[#strategy - 03] Manufacturing like ... services.

Manufacturing and service operations answer different questions and formulate different strategies when it comes to planning and managing the way in which an organization is run.

Manufacturing operations produce tangible goods, which are physical products that can be held and seen. Manufacturers have a standardized way of producing goods. One finished product is generally the same as the next. 

On the other hand, service operations provide certain intangible services that may not be easily identifiable and repeated. Service operations have more opportunities to customize the services they provide and match customers’ needs.

Both sides of the moon face similar issues, when they need to provide competitive prices to customers and still turn a profit. They both forecast demand for products and services and struggle to stay competitive in the marketplace.

The key difference factor is time. When you engage a customer in a potential commercial relationship, the time laps between actual demand and supply can deeply vary.

Recently it has happened to me that manufacturing companies have asked insights on how to get their process along a services like approach. That’s because there is more awareness on the need for developing the capability to get closer, in time and space, to the evolving customers’ demand and the sensitivity to rapidly understand such changing demand. That means (1) finding new ways to hear customers’ voice and (2) turn it into new products.

Here I focus on the second point.

The operational approach which has traditionally been focused on efficiency is often an obstacle to new product development. That’s because, apart from the expectable difficulties related to designing a new product, setting up the production process, integrating with the existing go-to-market or creating a new one, what needs to be overcome is a lot of internal resistance. That comes out of (too) much confidence on (well) performing consolidated processes. It’s a cultural resistance.

If you want to provide you established, manufacturing company with a more agile ability to develop new product, you cannot just claim a rapid and radical revolution. Your company is a rich set of competencies that need to be valued along that new direction. 

Self-providing the ability to rapidly move from an idea to a prototype that can be market-tested on a selected subset of early adopters is key to accelerate the New Product Development process, shorten the distance with customers and, definitely, improve the relationship with them. That means shortening development cycles.

A sustainable approach, in my view, would involve:

• Setting up and internally spreading a common business language on innovation (requirements and needs).
• Establishing a proper “innovation appetite” at top management level, based upon such language.
• Diagnosing own Innovation Maturity model and define a tailor made Roadmap
• Defining a strategic innovation strategy, through the adoption of lean evaluation model for new ideas/business opportunities.
• Providing with the ability to rapidly develop new market proposition in terms of prototypes. Those will allow anticipating the moment you validate such propositions with your customer base and prospects. Such new ideas might very well come from intense and continuous scouting, which can be external and internal. In the latter case, that’s a great way to value the huge capital of competence that lies in the human capital of the company.

DP

Here a few notes on Manufacturing and Services.

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[#strategy - 02] Corporate Innovation appetite.

What you find on the left is the word RISK written in Chinese. This word is made up of two characters, danger and opportunity. It expresses the very sense of risk. The more you risk, the higher the return of investment you expect. If you want to risk less and invest your energy (money, people, whatever), you’ll also expect less return.
I think it’s the very same with innovation.
Since the beginning of the global crisis, the competition in almost any market has focused on resistance strategies. That has actually meant spending best efforts to make efficiency (cost cutting, improving processes, etc). In many cases that hasn’t been enough and laying off people followed. There probably must be some limit to the efficiency you can do.
My view is that concretely investing in innovation is not an option anymore, if you want to differentiate your value proposition in your market and set up the present and future business for your company, your customers, your working people.
The point is that chances to make mistakes are high and the formerly spread innovation model, based on a closed and strictly R&D approach, is not affordable anymore, because it typically requires monolithic investments. The Open Innovation paradigm is more than an option.
Plus, the startup movement has long grown up over the point in which it’s become systemic. It offers the great opportunity to in-source marketing analysis and innovation value very cheaply, according to a scalable and affordable model.
That doesn’t mean you should dismiss your R&D, of course. My suggestion is that you set up your corporate innovation portfolio, differentiating with both, incremental and disruptive contents, in terms of potential impact and affordable feasibility. 

