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    Innovation Pressure Remains High #10 Innovation Newsletter

    According to the new 2013 GE Global Innovation Barometer, the pressure for innovation remains high globally. More than 90% of the 3,000+ executives surveyed cited innovation as their top priority.

    This news is not surprising; « innovation » is percolating not just in manufacturing, but in nearly every area we touch as individual consumers-from healthcare to shopping to entertainment.

    Perhaps more insightful is another result cited in the survey report: « While incremental and product innovation have historically been the main drivers of growth for companies, business model innovation is gaining momentum within the context of today’s low-growth, resource-constrained world. » Let’s put that in context.

    Business models – a place to look for innovationstrong>

    First, keep in mind that innovation within the scope of current business models-that is, the improvement of existing products and the creation of new products and processes-still accounts for the lion’s share of growth potential in most cases.

    We position that type of innovation as Platforms 1 and 2. New business models usually imply a higher-level, more disruptive form of innovation (our « Platform 3 ») that affects organizational, supply chain, and delivery structures.

    The right innovation strategy for your company depends on its specific situation, and that changes over time. That said, neglecting to at least consider possible opportunities for business model innovation is likely to be a mistake.

    As a first step, become conversant in the emerging language of business models, and proficient at identifying and capturing their key elements. It’s a skillset that has evolved; it differs from traditional business planning and most people will benefit from taking a fresh look.

    Learn how to articulate and map your current model, and make sure your management team learns as well. Visualizing your « current-state » business model is an excellent way to develop awareness of where to look for change. And only then will you have the foundation from which to draft future-state models. (See the August issue feature article « What Is a Business Model—And What Is Yours » for a two-minute introduction to the components of a business model.)

    Business models and green sustainability

    The notion of a « low-growth, resources constrained » world brings to mind the connection between innovation and sustainability.

    There is, in fact, a strong link between business model innovation and what we’ll call « profitable sustainability » – the drive to make companies and products greener and more sustainable, and to make a profitable business case for doing so.

    Recent research cited in MIT Sloan Management Review shows that more and more companies are changing their business models in response to sustainability challenges – and translating those challenges into profitable opportunities.

    Moreover, the innovation involved is not the massively disruptive, game-changing sort you might associate with business model innovation. Rather, companies like Kraft Foods (now Mondelez International) are delving into their supply chain and their target market segments, and coming up with innovative solutions in those areas that help them improve overall competitiveness.

    Kraft has turned sustainable supply chain sourcing into a business asset; they’ve benefited from improved reliability in raw materials and have also been able to open up new consumer segments, such as coffee.

    Your next steps

    Interesting, in theory, but how does the macro information from a global executive survey apply to your business situation, and your role?

    For one thing, it’s another strong reminder that operational excellence, though it may be a necessity, is not enough. Moreover, whatever your role in your organization, it’s critical to understand the scope and potential of innovation at the level of the business model. Here are three suggestions for specific next steps:

    1. Learn the new language of the business model. It’s different than traditional business planning lingo.
    2. Start using and practicing the skill of mapping your current-state business model, and analyzing it for opportunities to innovate. That skill is rapidly becoming a mandatory one for anyone involved in business strategy.
    3. Consider the relationship between sustainability efforts in your organization and your business model – and how shifts in one affect the other. Your competitors are likely doing that, or will be soon.

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