeholders,and different metrics and monitoring criteria.ADL data shows that those who score highest for breakthrough innovation management clearly differentiate between breakthrough and incremental innovation and man

108、age them differently.Leaders ensure that their portfolios are clearly split and that their innovation strategy sets out explicit boundaries,expectations,and resources for breakthrough innovation versus incremental innovation.2.INVESTING IN BRE AK THROUGH INNOVATION TO IMPROVE P ORTFOLIO PERFORMANCEb

109、y Dr.Habib Hussein,Simon Norman,Philipp Mudersbach,Dr.Arnaud Siraudin,Kerstin Widmann,Rick Eagar,and Ben Thuriaux-AlemnFigure 9.Technology/market innovation strategy planning framework Source:Arthur D.LittleSource:Arthur D.LittleFigure 9.Technology/market innovation strategy planning framework 10New

110、 technology for existing markets&customers New technology for new markets Existing technology for new markets&customers Existing technology for existing markets&customers Technology MarketExistingNewExistingNew_%of innovation budget_%of innovation budget_%of innovation budget_%of innovation budget1

111、8REPORT:FROM GOOD TO GREAT:ENHANCING INNOVATION PERFORMANCE THROUGH EFFECTIVE MANAGEMENTARTHUR D.LITTLEAnalysis of the GIEB shows that strengths in breakthrough innovation deliver two key benefits:1.Those companies that have allocated a portion of their budget specifically to breakthrough innovation

112、 projects reap better results,generating greater revenues from disruptive new products,services,and business models.2.Higher returns from breakthrough innovation correlate positively with overall higher innovation success.Companies where breakthrough innovations make up more than 5%of revenues have

113、an average innovation success score of 0.61.In comparison,companies where 0%-5%of revenue comes from breakthrough innovations have an average innovation success score of 0.53.The implication is that better breakthrough success leads to better overall innovation success.BREAKTHROUGH INNOVATION SPANS

114、ALL INNOVATION CATEGORIESINVESTING IN BREAKTHROUGH INNOVATIONThe results of ADLs analysis indicate that there is a clear link between where companies invest on innovation and their overall success:-Those that have a clear focus on breakthrough innovation as part of their innovation strategy generate

115、 on average a better return on innovation investment.The data shows that those companies with the best innovation success scores,with the highest revenue and EBIT from new products and services,spend proportionally more of their budget on breakthrough innovations(see Figure 10).Essentially,focusing

116、more on new technologies in new markets leads to greater benefits from innovation investments over the medium to long term.Extending existing technology to new markets can also generate a higher-than-average return on innovation.However,global firms have often reached the limits of entering new mark

117、ets and this is then only viable for companies that are still expanding geographically.Figure 10.Innovation budget spending profile of top 25%innovation success companies vs.bottom 25%Source:Arthur D.LittleSource:Arthur D.LittleFigure 10.Innovation budget spending profile of top 25%innovation succes

118、s companies vs.bottom 25%1121%25%13%25%35%45%17%19%Investment on markets&customersInvestment on technologyExistingNewExistingNewTop innovation performersBottom innovation performersInnovation budget spending profile 1 9-Companies that invest in breakthrough innovation spaces are better overall at de

119、livering innovation.Simply investing in new technology for new markets is not enough to deliver significant results.You need to spend money in the right areas and have the right innovation management practices in place,otherwise you are wasting your investment.Figure 11 shows that the top 25%of comp

120、anies that successfully implemented breakthrough innovation that facilitates them entering new markets with new technologies score correspondingly higher in deployment of innovation.This highlights the importance of considering and involving the entire innovation value chain to ensure that the gaps

121、from idea to technology to product and market success are bridged.COMPANIES THAT INVEST MOST IN NEW MARKETS AND NEW TECHNOLOGY HAVE STRONGER BREAKTRHOUGH INNOVATION CAPABILITIES Our analysis indicates that those companies that invest more in new technology and new markets display breakthrough innova

122、tion management practices 16%above the average.Companies that spend the most on developing for“new markets,new technologies”also invest on average 28%more on breakthrough innovation compared to others.This is logical,as strong innovation management practices correlate with higher success,which in tu

123、rn will give leadership teams and decision makers greater confidence in investing in higher-uncertainty projects.WHAT UNDERPINS BREAKTHROUGH INNOVATION SUCCESS?Our analysis indicates that a focus on breakthrough innovation is a key tool of companies focused on innovating for growth and a critical un

124、derpinning component that contributes to overall higher innovation success.However,creating the foundations for serial breakthrough innovation is challenging and involves focusing on six key success factors:Figure 11.Contrasting performance of companies that invest most in“new markets and new techno

125、logy”Source:Arthur D.LittleSource:Arthur D.LittleFigure 11.Contrasting performance of companies that invest most in“new markets and new technology”12“Push”intelligence“Pull”intelligenceInnovation strategy,objectives&governanceIdea managementInnovation project managementPortfolio managementDeployment

126、Ecosystem processesResource&competence managementNo change from average performanceSubstantial improvement vs.average performanceABCDEFGHIBreakthrough innovationAgile ways of workingDigital innovation management toolsBusiness model innovation12342 0REPORT:FROM GOOD TO GREAT:ENHANCING INNOVATION PERF

127、ORMANCE THROUGH EFFECTIVE MANAGEMENTARTHUR D.LITTLE1.A clear strategy&senior management supportTo complement bottom-up ideation for detecting disruptive concepts,it is generally useful to add a top-down approach.To succeed in this new era,companies must find platforms of stability and consistency to

128、 allow them to fully leverage their investments and resources in an agile,flexible,and dynamic way.They must also be able to communicate this purpose and direction to the markets and to their own staff,including full senior management support.To meet these challenges,ADL has developed a methodology

129、called“Innovation Purpose”for aligning R&D around innovation.6 The methodology consists of answering the following questions:-Why keep R&D rather than“nothing”?-In which business attributes should we be the best in terms of customer value?-In which associated technologies should we invest?-How do we

130、 define our R&D DNA to be at the leading edge of our markets?The Innovation Purpose approach engages R&D in a natural transformation process,clarifies the benefits it brings to the business,and helps select the technologies needed to develop breakthrough concepts and optimize resources while leverag

131、ing the innovation departments culture and working methods.Breakthrough innovation will not happen without a clear,well-defined strategy that explicitly states the commitment to this type of innovation and sets meaningful investments and clear goals.The more explicit the goals are,the greater the li

132、kelihood of achieving success.Goals can be derived from both the high-level innovation purpose defined by the organization and in response to trends/disruptions picked up through a“Future of X”study.Given the nature of breakthrough innovation,that means high uncertainty and often longer development

133、timelines,senior-level commitment,and a full investment plan are required to provide the resources and focus to follow through on these projects.6 Bamberger,Vincent,et al.“Innovation Purpose:Aligning Global R&D in Todays Fast-Moving Environment.”Arthur D.Little Prism,2019.There should also be a comm

134、itment to engage external partners such as customers,suppliers,and universities.In addition,corporate venture capital(CVC)investments in start-ups can serve as seeds for breakthrough innovations,and M&A activities over time can be useful for acquiring external resources.The success and speed of brea

