Prof. Sushant E R
Abstract
In last two decades, we have seen a drastic change in organisation’s business models and their new and innovative approach towards business as a whole. This immensely helped organisations to stand out in a crowd but also to reach out to huge numbers of customers and maximize their profit earning capacity. For example, Uber the world’s largest taxi company owns no vehicle. Facebook: the world’s most popular media owner creates no content. Alibaba: the most valuable retailer has no inventory. Airbnb: the world largest accommodations provider owns no real estate. Organisations also start challenging a traditional way of doing business to reduce the competition and usage of more advanced technology to create huge consumers base and minimizing their actual production or service cost. Innovation fails when you are not in touch with the customer and these organisations have proved this with their profit earning .Benefits are reducing cost, improving cycle time, quality, transparency, comfort level, goodwill, increasing customer base.
Six Innovation Models
Six Innovation Models | ||
Creators- Apple,Tesla,Nerfix,Lululemon Athletica | Expanders –Amazon,Gliead,Danaher | |
Solutionbuilders –Nike,Starbucks,GoPro,Traget,Under Armour | Defenders –AIG,Pfizer,Allstate,Insurance | |
Leveragers -Zara,Toyota Motor,Costco | Fast followers -Reck itt,Benckiser Group, Tencent ,JP Morgan Chase | |
Creators Fit the popular notion of highly innovative companies. Typically led by a strong, bold, visionary leader, they disrupt their core markets, protect their intellectual property, and make highly focused big bets that become the stuff of industry lore. Apple, which had a TSR(Total shareholder return) of 21.2% from 2008 through 2017, is the classic example.
Solution builders look to the market for inspiration, drawing on observations and deep insight to address customer priorities and problems. Nike (16.5% TSR) typifies this model, combining customer insights with cutting-edge design and technology. For instance, shoe-based sensors link to web-based platforms offering highly personalized feedback that customer’s value.
Leveragers Create a superior business model and then capitalize on it to sustain their industry leadership. Zara (whose parent company had a TSR of 16.8%) is a Spanish retailer whose fast-cycle innovation and fashion-forward designs changed the industry. At the heart of Zara’s success are its breakthrough design, manufacturing, and distribution processes, which dramatically shorten the time it takes for new items to reach stores.
Expanders Apply their core capabilities in new ways to take over adjacent markets and spur growth. Pharmaceutical innovator Gilead (14.4% TSR) continually enters new disease categories and markets in search of growth, achieving success through strong management, repeatable R&D and manufacturing processes, and a tolerance for risk that enables a long-term view. By acquiring Pharmasset in 2011, for instance, Gilead was able to develop two best-in-class treatments for hepatitis C and gain access to that promising market.
Defenders Tend to win in mature or slow-changing industries and to innovate defensively in order to protect their advantage. As technology transforms more and more industries, adhering to this model becomes increasingly risky. The key to success is the ability to monitor the landscape for potentially disruptive innovations and to defend against them using tactics such as partnerships and acquisitions. When Allstate Insurance (6.4% TSR) used this approach, it was able to identify the shift to online and app-based products—and to acquire pioneer Esurance to keep from falling behind.
Fast followers Optimize their capabilities across all dimensions in order to quickly respond to—and often improve upon—competitive innovations. Reckitt Benckiser Group (14.7% TSR) is a best-in-class fast follower in the consumer products industry, which is characterized by low consumer-switching costs and short product development cycles. To minimize risk and maximize speed, the company focuses technical capability and resource investment downstream, in product testing, with minimal energy spent up front, in consumer insight and ideation.
