[#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.

[#innovation - 12] Objectifying (as much as possible) the potential value of an idea.

Ok, you have some ideas. Now what?

Ideally, it would be fantastic if the proposer were already able to tell you something like: this project will need €1mln of initial investment and will take 3 years to pay you back with a 30% Internal Rate of Return.

Having such awareness would require a business case to be developed.

Numbers sound so comfortable when you navigate in a sea of uncertainty.

But, let’s suppose we can have very little clues about financials.

This means you cannot base your preliminary evaluation on quantitative criteria and you’ll have to base your estimate on qualitative ones.

Does it make you feel uncomfortable?

Even if a qualitative evaluation will necessarily be less precise … having common sense, shareable, well expressed a priori criteria will be surprisingly concrete.

When we have to evaluate many ideas, having a way to map them will help you to understand which of them will deserve your main attention. I mean prioritize.

Let’s talk about 2 main drivers.

The most important proposals will be those declaring the most plausible benefts and requiring the most affordable feasibility.

The potential impact (benefits) is related to:

    •The concreteness of the pretended market demand. Is the target well clear? Do you believe, based upon your experiece, that the demand  really exist? That means there is someone ready to give credit and pay some money to have the value you promise them.

    •More, what is the innovation content of that idea? Is it disruptive or incremental?  The more disruptive, the higheer the potential value; but only if the idea makes sense and you truly believe there might be a demand.

The stage of development is about the level of maturity of the idea in terms of its feasibility. How easy is it to be concretely realized by the team working on it? Is that team well balanced in terms of needed competence? Does it take to catch up on some competence and/or resource they lack?

Having to qualify those drivers (benefits and feasibility), according to a 1 to 9 range, will help you to classify ideas into three subsets: low, medium, high potential impact. The same will be for the maturity.

As raw this model might seem, you will appreciate its value when you’ll have to merge several contemporary evaluations, which might come from your cooperators, and when you’ll have to compare the qualitative value of several proposals.

What you get, in the end, is a map which can be read according to hyperbolic curves.

Any idea might have some good potential and probably it can be difficult to definitely say an idea is a good or a bad one. But now you can more easily say which ideas are more appealing, based on your evaluation criteria. And which ones are less valuable. 
You can also tell which ideas are the ones you’ll focus more now. And which ones you’ll focus on tomorrow.

[#innovation - 11] Ideas at the coffee machine.

How many times has it happened that a friend of yours said something like "I’ve got an idea (a good one!) and want to tell you about it"?

This often happens in front of a coffee, doesn’t it?

Any single new idea might have the potential to become valuable business.

But, when is an idea a concretely and potentially good one?

Is your individual experience enough to allow you understand when it’s worth spending some more energy on that?

Do you feel confident about always taking decisions with your gut?

Finding value in ideas needs some minimal structure, otherwise you might spend a lot of time and energy in understanding whether it’s worth investing your attention on that opportunity or not.

The structure needs to be lightweight, not to be restrictive: you have to leave the proponent enough room to express their vision and proposal.

It should be organized and include four topics:

[1] PAIN: this is a potential demand to be satisfied. Here you explain the needs of a potential customer base and define the nature of the demand, identifying the target the proposal is related to.

[2] SOLUTION: If there’s only a pain and not a proposal for its solution, than it’s not an idea but just a complaint. Here is the core of the idea, the most innovative contribution. What needs to be clear here is that the proposal will have to describe how the PAIN will be solved from the final customer’s viewpoint.

[3] BUSINESS IDEA (MODEL): actually, anticipating the way even a really potential idea will generate value (e.g. money) can be very difficult. This point is about awareness on the complexity from a business viewpoint. That means anticipating possible risks, knowing your competitors (having them is good news!), needs for partnerships, activities to be performed, customer relationships, distribution channels, customer segments, cost structure, revenue streams.