135、kthrough innovation depend on these aspects being considered in the strategy and not having to be resolved on an ad hoc basis.2.Articulating the target operating modelThe starting point for any breakthrough project is to articulate clearly the target offer characteristics in a way that is outcome-fo

136、cused,stretching(targets)and not over-constraining in terms of product details such as target performance,key functionalities,cost,and time to market.Product architecture is a central consideration at this stage.For complex products or systems,reduction of interface complexity is a key criterion,esp

137、ecially when Agile approaches need to be introduced.Early attention must also be given to market access.3.Articulating a scientific approach to innovationHowever,achieving true breakthroughs requires not only degrees of freedom,but also a strictly scientific approach to test and validate ideas,featu

138、res,and so on,in iterations.The higher uncertainty in breakthrough projects can be successfully countered by initiating a build-measure-learn loop.In this approach,hypotheses are formulated and an appropriate test design is developed.The actual development and experimentation take place along these

139、orientations.By comparing test results with the hypotheses,scientific learning is achieved and further development is conducted accordingly.Therefore,even failure in experiments,market tests,and so forth,is an insightful source of learning and,from a breakthrough innovation perspective,will enable f

140、urther progress.2 1In addition,the build-measure-learn approach forces early attention to market access as part of the process of deriving and testing hypotheses.For example,would the innovation require new channels to market and/or branding?Putting these considerations off until later stages is one

141、 common reason for the failure of promising breakthroughs to go through to scale-up and commercialization.Simply put,a scientific approach to breakthrough innovation minimizes the risk and cost of developing products,services,processes,and so on,that ultimately fail and enables continuous tracking o

142、f progress.And a persistent focus on minimizing cycle time through the build-measure-learn loop is what separates the excellent innovators from the good ones.4.Choosing the right operating modelBreakthrough and incremental innovations have different requirements,levels of uncertainty,and complexity.

143、Consequently,they require different operating structures,frameworks,skills,and mindsets to be managed in the most effective way.At a basic level this often means creating a dedicated breakthrough team(previous ADL analysis shows this approach yields 15%higher satisfaction compared to companies with

144、no dedicated breakthrough function).7 Results from the GIEB support this,with a strong correlation between setting explicit boundaries,expectations,and resources and breakthrough innovation success.7 Harenstam,Fredrik,Ben Thuriaux-Alemn,and Rick Eagar.“Systemizing Breakthrough Innovation:Findings fr

145、om the Arthur D.Little Breakthrough Innovation Survey.”Arthur D.Little,2015.When creating a team,there are multiple potential operating models that can be deployed(see Figure 12).Choosing the best fit should be guided in the first instance by two dimensions:-The complexity and technology intensivene

146、ss of the domain(e.g.,aerospace products tend to have higher complexity and investment levels than,say,food products).-The novelty of the technology,product,or service being developed from“known to company”through to“unknown to the world.”Applying this thinking identifies four generic operating mode

147、ls that are effective in different circumstances.Larger companies may need to use more than one model simultaneously across different areas of the business.Business unit/division R&D breakthrough teamsIf the domain is known to the company and the breakthrough sought has a relatively low level of com

148、plexity and required investment,breakthrough innovation teams can be located within the business unit(BU).However,if needs change,these teams are unlikely to be able to cope with high complexity and risk.Additionally,resources can be susceptible to short-term BU reprioritization pressures and someti

149、mes undue BU procedural red tape(see Chapter 4).Figure 12.Potential structures for breakout innovation teamsSource:Arthur D.LittleSource:Arthur D.LittleFigure 12.Potential structures for breakout innovation teams13Short product lifestyleComplexity of technology/product/service domainHigh technology

150、intensivenessHigh investmentLong product lifestyleLow technology intensivenessLow investmentNovelty of technology/product/serviceKnown tocompanyUnknown to companyUnknown to worldI.BU/divisionR&D breakthrough teamIII.Internal dedicated breakthrough teamIV.External or hybrid dedicated breakthrough tea

151、mII.Corporate R&D breakthrough team2 2REPORT:FROM GOOD TO GREAT:ENHANCING INNOVATION PERFORMANCE THROUGH EFFECTIVE MANAGEMENTARTHUR D.LITTLECorporate R&D breakthrough teamsCorporate R&D breakthrough teams are better suited to more technology-intensive or higher-investment known domains where a longe

152、r-term perspective,specialist technical skills,and/or the use of unique corporate assets are required to develop the breakthrough.However,locating teams under the corporate R&D umbrella potentially introduces barriers to successful breakthrough thinking.For example,there can be an overemphasis on“te

153、chnology push,”and breakthrough innovations can become misaligned with the business or be stifled by corporate control and culture.Finding a project leader with good business skills as well as technical expertise is key.Internal dedicated breakthrough teamsInternal teams are separate from corporate

154、R&D and report directly to technical or business R&D top management.Teams are multifunctional and have the freedom to operate outside core product development procedures and controls.While they may be more effective in innovating in areas of greater uncertainty,they require strong senior governance

155、to ensure that the teams independence and integrity are maintained in the face of short-term corporate pressures,as well as to ensure that the team does not become disconnected from the business but delivers sufficient short-term value to justify the ongoing investment.External or hybrid dedicated b

156、reakthrough teamsIn the case of“grand challenge”led radical or game-changing innovations that push the boundaries of science,it is often necessary to use external expertise not available inside the company.The team could be hybrid internal/external or even almost entirely external.In addition,hybrid

157、 teams can be strengthened through strategic alliances with other firms,which can be particularly beneficial later on in terms of market access through new channels and/or branding.The team could be created as a separate legal entity or kept within the current legal framework,depending on issues suc

158、h as the scale of likely investment needs and the fit with corporate strategy.In the case of technologically complex innovations with high uncertainty that are well outside core business,models such as ADLs“Breakthrough Factory”may be used.In this model,world-class external expertise is identified a

159、nd recruited under time-limited contracts,led by a senior project or program leader with deep technical or scientific knowledge as well as entrepreneurial capabilities.Using time limitations means that the best individuals can be hired on merit,even if they dont fit the typical corporate profile.Goo

160、gles Advanced Technology and Projects(ATAP)and the US Defense Advanced Research Programs Agency(DARPA)are based on similar structures.Regardless of the model chosen,any breakthrough innovation project is strategic and should involve management at the corporate level.Managers should also pay attentio

161、n to key questions around management of scarce resources(that cannot be dedicated)and whether or not to create a legal entity for the project.5.Build a cross-functional approachBreakthrough innovation requires a range of skills and“buy-in”from many different parts of the organization.Companies must

162、therefore involve functions beyond R&D,including manufacturing,marketing,procurement,IT,and customer insight.This must be done from program inception so that market,roadmap,product,resources,governance,and funding can be optimally designed.The most successful companies actively engage and involve cr

163、oss-functional resources rather than simply having cross-functional steering groups,such that the initial inception team effectively becomes the first iteration of the team that will eventually scale up and launch the new business.However,before staffing the team with largely cross-functional resour