90 Days Innovation Model.
Day-01-30 | |
Define your innovation buckets | Innovation Leader – Determine Gap between growth and current operations |
Top Leaders-Determine broad categories of innovation that could fill gap | |
Day-20-50 | |
Zero in on a few strategic opportunity areas | Innovation Leader & Internal Advisers: Meet at least dozen customers to probe unmet needs |
Innovation Leader & Top Leaders: Hold workshop to choose 2-3 opportunity areas | |
Day-20-70 | |
Form a Small Team to Develop innovation | Innovation Leader– Dedicate a handful of people to developing innovations |
Innovation Leader,CEO& CFO-Find and Eliminate “ZOMBIE” Innovation Projects | |
Development Team & Innovation Leader-Develop Process Checklist | |
Day-45-90 | |
Create a Mechanism to shepherd Projects | Innovation Leader:-Select and train senior leaders to oversee development team, and established Oversight Rules |
Senior Shepherds & Development Team – Conduct First review and first Innovation Project |
Paths to Business Model Innovation |
What Mix of Products or Services Should You Offer? |
Focus narrowly. |
Search for commonalities across products. |
Create a hedged portfolio. |
When Should You Make Your Key Decisions? |
Postpone the decision. |
Change the order of your decisions. |
Split up the key decisions. |
Who Are the Best Decision Makers? |
Appoint a better-informed decision maker. |
Pass the decision risk to the party that can best manage the consequences. |
Select the decision maker with the most to gain. |
Why Do Key Decision Makers Choose as They Do? |
Change the revenue stream. |
Synchronize the time horizons. |
Integrate the incentives. |
Create a culture of innovation |
Influencing innovation and ideas at the organizational level. |
Acknowledge and reward innovation. Promoting innovation and ideas should be on every leader´s scorecard. |
Inject creativity with acquisitions |
Dedicate time to innovation |
Increase dialogue |
Suspend assumptions and judgements |
Actively listen |
7 Criteria to Select the Best Idea |
Clarity, Usability, Stability, Scalability, Stickiness ,Integration, Profitability |
Evaluating your innovation |
Any original concept, new or improved device, product, material, business model, process or service can be considered an innovation. The true test of whether an innovation can become a business success is when: a new device, product or service becomes accepted by the marketplace |
Very few innovations end up making money for their creators. Many factors can contribute to this low success rate, such as: the innovation is not technically feasible |
Creator | Solution Builder | Leverager | Expander | Defender | Fast Follower |
We Know the Best | We are Listening | We Do it Best | Seeking share to Steal | Protecting our turf | Ready to react |
Typically led by a visionary,creators disrupt,markets and make focus,big bets | Solution Builder win by understanding and Delighting customers | Leverage innovate their core business model to drive ongoing advantage | Expander use a core capability to enter and dominate adjacent markets | Defender focus on points of advantage in mature or slow – Changing sector | Fast Follower optimize their capabilities to react rapidly to competitive innovations |
A closed Innovation approach | Excellence in customer insight | Concentration on innovation that can speed the expansion of the model | A Mandate for growth. A Focus on one or two advantaged capabilities. | Continued improvement to maintain edge of current offering | A Focus on sensing and Speed to improve on competitive Innovation and lower risk |
Deliberate life cycle management | A Focus on the full purchase experience | A Focus on one or two advantage capabilities, consistent in market expansion | Consistent in market experimentation | Rigorous defensive monitoring of potential disruption | Investment in go to market excellence |
A Limited number of big bets | Centralised governance to keep the customer at the centre of innovation | An open empowering innovation culture | An open empowering Innovation culture | Use of M&A and partnership to keep pace | Flat organisation to facilitate rapid decisions |
Examples | |||||
Apple,Tesla,Nerfix,Lululemon Athletica | Nike,Starbucks,GoPro,Traget,Under Armour | Zara,Toyota Motor,Costco | Amazon,Gliead,Danaher | AIG,Pfizer,Allstate,Insurance | Reckitt,Benckiser Group, Tencent ,JP Morgan Chase |
Company Name | Innovative angle | Lesson to be learned | Details Regarding Operation |
Skillshare | A platform for learning about anything | Leverage the intelligence and expertise of normals to create a massive intellectual marketplace. | Is an educational marketplace, anyone can attend these classes by paying $20 or $25 ,but in past march Skill share reduced it for $10.Like other educational start up Skillshare doesn’t use professors from top-notch universities you need not be a Ph.D. to be able to teach something useful and relatively inexpensive — to become a lifelong learner |
Stitch Fix | Personal styling made smarter by data and trendy part-time fashionistas | A product that uses smart data to surprise and delight — and save consumers time — is a win. | Stitch Fix originally targeted the mid-20s urban professional who has a demanding job and doesn’t have much time to shop, but appreciates being on-trend and looking nice. Combination of the art and science hasn’t been seen before in retail industry |
Warby Parker | Cutting out the middleman — especially a behemoth one — and transforming a medical device into a fashion accessory | Change the way people see an industry. | Warby Parker eliminated the intermediary and added not only an immense cool factor, but also a social good element. |
Paperless Post | Reinventing the world of stationery, by taking it online, then back offline | Aesthetics matter. | Post started in 2008 as the U.S. Postal Service’s biggest enemy — it encouraged people to email invitations and announcements, made pretty with hundreds of design templates. The site was free to use, though premium templates and envelope liners required prepaid “Coins.” |