The more you’ll invest in disruptive innovation, the higher the potential value (impact or plausible benefits) you’ll create for your company. But the lower the likelihood to succeed. That means choosing ideas located in the bottom-right corner of your matrix.
You can compensate such investments with some being less risky, I mean those (located at the top-left corner) having more chances to get to concrete business.
Innovation appetite is related not only to your entrepreneurial attitude, but also to your actual and current possibility to invest in innovation opportunities. What I propose here is to use such elementary model to express it and help yourself build a balanced portfolio of incremental and disruptive innovation and to focus your energy only on the ideas that properly fit with your innovation appetite.

[#strategy - 01] The Gaza conflict according to game theory.

Here I'll expose a few considerations the recent recrudescence of the Israeli/Palestinian led me to think of. I'll strive to abstract from the relative size of the forces, who's supposed to be right or wrong, the role and relative importance of involved allies, that of the United Nations, the external involved countries and the international press.

The Israeli/Palestinian contrast, if we try to read it according to the Theory of Games (Nash), emerges as a "competition" between two parties that dispute (sorry for the crude simplification) a "market" (territory). Specifically, it is a sequential game with a finite number of moves. Actually, both parties act as if the number of possible moves can only be limited; as if both actors expected that one day the conflict must necessarily end with one of two that definitely prevails over the other, which succumbs. Every war has this assumption. 
In this kind of "game", the strategy with the highest individual benefit looks the opportunistic/selfish one: each party wants to maximize their individual benefit at the expense of the other. That happens even if the game would allow, in case of collaboration (eg. a peace agreement), a major individual benefit for each of the contenders ("prisoner's dilemma"). 

                            

To have a possibility to the end of the conflict, the game should turn into an infinite sequence of moves. Like when two people get married: they sign a contract stating that their confrontation will last indefinitely (or until death of one or both partners or termination of the contract). This is a necessary precondition to enable collaboration as the best strategy for each party. In this kind of game the optimal strategy would be to pursue a higher collective benefit for the individual value of each of the interlocutors. 

How could that be? 
If I had an answer I would be a candidate for the Peace Nobel Prize. 
Of course having a common objective would be of help. 
I think this would probably be a good chance for Europe to start acting a unique, common foreign policy, gaining a third party role which would have some possibility to be recognised as neutral and balanced.

[#innovation - 08] When Vulcan meets Mercury.

How would it be if two cultures (apparently) antipodes could talk in the name of a common objective, namely to transform innovation into value?

In ancient Roman mythology, Vulcan and Mercury were both sons of Jupiter. They are used to acknowledging their different mutual perspectives.

Vulcan, with his strong, long lasting ‘managerial’ experience, gained in well-established business contexts, represents focus; that is constructive concentration. He is the self-confident master of processes related to incremental innovation, he strives ceaselessly to improve the value chain. Determined to pursue targets coherently with his tradition, his role and his responsibilities.

Mercury, wannabe entrepreneur and start-up founder, is on the other hand emblem of “harmony”, that is the participation to the world surrounding us.

As they meet, they realize naturally that they represent two essential, inseparable and complementary functions: Vulcan’s concentration is the necessary condition to enable Mercury’s metamorphosis; Mercury’s lightness (sometimes recklessness) is the necessary condition to allow Vulcan’s tiring efforts to become drivers of new meanings.

Injecting innovation effectively in established companies requires to take into consideration different times. Mercury’s and Vulcan’s times. A message of agility and spontaneity, expressed by persisting with accurate and tenacious adjustments. An instantaneous intuition that, as soon as formulated, becomes as conclusive as something that could not be expressed differently. But also the time that flows with no other interest than letting young ideas mature, detaching from any ephemeral impatience.

This meeting needs to be renewed daily and transformed into concrete value.

According to our professional and personal experience, there can be many chances to consider the start-up phenomenon, especially from a perspective of contamination of the dominating culture in established companies. It is worth sharing a common thought on how to create opportunities for those willing to experiment and recover the original confidence with uncertainty, chaos and change.

What will make the difference is the resolute, strategic will to observe the reality with an open and dedicated mind-set and to look at things around us with revealing eyes.

Massimo Pelaia, Daniele Pes