164、ces,there is one other key aspect that is important for success,relating to how the breakthrough project is initiated.We refer to this as the“Iteration Zero”approach.This approach involves,at the outset,setting up a multidisciplinary taskforce to identify and mitigate the main uncertainties,which ar

165、e much larger than for a normal project.The key point is that the taskforce is set up to be the first iteration of the new“company”to be created,not just a concept-phase study group.The Iteration Zero taskforce starts by clarifying aims,ambitions,and scoping,including targets for features,cost,and t

166、ime to market.It then takes initial steps to articulate clearly the gap 2 3between the current status and capabilities and the desired target,as well as identifying the main uncertainties and how they will be progressively reduced.Based on the results of this work,it is then possible for the leaders

167、hip to gain a much more realistic picture of the business goals of the project,the necessary resources and funding,especially for the resource-intensive delivery phase,and the best organization and governance to ensure success.Ring-fence fundingBreakthrough projects and programs normally(but not exc

168、lusively)require longer time frames than incremental innovation.There is therefore a major risk that budgets and resources will be threatened by short-term changes.Programs must therefore be ring-fenced to enable stable,long-term investment.Ensure breakthrough leaders have the right skillsBringing b

169、reakthrough concepts successfully to market requires leaders with strong entrepreneurial skills and mindset.(For more on best practices,see“Ecosystem management.”)Projects should be led by strong intrapreneurs individuals with the ability to pursue a commercial vision with dedication,inspire others

170、to join the cause,take measured risks,and protect an effort through to market,securing needed resources along the way.These leaders can either be existing staff members with the right skills and support or external hires.Leaders must be able to navigate and negotiate the interface between the breakt

171、hrough team and the group because it can be a key limiting factor.One key way to unlock breakthrough innovation is leveraging the wider innovation ecosystem,whether through familiar open innovation systems or more radical expansive approaches such as a Breakthrough Factory.Flexible,timely access to

172、high-quality innovation can be achieved through proactive and effective ecosystem management,yet the GIEB reveals that ecosystem management best practices are among the least common among the respondents.There are few dedicated champions/advocates for ecosystem engagement and low levels of formal pr

173、ocesses for collaboration with the external ecosystem.This is a key gap that companies looking to innovate for growth should investigate and fill.Table A.Innovation management best practice adoption Source:Arthur D.LittleSource:Arthur D.LittleTable A.Innovation management best practice adoption 14OF

174、TEN APPLIEDSELDOM APPLIEDStage-gate processes with formal milestone reviewsInnovation tools deployed across company(incl.outside R&D,marketing)Project management approaches adjusted for different project typesClear,well-communicated&prioritized strategy for ecosystem managementClear project end goal

175、s setNew business models&value propositions developed in collaboration with external ecosystemStrengths of innovation competencies understood,versus competitorsCommitted advocate in charge of ecosystem engagementProcesses to understand strengths&weaknesses in existing&future technical fieldsClear pr

176、ocess to determine appropriate way to collaborate with external partners(e.g.,outsourcing,joint venture)Ecosystem management24REPORT:FROM GOOD TO GREAT:ENHANCING INNOVATION PERFORMANCE THROUGH EFFECTIVE MANAGEMENTARTHUR D.LITTLE2 53.BUSINESS MODEL INNOVATION AN UNDERE XPLOITED TOOLIn the context of

177、innovation,a business model used to be seen solely as a vehicle for delivering commercial value from a disruptive technology and as a tool most often employed by start-ups.(For more on business models,see“Defining business models&business model innovation.”)Today,however,strategy and innovation lead

178、ers,in businesses of all sizes,realize that they can drive sustained profitability by innovating around the business model.This delivers both productivity(value)as well as growth opportunities.In this context,digital capabilities can act as a strong enabler for the development of new business models

179、,where data can be better valorized both within the organization and by combining internal and external data sets.BUSINESS MODEL INNOVATION OFTEN REQUIRES BUY-IN FROM MULTIPLE STAKEHOLDERSAchieving an adequate level of traction for effective business model innovation is often challenging.While busin

180、ess model innovation can occur within a single division or business unit,it often requires buy-in from multiple stakeholders from across and even beyond the organization,requiring a shared sense of purpose and high levels of coordination.Nevertheless,leading practitioners know that business model in

181、novation can:-Create better product-market fit.Reengineering the business model can enhance the degree to which a given value proposition is creating value for customers,without necessarily altering the product/service itself.For example,changing price points,delivery channels,resources,and customer

182、 segmentation could all lead to lower friction for customers and higher market uptake.-Develop underexploited market segments.Just as with achieving better existing product-market fit,engineering the business model allows for exploitation of altogether new segments of the market.It is often necessar

183、y to update the delivery vehicle of a given value proposition for a new segment.-Explore the potential to embed data collection with products and services to create better user insights(e.g.,new use cases or insights into how users interface/combine products and services with other solutions)to iden

184、tify data valorization opportunities and potential in business models.-Commercialize new products.The more disruptive the new technology,the greater the need for business model innovation in order to capture(part of)the new value created and avoid killing the new business through cannibalization.-Bu

185、siness future-proofing.If businesses can disrupt themselves,they shield themselves from unexpected external developments.More than the innovations themselves,the organization that is capable of changing its business model and often its position in the value chain can respond to dramatic shifts in th

186、e market driven by geopolitical,climate,and health crises.by Dr.James Semple,Ben Thuriaux-Alemn,Salman Ali,and Ignacio Garca Alves 2 6REPORT:FROM GOOD TO GREAT:ENHANCING INNOVATION PERFORMANCE THROUGH EFFECTIVE MANAGEMENTARTHUR D.LITTLERESISTANCE8The new landscape makes it imperative that organizati

187、ons continuously reinvigorate their business models,but ADL research suggests that few do,and even fewer do so successfully.To put it bluntly,even companies that are considered to be innovation leaders in ADLs benchmark struggle with this and its not due to a lack of resources,smart managers,lack of

188、 analytical capabilities,or market pressures to innovate.The GIEB indicates that only 60%of company leadership across industries allocate a minimum of 10%of their innovation resource to BMI.Given the benefits of engaging with this process and the risks of ignoring it,this is a surprisingly low figur

189、e.A further concern is that the majority of companies(70%)rate themselves as having average or less-than-average satisfaction with business model innovation,at visible odds with the likes of process and product innovation(see Figure 13).In ADLs benchmarking study,the mean satisfaction rating for pro

190、duct innovation is 3.65/5,while the mean satisfaction rating for BMI is 2.95/5.8 Chesbrough,Henry.“Business Model Innovation:Its Not Just About Technology Anymore.”Strategy&Leadership,Vol.35,No.6,November 2007.The question emerges:why do so many find business model innovation difficult to succeed in

191、?The GIEB study outlines two main reasons:confusion and the change of the ongoing momentum associated with performance improvement.ConfusionThe primary challenge that many attempting business model innovation face is in coming to a collective understanding:first,what it is;second,where to start;and

192、third,how to go about doing it(or who should be responsible).Underpinning this confusion is quite often a lack of consensus on how to explain the current company business model.There are a multitude of business model frameworks,but having a single source of truth within an organization is surprising