Zady | Curation of sustainable apparel with an emphasis on the items’ backstory and beautiful design | Storytelling — and the goods’ path to consumers — matters, and people will pay a premium for it. | Focus on high-quality, hand-crafted goods that are ethically produced (think: vegan leggings), locallysourced, environmentally conscious and made in America |
Handybook | On-demand home services, like cleaning or repairs, bookable from a sleek mobile app | Convenience is key. | The way we set up Handybook is to think about all the services you need inside your home and how we can be a remote control for managing those services.” Looks like people are clicking that remote. |
Popsugar | Multiple, symbiotic revenue streams for the Popsugar woman | Content drives commerce, and people love a one-stop shop. | It’s become a global lifestyle brand with 41 million unique visitors and 234 million pageviews monthly. |
NatureBox | A twist on the subscription service — Naturebox isn’t curating, it’s making all-natural snacks in-house | Making your own product gives the business an edge unparalleled by competitors who curate. | To date, NatureBox has developed 120 snack varieties and shipped 1 million boxes. Naturebox is taking on the $64 billion snack food category that to date has been chock-full of manipulative food science and unhealthy additives |
Hukkster | Tracks the items you want via SKU, makes shopping (even more) fun via a Tinder-like interface | Shoppers like saving money; helping them do it means everyone wins. | The startup’s Hukk It Chrome extension creates a one-click experience for tracking coupon codes. (70% of discounts in the marketplace are coupon code-based). |
Zola | A fully customizable registry, with group-buying for bigger gifts and a “cash fund.” Down with pots and towels! | A beautiful interface and the ability to customize go a long way, as does reinventing the traditional way of doing things. | This gifting trend “supports our bigger belief that couples today want to register not just for tangible products, but also for experiences that allow them to spend time together and keep date night alive,” |
Oyster | Ebooks plus a beautiful user interface | Embrace the direction of media consumption habits, make the price undeniable. | The monthly subscription is $9.95, which is far less than the price of a single book, hardcover or paperback. Oyster has emerged as a runaway success. In 2012, the social reading startup raised $3 million in 2012 from Founders Fund, and since then — in addition to raising another $14 million |
Uber | Upending the taxi/transportation ecosystem with on-demand drivers and dynamic pricing | Innovation is an uphill battle, but it’s one worth fighting. | Uber the world’s largest taxi company, owns no vehicle .Uber has become a fixture in some of the world’s biggest cities. To date, the company has raised $1.5 billion and has hinted at expansion to other logistics markets, like same-day delivery and errands. |
Serengetee | Bootstrapped, cause-oriented apparel with an army of campus reps | Millennials like customization and social enterprises — and they’ll evangelize for you. | Each of the pocket patterns on a Serengetee tee originates from a place the founders have visited and is tied to a social cause in the region. Customers personalize shirts (base color + pocket pattern) and thereby support a cause, thus becoming tied to and invested in global issues. |
StyleSaint | Fashion meets media in this fashion label, whose designs are inspired by customer interests | The customer is right, especially when it comes to her own taste. | Helps to reduce excess inventory and eschews fast fashion in favour of quality goods. where style-minded users could create their own “tear sheets.” Those tear sheets were then used by founder Allison Beal as inspiration for the inaugural StyleSaint collection, StyleSaint makes new collections every six to eight weeks based on those tear sheets, and uses $10.1 million of venture capital to fuel growth. |
Airbnb | Create a sharing economy that utilizes empty rooms, apartments and homes, upending the hotel sector | Sharing is caring — peer-to-peer models save consumers money, help owners make money and create a more authentic, local experience for travel. | The world largest accommodations provider owns no real estate. collaborative consumption.” The site hosts 300,000 listings and has helped more than 4 million travellers book stays. Not content with just the space booking element, the site is also experimenting with group dining experiences.(Net worth $3.8Billion) |
Rent the Runway | Rent inventory of high-end dresses at a fraction of the price to create a “Cinderella moment” and introduce women to brands they wouldn’t otherwise wear | Aspirational fashion and try-before-you-buy are potent sales drivers. | Rent the Runway was founded after a closet-full-of-clothes-and-nothing-to-wear moment so women could have access to the red carpet looks they see on celebrities, without breaking the bank (rentals are typically 10-15% of the dress’ ticket price). |
Birchbox | Subscription boxes whet the appetite for beauty fiends | A little curation goes a long way in a crowded industry. | The mother of all subscription services. The beauty startup spawned an entire industry and influenced several of the businesses on this list. Birchbox introduced us to expert curation, the joys of surprise and delight and the idea of discovery ecommerce. |
Conclusion: Innovation only in technology is not enough. You need that more in management practices, where the RoI is greater. Innovations is very important for survival and success of corporations, societies and universities. Innovative way of doing business and challenging traditional way of doing business is helping organisations a lot. Courage to challenge the traditional way of doing business is also benefiting end consumers a lot. Organisations are also able to reduce their total capital investment in business by thinking out of box. Information technology also allow these organisations to implement these innovative business models effectively. To survive in today’s competitive world standing out from a crowd and making your presence recognisable is a key. Traditional way of doing business are been challenged by new entrepreneurs which eventually helping end consumers a lot.
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