[4] COMPETENCE: point [4] is stricly related to [3]. This is because both concern feasibility, that is how complexity needs to be dominated to concretely transform the idea into business. Point [4] focuses more on the needed competence. In Silicon Valley, at this point, it is typical during a pitch that the speaker spends some spot talking about the team. That’s coherent with the whole story which is about: dear potential investor, in ten of minutes I expect you to believe I’ve identified a potential and concrete market demand [PAIN] and, you know what? I’ve also found a way to satisfy that demand [SOLUTION] and, want to know more? Well, I’m aware this is gonna be complex to be realized but I know what will be necessary to do it, I have a plan to create value [BUSINESS]. And, finally, I CAN DO THAT, because my team is well balanced and we do have all the competence necessary to transform the dream into reality [COMPETENCE].

You can consider this as a sort of check list:

just make sure you’ve some clue of these four points before you (can) feel satisfied about any “coffee machine” proposal.

[#innovation - 10] Turning digital: an irreversible evolutionary step.

In the foreword of Shawn Dubravac's book "Digital Destiny" is a passage that has inspired me to give shape a thought I have had in mind since long.

"Whether or not we enter the digital age is not a choice anymore. Once man invented the sail, he could not go back to just using the oar. Once man invented the steam engine, he could not pretend that horses were the only way to travel. And once man discovered atomic energy, he had to come to grips with the benefits and risks of his new innovation - from power plants to bombs. Digital technology resides in the same realm as these transformational technologies, and we cannot undo what has been done. This is our digital destiny. This is not what might happen if we choose this road over another. This is what will happen regardless of which road we take." [Gary Shapiro]

Even if the point is not on startups, I find some interesting parallelism.

During the past three years I have been professionally involved in coaching startups, something that has progressively become more than a hobby. 

Mutually exchanging the daily experience in an established company and the agility of startups has provided me pretty much enlarged views.

Any time I attend to a new pitch, I am provided with a valuable marketing drill down, for free. These wannabe entrepreneurs get very close to their potential customers and give me hands on insight on their needs.

Apart from that, they struggle to satisfy those needs, with creativity and keen concreteness. They find new solutions to newly discovered problems, trying to make peoples' desires come true.

Well, if you work in an established company, doesn't it sound familiar to you?

This might sound quite granted for anybody having had a touch of Silicon Valley culture. But one month ago I attended a conference where, according to a survey submitted to a thousand managers, investing energy (not necessarily and only money) in startups is the ultimate driver.

After seven years of global economic crisis, who can afford old style, monolithic investment in research and innovation?

There's much talk about the opportunity, the vital need to listen to and possibly disclose in advance customers' needs to gain competitive advantage through innovative market value proposition.

And many companies appreciate appearing in articles related to startups contests as well. Looking related to startups sounds so cutting-edge.

But what's the real investment companies are making on such innovation opportunity?

I believe startups are the most concrete possibility to invest in innovation in a sustainable, scalable, affordable way. That means becoming able to capitalize internal assets and competence to raise the odds of startups to make their project successful ... and to turn that into new enterprise, valuable business.

Innovations from startups maybe won't save the world, but radical innovation will happen, whether established companies will recognize it or not. The digital revolution is in progress and startups are proving their sensitivity to its potential. They really are more than an opportunity.

I think developing the ability to give value to startups and gain from their innovative potential is no more an opportunity, but a necessary lever any manager should mature and have as a monkey wrench in their tool case.

Let's contribute to create new bridges among established companies and startups.

[#innovation - 09] The right attitude to manage innovation?

Well, doesn't really come to your mind that having as innovation manager a process addicted that has never had a credit card in his lifetime and has never made an online digital transaction might not be a proper investment on the future of your company and their people?
Doing that is like insisting on protecting the past of your company, not its future.
How much talent are you killing because of that? How much energy are you throwing in the garbage?
Well, you'd probably need a change in mindset.
Where is the digital revolution you like to talk about? Please!

 (Banksy)