193、ly rare.Defining business models&business model innovation Business models are the implementation of strategic choices and can be thought of an expression of an organizations strategy.8 A business model articulates what clients the company will serve and the resources it has to leverage,what costs a

194、re incurred,and how revenue is generated.It is fixed by the companys position in the value chain and how interfaces with the wider world are managed,including who customers and key partners are and how the company interacts with them.Business model innovation(BMI),therefore,involves reconfiguring th

195、ese components to alter a companys value creation machine.“Business model”was not a widely used term even within the corporate vernacular until the early 2000s.The rise of the Internet spread the term more widely and gave rise to demand for the strategic thinking that emphasized the reexamination of

196、 the business model as a source of competitive advantage.Digital sales channels,marketplaces,and straight through ordering processes created a greater opportunity for reconfiguring operating models,customer interfaces,and markets than ever before.As a result,existing value chains unraveled and niche

197、-specialized businesses took off,increasing competition.Companies understood individual changes but found themselves unable to onboard and manage these effectively to compete.As a result,disruptive business model archetypes such as online retailers,freemium models,ad-based revenue,streaming services

198、,and“x as a service”all appeared and grew.Early adopters saw outsize profits.Slower-moving incumbents suffered.2 7Once a common understanding of the business model is defined and widely accepted,key decision makers can decide where best to start.Typically,the first decision is whether to test a new

199、business model or tweak the existing one(see“Business model innovation breakdown”).Processes can then be put in place to begin to experiment with new business models.Its important to manage this carefully,as there is typically quite a lot of internal resistance to business models that cannibalize th

200、e current one.It is this confusion and perceived threat to the existing business that hamper experimentation with business model innovation.MomentumThe mechanics of innovating a business model are not straightforward,particularly for established organizations with long-standing successful product li

201、nes,customers,and industries accustomed to the products and services they provide.Business models by their very nature are not designed to change;they typically begin by being fluid but become less agile and more resistant to change over time.Consider the natural business model innovators:start-ups.

202、Starting from zero,a business model has to be designed or adapted.One need look no further than Steve Blanks definition of a start-up to see just this:“a temporary organization designed to search for a repeatable and scalable business model.”But what happens when a young start-up gains some traction

203、?When a young company gains a foothold in a market,the fluid business model solidifies.Emphasis shifts from experimentation of value propositions,channels,products,and resources to growth,margin,and ultimately efficiency gains and cost minimization.As time goes on,it becomes increasingly difficult t

204、o innovate at the macro level of the business model and fight against the existing momentum of the business direction.Larger firms do not have the luxury of discovering a single new winning business model;they must focus on sustaining their existing business model(s),while replicating others.The res

205、ources and processes that work so perfectly in their original business model do so because they have been honed and optimized for delivering on the priorities of that model.Figure 13.Companies are least satisfied with business model innovationNote:Self-rated satisfaction scores,comparing business mo

206、del innovation with process and product innovation;average score(out of 5):product innovation(3.65),process innovation(3.34),business model innovation(2.95);differences in mean values are statistically significant to 99%confidence levelSource:Arthur D.LittleNote:Self-rated satisfaction scores,compar

207、ing business model innovation with process and product innovation;average score(out of 5):product innovation(3.65),process innovation(3.34),business model innovation(2.95);differences in mean values are statistically significant to 99%confidence levelSource:Arthur D.LittleFigure 13.Satisfaction with

208、 business model,product,and process innovation15Very unsatisfiedHighly satisfiedBusiness model innovationProcess innovationProduct innovationAverageMean scores2.953.653.342 8REPORT:FROM GOOD TO GREAT:ENHANCING INNOVATION PERFORMANCE THROUGH EFFECTIVE MANAGEMENTARTHUR D.LITTLEThere are two paths a co

209、mpany can take in business model innovation.The first is the creation of a new business model,allowing the organization to explore new avenues for future growth while continuing to rely on its existing business model to exploit opportunities in the present.This is the realm of strategic entrepreneur

210、ship,which itself can be achieved typically via one of three approaches:1.Incubate setting up new businesses internally,typically done through corporate incubators,requiring the fresh design of new business models,leveraging company assets,relationships,and customers,using typical entrepreneurship t

211、ools.2.Partner establishing links with innovative suppliers and start-ups,through thoughtful procurement and corporate accelerators,which allows a nascent business model developed externally to be interfaced with the business,typically still requiring some adaptation but with the advantage of allowi

212、ng external thinking to permeate the business.3.Acquire investing in adjacent businesses through M&A or more typically corporate venturing to allow new business models to be added to the company portfolio.The second pathway is altering an existing business model,meaning changing the companys assets,

213、capabilities,boundaries,relationships with external parties,and/or the economics of how the company makes money.There is broad consensus of three typical ways to do this:9 1.Revenue innovation reconfiguring of how revenues are generated.2.Enterprise innovation changing the role a firm plays in the v

214、alue chain.3.Industry model innovation moving existing products or services into new industries,redefining existing industries,or creating entirely new ones.Business model innovation breakdownUNLOCKING CHANGE WITH THE NIGHTMARE COMPETITOR9To overcome the twin challenges of confusion and momentum,a s

215、imple yet effective methodology to employ is the nightmare competitor exercise.The nightmare competitor is the hypothetical entity that challenges your core and future growth businesses,creating business models that successfully steal away your customers.The exercise invites teams to consider what t

216、his competitor looks like for them,what attributes it would possess,and how they can either overcome it or become it.9 Based on the works of Giesen,Edward,et al.”Three Ways to Successfully Innovate Your Business Model.”Strategy&Leadership,Vol.35,No.6,November 2007.THE BARRIERS TO BMI ARE OFTEN MORE

217、TO DO WITH COGNITIVE BIASESBy locating the new or altered business models outside of their actual organization,individuals are more free to imagine and ideate,bypassing common cognitive biases that blind them to the possibility of new business models,such as the status quo trap(“but things are just

218、fine the way they are”),the sunk-cost trap(“but we have invested heavily in X”),and the overconfidence trap(“but we know our business model is future-proof”).In practice,selected individuals envision a disruptor of the organization in a workshop setting,defining first its positioning,purpose,and bus

219、iness model,and finally the key ingredients for its success.Participants then pitch back the imagined nightmare competitors,with the aim of convincing customers to buy,employees to join,investors to fund,and stakeholders at large to take notice.2 9Setting different workshop groups with different nig

220、htmare competitor archetypes(see Table 1)generates a comprehensive list of alternative business models.Of critical importance is involving a diversity of voices.Companies see the best results in the nightmare competitor exercise when participant selection ignores organizational hierarchy,focusing in

221、stead on people with functional expertise in strategy,corporate foresight,operations,sales,marketing,or R&D and includes external participants from knowledge domains outside the industry,such as digital technologies and business models,potential customers,suppliers,entrepreneurs who have disrupted t

222、heir markets,and lateral thinkers capable of recognizing transferable patterns and solutions.1010 Stadler,Christian,et al.“Open Up Your Strategy.”MIT Sloan Management Review,December 2021.This is because underpinning both business model creation and business model alteration is one recurrent theme:h

223、ow effectively an organization can innovate with ecosystem partners,from customers,to suppliers,to partners,to start-ups.Because the business model itself is intrinsically linked with partners,customers,and channels,BMI typically occurs at the interface of the companys activities with external partn

224、ers.In fact,when we look at ecosystem innovation as a core innovation management practice,we see that those companies that perform well in both business model innovation practices and ecosystem processes are the top performers in terms of innovation success(see Figure 14).The nightmare competitor fr

225、amework facilitates the building of a shared understanding of the business model and exploration of new ideas.It allocates time and resources for BMI and creates a strong culture of collaboration,all of which are critical ingredients for success.In summary,business model innovation provides a bridge

226、 between strategy and innovation practitioners.Through collaborative design and thinking,effective business model innovation can be a driver for value and growth within any business in the 21st century.Furthermore,business model innovation is the only antidote to future failure as existing business

227、models become superseded.Table 1.BMI positioning for nightmare competitorsSource:Adapted from frameworks developed by Arthur D.Little,Horvth,and NC-CreatorsSource:Arthur D.LittleTable 1.Common nightmare competitor archetypes16NIGHTMARE COMPETITOR ARCHETYPEBETTER THAN YOUVALUE-FOCUSEDINNOVATORNICHE-F

228、OCUSEDPREDATORFREEDOM TO CHOOSE Industry preconditionsDominant or monopoly players result in poor service or valueIndustry competes on frequent new product launches Despite many marketing dollars,customers are neither loyal nor satisfiedIndustry doesnt question boundaries of customer definitionIndus

229、try is generally aggressively sales-orientatedIndustry does not grant the choice and control customers wantTarget customersClients that are sensitive to non-price factorsVery cost consciousBored with status quo,looking for new experiencesOverlooked or not addressed by the industrySee industrys offer

230、ing as workaroundsSee choice and transparency as a fundamental rightWhat the nightmare competitor doesDesigns a business model that has better service or good-enough productsNarrow offering;streamlined processes;fosters modularity and reusability;low marketing costOffers differentiated product in pr

231、oprietary systemProvides access to previously excluded customersProvides service or product designed from the customer backwardProvides suite of offerings that disrupts key player offerings or provides valued alternatives Example nightmare competitorsMetro Bank,Uber,Airbnb,Rolls RoyceHuawei,Wise,Rya

232、nair,Ikea,AldiZara,Tesla,Apple,NetflixAirbnb,Zipcar NintendoSpotify,ZipcarAmazon,Uber,Expedia,AirbnbFigure 14.Ecosystem innovation mastery and BMI performance Source:Arthur D.LittleSource:Arthur D.LittleFigure 14.Ecosystem innovation mastery and BMI performance 170.20.30.40.50.60.70.80.91.0200300400

233、500600700800900SuccessInnovation management practicesTop 10%ecosystem scoresTop 10%business model innovation scoresTop 10%ecosystem&top 10%business model innovation scoresOther3 0REPORT:FROM GOOD TO GREAT:ENHANCING INNOVATION PERFORMANCE THROUGH EFFECTIVE MANAGEMENTARTHUR D.LITTLE3 1As we have discu

234、ssed in this Report,alongside innovating for growth,organizations need to innovate for value.The simplest way to achieve this is to share good innovation practices across the organization.However,ADL analysis highlights wide discrepancies in innovation management practices between different BU R&D t

235、eams within the same company.This contributes to lower overall performance and represents a 5%BU revenue gap,as well as impacting EBIT and time to breakeven.This innovation management gap spans all industries and leads to underperformance with duplication of efforts,a lack of transparency over the R

236、&D portfolio,and lower revenues.IF A BUSINESS HAD TWO SIMILAR MANUFACTURING SITES THAT FAILED TO SHARE BEST PRACTICE PROCESSES,THE COO WOULD BE SEEN AS NEGLIGENT.YET,ACCORDING TO OUR LATEST RESEARCH,THE SAME THINKING DOESNT SEEM TO APPLY TO SHARING INNOVATION BEST PRACTICES,DESPITE ITS IMPORTANCE FO

237、R GROWTH AND COMPETITIVENESSIf two factories belonging to the same organization failed to effectively share manufacturing best practices that could dramatically impact performance,the COOs days would be numbered.Yet,despite the importance of innovation to business success,the same rule does not seem

238、 to apply when it comes to sharing innovation management best practice between different BUs.THE INNOVATION MANAGEMENT GAP Analysis of the GIEB found wide variability between BUs within the same organization(see Figure 15).In many cases,in fact,it was impossible to tell that these BUs were part of o

239、ne company,such was the performance spread.These gaps occurred across multiple industries(including automotive,telecoms,transport,manufacturing,medical devices,and chemicals).Innovation practitioners back up this finding:78%of those surveyed said that standardizing best practices was a challenge and

240、 the failure to do so has a negative impact on innovation performance.The impact of this gap translates into multiple issues,including:-Lower overall innovation performance across the organization.Significant value is being left on the table through inconsistent innovation management practices.-Slow

241、er time to market and a longer breakeven time.-No consistent view of innovation processes/projects across the firm,leading to a lack of transparency.-Duplication of programs and repetition of processes that have not worked in other BUs,thus reinventing failure.4.INNOVATING FOR VALUE BY ADDRESSING TH

242、E GAP IN BU PERFORMANCEby Dr.Habib Hussein,Ben Thuriaux-Alemn,Elis Wilkins,Dr.James Semple,Shota Mitsuya,Rui Ibuki,and Atsuro Inoue3 2REPORT:FROM GOOD TO GREAT:ENHANCING INNOVATION PERFORMANCE THROUGH EFFECTIVE MANAGEMENTARTHUR D.LITTLEDrilling down into the data,we investigated multiple organizatio

243、ns across a variety of sectors,comparing performance of BUs within their industries and removing sectoral variations(see,for example,Figure 16).ADL found that the lowest-performing BUs in our sample of 48 are losing out on an average of 5%revenue(range 1%-15%)due to their subpar innovation managemen

244、t practices.They could further see a 3%point EBIT boost(range 1%-6.5%)and reduction in time to breakeven by bringing their innovation management practices up to the cross-BU average.Further improvements could also be targeted by aiming for top-quartile performance or by looking for inspiration with

245、the top 10%of peer-group companies.UNDERSTANDING THE ROOT CAUSES A combination of client experience,academic research,and an innovation management workshop that brought together more than 50 industry innovation leaders and senior academics identifies three groups of root causes:1.Leadership&incentiv

246、es Carrying out R&D in BUs strengthens the relevance and applicability of innovation.However,it also leads to a focus on the BUs own,incremental,and often short-term innovation goals,particularly if they are incentivized to hit quarterly revenue targets.Figure 15.Variance of BU innovation performanc

247、eFor each of 12 companies tested with multiple BU responses,we were unable to reject the null hypothesis(95%confidence interval)that the variance of the company scores is significantly different to the industry overallSource:Arthur D.LittleFor each of 12 companies tested with multiple BU responses,w

248、e were unable to reject the null hypothesis(95%confidence interval)that the variance of the company scores is significantly different to the industry overallSource:Arthur D.LittleFigure 15.Variance of BU innovation performance18300400500600700800Med tech&devicesChemicalsCompany CCompany ACompany DCo

249、mpany ECompany BIMP scoreMEDICAL TECHNOLOGY&MEDICAL DEVICES,CHEMICALSExpected resultSimilar performance across BUsClustered IMP and IS scores relative to full data setActual resultHigh performance variation across BUsVariance among BUs not statistically different from industryFigure 16.Impact on rev

250、enue and EBIT from improving underperforming BUs innovation performanceAnalysis of 48 BUs across businesses indicates improving innovation management of the worst-performing BU to the average would boost revenue by 5%and 1-year EBIT by 3%(mean values)Source:Arthur D.LittleAnalysis of 48 BUs across b

251、usinesses indicates improving innovation management of the worst-performing BU to the average would boost revenue by 5%and 1-year EBIT by 3%(mean values)Source:Arthur D.LittleFigure 16.Impact on revenue and EBIT from improving underperforming BUs innovation performance190.200.300.400.500.600.700.800

252、.901.00200250300350400450500550600650700750800850900SuccessInnovation management performance AllIndustry peersCompany BUsBU averageIndustry regression(R2=0.54)EXAMPLE COMPANYLowest BU score397Improvement through standardizationAvg.BU score5223 3This risk-averse mindset can lead to an unwillingness t

253、o adopt new ideas and practices as leaders fail to see the potential benefits.The lack of an organization-wide governance strategy for innovation management or senior management support for an overall innovation focus holds back efforts to collaborate and share best practice.Often,senior innovation

254、executives in the central team(such as the CTO),focus on developing technologies in areas beyond BUs,and lack a perspective on how to share best practice across BUs.2.Organizational structure BUs want autonomy over innovation and may see organizational best practices as inappropriate for their needs

255、,targets,and aims.There may also be variances in innovation clock cycles(i.e.,the pace of innovation)and maturity levels between BUs,particularly if they are located in multiple geographies or have different heritages,such as being added by acquisition.This all contributes to a rejection of organiza

256、tional best practices,no flow of ideas between BUs,and a lack of collaboration between teams.This not only harms innovation efforts in BUs,but holds back cross-BU collaboration around innovation,preventing the creation of new convergence products and services.3.Business unit culture Individual busin

257、ess units have built up their own cultures and may even compete against other parts of the same organization,undermining efforts to increase transparency and the sharing of best practice.Conflicts around power,politics,and resources lead to an insular“not invented here”mentality and a strong resista

258、nce to external“interference”in BU innovation management.Central management and centers of excellence are seen as out of touch with BU needs,leading to a lack of engagement.In many cases,sharing and collaboration is viewed by BUs as either a potential weakness or an unwelcome distraction from achiev

259、ing their specific goals.These cultural differences further manifest themselves in a wide variance in how innovation is described and valued there is no shared language of innovation across the organization.This makes it particularly hard to create common forums and spaces for collaboration.ADDRESSI

260、NG THE CHALLENGEThese challenges can be overcome but require a strategic approach,with senior management backing:1.Leadership&incentivesSenior management must first understand the size of this innovation gap and then take an active role in closing it,emphasizing the strategic importance of innovatio

261、n management best practice to the entire organization.They must help make it part of overall company culture.It is vital to build trust with BUs,demonstrating that adopting best practices is an opportunity not a threat.This can include incentives,such as providing access to additional innovation fun

262、ding for BUs that deploy best practices and meet innovation targets.Senior leadership then must create a balanced cross-BU(XBU)innovation portfolio with clear plans and protected budgets for short-,medium-,and long-term innovation targets.This can also include areas for convergence between BUs.Chemi

263、cals company Johnson Matthey has one“single source of truth”company-wide innovation portfolio to monitor and control innovation and allocate resources.This features a standardized approach to innovation management based on best practice,while allowing some variability for different BUs.An alternativ

264、e approach,as practiced by Japanese glassmaker AGC,is to focus and invest heavily on innovation/business portfolio enhancement and take a more aggressive role in managing conflict between the central innovation organization and the BUs.This may lead to complaints from BUs,but in this case led to sig

265、nificant innovation success.Management should set clear expectations for innovation portfolio transparency including dashboards with board-level monitoring and KPIs.As an example,materials technology provider Umicore has an Innovation Excellence Board.3 4REPORT:FROM GOOD TO GREAT:ENHANCING INNOVATIO

266、N PERFORMANCE THROUGH EFFECTIVE MANAGEMENTARTHUR D.LITTLE2.Organizational structure&culture Start by establishing a common language to describe innovation and set the vision and mission for the organization,while understanding that there may be variations between markets based on BU maturity and loc

267、al needs.Engage BUs in the change process,creating a flexible innovation management framework containing guidelines,agile processes,and common practices that can be adapted to specific local needs while providing the rigor and transparency needed by the head office.For example,utility company Engie

268、is investing time in aligning/coordinating innovation practices between BUs.Additionally,increase collaboration by encouraging the movement of people and,in turn,ideas.At a more radical level,changing the structure of the organization to encourage innovation excellence can be an option.For example,i

269、n the chemical industry,the traditional split between product teams and functions(such as process engineering)can be transformed to align with customer/society needs or delivering new value.3.BU cultureChange carries risk.To minimize the potential for rejection,BU stakeholders should be engaged,invo

270、lved,and listened to,creating a sense of ownership around“new”best practices.Recruit successful and influential innovation project leaders as evangelists to demonstrate the value of best practices(from outside the organization or from other BUs).Break down silos and enable the cross-pollination of i

271、deas through meetups,communities,and other knowledge-sharing forums.Johnson Matthey has seen real value in formalizing cross-business unit and cross-functional teams to share learnings and agree on the best ways to balance what is standardized and what is not.Champion inclusivity to involve everyone

272、 and recognize success through cross-company awards.Introduce the right incentives and KPIs for individuals to encourage the sharing and adoption of best practice.Encourage(healthy)competition between BUs around innovation excellence.CAPTURING VALUEAn inability to share innovation management best pr

273、actices across BUs is holding back innovation success for many multi-BU organizations.This impacts individual BUs and reduces opportunities for XBU collaboration to create converged products and services.This gap is recognized by the majority of innovation practitioners,and while the root causes are

274、 complex,they can be overcome.Success requires senior management involvement and an approach that builds trust while ensuring harmonization,focusing on changing culture and aligning incentives.Bridging the gap between BUs ensures organizations with decentralized R&D can successfully innovate for val

275、ue,unlocking greater success across the entire company.SUCCESS REQUIRES SENIOR MANAGEMENT INVOLVEMENT AND AN APPROACH THAT BUILDS TRUST WHILE ENSURING HARMONIZATION3 5Selectively applying the Agile methodology is proven to increase innovation success.It enables teams to identify bigger ideas,develop

276、 them faster,and execute them better and more efficiently through a relentless focus on the customer or end user.The GIEB data demonstrates a relationship between Agile performance and innovation success(see Figure 17).Those organizations/BUs that score highest for the use of Agile methods also gene

277、rally demonstrate higher innovation management practice scores,showing that Agile is well-integrated into their suite of innovation methods.Agile innovation streamlines innovation processes and reduces oversight.This enables autonomous innovation teams to iterate rapidly,testing innovations,concepts

278、,and hypotheses with customers to deliver overall faster innovation.From its original use in software development,it has spread to other sectors,notably consumer electronics,telecommunications,information technology,media and electronics,and food and beverage.There is significant variation between i

279、ndustries however,as the advantages of Agile depend on their specific requirements for innovation(see Figure 18).Capital-intensive industries,the public sector,and healthcare and pharmaceutical industries have tended to lag in terms of Agile innovation adoption while consumer electronics,telecoms an

280、d media,food and beverage,and medical technology/devices have seen relatively good take-up of Agile innovation management practices.That said,even in pharmaceuticals,the range of biotech start-ups has created a very dynamic environment.While it takes time to develop a new drug,the speed with which t

281、he COVID vaccines were developed showed what Agile approaches can achieve when there is sufficient pressure and the willingness to balance the risk of inaction versus the additional risks of rapid development.How can Agile be applied to innovation management?When applying the Agile approach to innov

282、ation,the key principles remain the same as for software development.However,certain elements require a different focus:5.THE BENEFIT S&PITFALL S OF AGILE INNOVATIONby Dr.Habib Hussein,Philip van Basten Batenburg,and Dr.Arnaud SiraudinFigure 18.GIEB trends by industry for adopting Agile to manage in

283、novation Source:Arthur D.LittleFigure 17.Adopting Agile as an approach to managing innovation for competitive advantage Source:Arthur D.Little0.20.30.40.50.60.70.80.91.0200300400500600700800900SuccessInnovation management practicesSource:Arthur D.LittleFigure 17.Adopting Agile as an approach to mana

284、ging innovation for competitive advantage 20Others(11-89%Agile scores)Bottom 10%Agile scoresTop 10%Agile scoresSource:Arthur D.LittleFigure 18.GIEB trends by industry for adopting Agile to manage innovation 21HIGHMIDLOW3 6REPORT:FROM GOOD TO GREAT:ENHANCING INNOVATION PERFORMANCE THROUGH EFFECTIVE M

285、ANAGEMENTARTHUR D.LITTLE-Iterative approach.The heart of the Agile approach in innovation is the use of a series of rapid(two-to-four-week),iterative loops,similar to an Agile iteration for software.This helps address uncertainties and unknowns,test prototypes and concepts,and then drive the develop

286、ment of parts of the overall solution.It avoids tunnel effects and pushes teams to deliver intermediate products,increase know-how,and accelerate the pace of development.-Teams.Within the innovation environment,Agile teams are multidisciplinary groups of specialists that expand and contract dependin

287、g on the current project focus.For example,if a team is testing a business model or other concept,there might need to be greater involvement of internal or external people with experience and knowledge in finance,sales,and behavioral economics.-Governance.While governance is not often identified as

288、a key element of Agile software development,it is critical within product development.In the Agile environment,governance acts less like a go/no-go decision maker and more like a coach to project teams,with added responsibilities for managing tradeoffs in feature selection and resource sizing.Govern

289、ance makes sure the customers voice is heard and helps teams to navigate organizational challenges.AGILE IS NOT THE SILVER BULLET FOR INNOVATION SUCCESSBased on these findings,it might seem logical to recommend Agile to every organization looking to improve its innovation success,and to abandon trad

290、itional phase-gate(waterfall)processes.However,the Agile and phase-gate approaches are distinct in their implementation and generally suited to different innovation objectives when applied outside software(see“Where Agile innovation delivers value”).Agile is therefore not a silver bullet that will m

291、agically solve all innovation project challenges.When deciding whether to apply it,companies should consider three factors:1.Scope variability.Agile works best in areas where work is carried out within complete teams that have the resources,skills,and capabilities to act autonomously,without any ext

292、ernal dependencies,or where there are limited interdependencies.This is a fundamental difference between Agile and other ways of working.It can be difficult to implement in R&D,where activities are typically interdependent and based on discrete technical requirements difficult to separate.In the sam

293、e spirit,a project with no uncertainty and a complex development process that needs to be delivered quickly can be more efficient with a V-cycle than an Agile approach.2.Time horizons.Software development projects,especially Web-based services,work to short,constrained timescales,with delivery somet

294、imes expected within months or even weeks.Agile methods meet this need through quick learning loops that enable rapid,iterative development.In contrast,ADLs research shows that half of all major industrial innovations take five years or more to generate first revenues,and even breakthrough success s

295、tories sometimes take a very long time.Balancing these two,radically different time horizons is particularly challenging for many innovations or industries.3.Risk exposure.Agile working is based on speed,with a mantra of“fail fast and fail cheap.”Again,while this may fit strongly with activities suc

296、h as software development,it is often not possible in the context of many industrial R&D activities.Unlike developing software,innovation is not a smooth process where small incremental development steps can be taken and discrete components of the final deliverable developed in isolation.It often re

297、quires major steps in terms of commitments,whether in substantially increased investment or market exposure.Uncertainty is not always something that can be measured and managed,due to a high number of dependencies and levels of complexity.Failing fast or cheap may simply not be an option.3 7Where Ag

298、ile innovation delivers valueAs well as understanding the three factors discussed,companies should look at the relative complexity and uncertainty of the problems they are facing before selectively adopting Agile innovation,as illustrated in Figure B.1.Low complexity/low uncertainty.Here Agile adds

299、little value to a traditional waterfall phase-gate approach and may even damage innovation efficiency through the effort needed to implement it.For example,innovation in sectors such as industrial goods,downstream energy resources,and public services revolves around incremental,predictable processes

300、 that solve specific,known problems.Customer requirements and market conditions are clear and stable and are unlikely to significantly change the course of the project.2.High complexity/low uncertainty.In this area of the quadrant,innovation aims to solve highly complex but well-known problems.Examp

301、le sectors include aerospace,pharma,and life sciences.Innovation is likely to involve wider teams,introducing high levels of dependencies and potentially longer time horizons.Late changes will cause significant issues failing fast is therefore an acceptable outcome.In this case there is little benef

302、it from the iterative approach that Agile provides,and beyond a certain development point this is expensive and counterproductive.3.Low complexity/high uncertainty.This is the traditional sweet spot of Agile.Here,organizations need to constantly iterate and learn,involving customers in the process t

303、o address unknowns,reduce uncertainty,and lower risk.Adding Agile loops to the ideation,concepts,and business plan development stages delivers real value,speeding up the innovation process.Innovation timelines are short,as in the telecommunications sector.Agile can be equally applied to other fast-m

304、oving industries,such as food and beverage,fashion,and retail.For example,where companies dont know what customers truly want,uncertainty is reduced by iterating quickly and testing concepts,using consumer,user,or beneficiary feedback to progress,improve,or stop specific projects.4.High complexity/h

305、igh uncertainty.Generating breakthrough innovations normally requires mastering high complexity and high uncertainty.Traditionally this has been handled through phase-gate approaches,but with a high risk of projects failing to deliver or running significantly over budget.Instead,by adopting a combin

306、ation of Agile and phase-gate methodologies,potential issues around speed,cost,and requirements can be mitigated.Typically,in this hybrid approach,Agile is applied at the front end of the development process.This enables innovation teams to quickly explore,test,and better understand concepts to redu

307、ce uncertainty.For example,prototypes or pilots can be created to be quickly tested with customers and then iterated until they meet their needs.Complex downstream development activities such as detailed design,production,test,and launch can then be handled through traditional phase-gate processes.F

308、igure B.Complexity uncertainty matrix for project management approachesSource:Arthur D.LittleSource:Arthur D.LittleFigure B.Complexity uncertainty matrix for project management approaches222.Traditionalwaterfall4.Agile innovationopportunity usinghybrid approach1.Take your pick3.Agile sweetspotTechni

309、cal complexityHighLowHighLowRequirement uncertainty3 8REPORT:FROM GOOD TO GREAT:ENHANCING INNOVATION PERFORMANCE THROUGH EFFECTIVE MANAGEMENTARTHUR D.LITTLECHOOSING THE RIGHT PROCESS TO USEEvidence from the GIEB indicates that Agile can speed up the innovation process if it is implemented in the rig

310、ht way for the right opportunities.However,innovators should not expect it to be the best approach for every project.A portfolio assessment is needed to select the right innovation process(Agile,phase-gate,or hybrid)based on the needs of the specific project,industry,and region.Asking these question

311、s can help understand when Agile will work best:-Market environment.Do customer preferences and solution options change frequently or are they stable and predictable?-Customer involvement.Is close customer collaboration needed/feasible or are requirements clear from the outset?-Innovation type.Is th

312、e innovation problem complex and solutions unknown or is the innovation incremental and based on detailed specifications?-Modularity of work.Will an iterative approach deliver products that customers can use and benefit from,or does the project need to be completed in full before it can be provided?

313、Projects that meet the first criteria for each of these questions should look to Agile innovation management methodologies,while more incremental opportunities with clear requirements or specifications will gain greater value from remaining with a phase-gate/waterfall approach.3 RULES FOR SUCCESSFUL

314、LY IMPLEMENTING AGILEAdopting Agile is not rocket science.However,for many large organizations successfully implementing it can be difficult as Agile challenges traditional organizational norms and hierarchies.In an Agile world,senior management are facilitators,not decision makers.This shift means

315、they must trust and empower their teams to drive success.Following these three rules maximizes the chances of success:1.Start small.Many organizations looking to improve innovation speed and quality embark on large-scale transformations to switch to Agile.However,this can meet internal resistance fr

316、om those used to traditional hierarchies.Instead,starting small and piloting Agile with the right team on the right project is more likely to provide the quick wins the business is looking for,creating evangelists and then delivering long-term success.2.Start simple.It is important when starting out

317、 on the Agile journey that leadership teams commit to doing“vanilla”Agile well before modifying or customizing it for their organization.Use the standard approach that has delivered success in thousands of companies.Create independent,autonomous teams,with clearly defined and fixed roles for the dur

318、ation of the project,supported by all standard processes.Hiring an experienced external Agile innovation coach to mentor and support Agile pilots is also a valuable investment that executives should consider if they are serious about adoption.3.Start with a pilot.Agile requires a multidisciplinary,s

319、elf-organizing,and self-managed team that is comfortable working in changing environments with high levels of uncertainty.This is uncomfortable for many people in large organizations,including leadership.Therefore,building Agile pilots around motivated individuals is a key success factor.Creating a

320、mindset that understands that not every project will succeed,but can be learned from,is critical to getting Agile right.By following these rules organizations can set themselves up for success by making Agile adoption much less painful.This consequently improves innovation performance and delivers h

321、igh-value products faster.3 9ADL supported a Nordic telco operator that had recently launched a strategy targeting an increased return from digital projects,aiming at the creation of best-in-class customer experience.To reach the initiative target and improve speed to market and efficiency,the telco

322、 operator wanted to implement cross-functional teams that worked in a convergent,integrated,and Agile way.By working with ADL,the telco implemented:-Commercial tribes cross-functional teams based on customer lifecycle phases with long-term ownership.-Technical tribes providing capabilities to enable

323、 the autonomy of the commercial tribes.-Agile roles for example tribe leader,chapter lead,guild lead,venture owner,squad member,product owner,scrum master,and product insight lead.-Agile artifacts including tribe vision,tribe roadmap,one-pager,product backlog,sprint backlog,and chapter and guild pri

324、orities.-Integration with the telco operators operating model and processes to enable efficiency and effectiveness.-KPIs including customer experience,time to market,happiness,defects,velocity,and reliability.As a result of the Agile pilot,the speed of development increased rapidly,with average time

325、 to market falling by 50%within the first six months.The method was scaled with significant impact on company revenue and costs felt within the first year.Case study:Agile in practice4 0REPORT:FROM GOOD TO GREAT:ENHANCING INNOVATION PERFORMANCE THROUGH EFFECTIVE MANAGEMENTARTHUR D.LITTLE416.E XCELLE

326、NCE IN INNOVATION LE ADERSHIP PULLING IT ALL TOGE THERAs we have seen,the GIEB focuses on excellence in how innovation is managed and what is being achieved in terms of business value.However,like any other aspect of business,the capabilities and behaviors of the human being leading the innovation e

327、ffort also have a huge impact on its effectiveness.At the most basic level,innovation leadership is no different than any other form of business leadership,in that it requires a combination of strategic thinking,strong communication skills,problem-solving abilities,emotional intelligence,and integri

328、ty.Beyond this,the nature of innovation management today places a premium on other particular capabilities and ways of behaving that not all leaders naturally possess.To understand these,it is helpful first to consider how much innovation has changed over the years.HOW INNOVATION HAS CHANGEDFor much

329、 of the 20th century,business innovation was largely the domain of specialist researchers and developers in academic institutions and in the R&D departments of large corporations.Successful innovation leaders were those who were best at“fishing in their own think tank,”building unique in-house capab

330、ilities and avoiding sharing with others unless it was absolutely necessary.In the latter decades of the 20th century as industrial systems and products became more complex,innovation leaders realized the need for collaboration with others to speed up time to market,enrich creative thinking,and enab

331、le greater in-house focus on key differentiating know-how.This gave rise to the need for different types of innovation resources with broader expertise,to complement the deep-knowledge experts working in their silos.AT THE MOST BASIC LEVEL,INNOVATION LEADERSHIP IS NO DIFFERENT THAN ANY OTHER FORM OF

332、 BUSINESS LEADERSHIPToday,innovation has moved even further:knowledge has become highly decentralized as networks have grown,and businesses have realized that it is usually cheaper and faster to acquire most of the knowledge they need from outside.As the speed of business cycles has increased and te

333、chnologies and industries have converged,capabilities to scout and organize knowledge effectively,and to quickly move from one domain to another,are now more critical than ever.KEY CAPABILITIES FOR TODAYS INNOVATION LEADERSTo meet these new needs,innovation leaders need to focus on five key capabilities:1.Vision belief.While all leaders need to have a clear sense of where they are heading,strong i