Technological or market driven innovation?

(----- footnote thinking - just need to comment on this -----)

What drives innovation?
What is the best way to innovate? Talking to development engineers they would say through researching technological opportunities...talking to business people they would argue we need to understand the market first.

But is there a best way to go? I would argue NO....it's true that most great inventions come from technological development but again it is seldom that the actual companies developing the technologies in the first place are actually profiting from them. Coca Cola is a good example...it's in fact more likely that the first movers are the losers in technological driven innovation. Looking at market driven innovation we have all seen many examples of GREAT business concepts, with great prospects...it just lags one thing...the offering (especially when bringing in consultants that don't know anything about your core products). It's easy to write a good business plan for the time machine.....!

Innovation projects should respect their origin
I've seen technological projects being devastated because it was hip to develop business concepts and market knowledge before testing the technology and finding out what it was capable of and to guess on the cusomter segments. I've also seen lots of business concepts being trashed because we didn't have the solution to the concept right now.....

Ideas come from both worlds and we need to respect where we first saw the competitive advantage. A technological driven innovation project builds on an idea that this technology is able to deliver substantial new value.....OK then prove it and then go and learn from the market. Direct all the resources upon proving that the proposed value creation is possible....fine business models and concepts are worth nothing without this. Same goes for market driven innovation. It builds on an idea of superior value creation that we think we can capture somewhere....prove it and the write the business plan and Then initiate operational business development.

There are simply too many examples in daily press of companies blasting out the "breaking news" of a new technology and when you actually dig into it you find a technology that is not tested yet and the article builds mostly on dreams of engineers to what this technology might be able to in the future...

Be MEAN to you value proposition and build your mission
I'm not saying that positive marketing is bad, - I'm saying that if positive marketing should have a longlasting effect, and if companies should increase innovation succes rate they have to keep integrity inside and outside the organisation and be MEAN to the value proposition of the project. As time goes by a project learns and by constantly asking the question "what value are we delivering" it will learn about itself and build its own mission!

Too many projects are driven on the basis of "hope-to-find-something-in-this-exciting-project" with no clue of systematic evaluation of business potential and strategic importance.

Business Model Innovation - is it only for consultants?

This sounds like something very "flashy" and as a "new-biz-buzz". However, we are all thinking business models and a lot of us are also doing business model innovations without even knowing it.

A lot of people get confused when using a term like a business model...why not just call it a strategy? Well, - there are some differences. A business strategy holds a lot of the information that a business model does....it describes where we are going with our business. The business Model however, describes how we make money.

Cost structure and revenue streams
In the end it all comes down to cost structure and revenue streams. There are no single-most important aspects in a business model...it's about how you integrate the different components to make a profitable business that is essential.

The "bridge" between a cost structure and the revenue streams is the "Value Proposition". The value proposition states what value that you are offering your clients in return for their money. It is important to articulate this value proposition so it reaches high enough without loosing foot-hold. It should be easy for anyone to see why customers would want to accept your value proposition. (see former issue around business strategy)

The cost structure can be defined as "key resources", "key activities" and "key partners" that is needed to make the business model work. They all have associated costs. The revenue streams defines how cash flow is delivered to the company and is made up by "client relations", "distribution channels" and "client segments". Here you will define how your value proposition is offered to your clients and who your clients are....and how they are going to pay for it.

In the end it is ofcourse imperative to match a reasonable cost structure with the revenue streams to become succesful. It sounds very simple...but there are tons of ways to do this.


http://www.businessmodelgeneration.com/

The above link will guide you to one of the most straightforward, yet innovative, approaches to describe the concept and how you can use it to find new ways to make money, - either for your existing business or for a completely new startup. Explained in this visual way, - anyone is able to follow it and find time to complete it. It is a book for people that sees beyond initial offerings and want to challenge the old models of doing things. An important aspect that I will urge you to notice in this book is, that they are focusing on working systematically with creativity...(see the last post on this blog). This issue is becoming more and more important and organisations are really opening up for 1. aknowledging that we are not good at this & 2. seeing the possibilities in behaving crazy :-)

I'm sure that anyone interested in business development and innovation will find this book very interesting and get lots of ideas.

Systematic Creativity - Unleash your company's potential!

For several years, litterature upon how to become creative and how to systematically work with other peoples creative potential, have grown significantly. There's no doubt that more and more people have become aware of the posibilities in systematic creativity, but somehow it hasn't been integrated into many companies yet. Companies with a long track record of success find it hard to integrate this thinking, - many of them are still shocked by how fast everything is changing these days....not realizing that the competence of being able to systematically work with creativity would make them MUCH more innovative and able to cope with future competition.

What is systematic creativity and how can it help my company? Can't I just brainstorm?

Let's start by answering how it can help you and your company. Having this competence...

• makes a company much more agile in development
  
• develops the full potential of good ideas and trashes the bad ones rarely fast


• makes the whole company more creative

All in all it makes development much more profitable if succesfully applied. It contributes to the overall company innovativeness by constanstly developing and renewing the business foundation. Of course this is only true when a company really feels a NEED to change...a need to be innovative and do things in different ways! Many companies have great visions of the future and how to innovate but often these visions comes from the minds of top managers that will never work practically with innovation....the result is that the people that are really working with developing the company don't have a good understanding of "why to change".

It's a process and a journey...

That's why a creative process often starts out with clarifying "why innovate". All people involved should discuss and inspire each other to get a sound understanding of the "problem to be solved". It all ends up by defining a "FOCAL QUESTION" to be answered during the creative sessions. The question should motivate everybody to find solutions and everybody should feel a need for answering the question.

When the focal question has been defined it's all up to the process leader/facilitator to make things happen. A golden rule in systematic creativity is "Preparation"...the more prepared you are, the more you will get out of your process. The first task is to set up a good process structure which respects how people think.

Divergent (creative) and convergent(rational) thinking

ALL people can be creative...!!! Some people just doesn''t use their right brain-half very much and then they conclude: "I'm not a creative person". Well maybe not, but by training your right brain-half, you can become more creative...you have to "wake-it up" and hammer it out of the day-to-day rational thinking....we're all very good at rational thinking....at work you calculate, measure, evaluate, etc, etc...when you drive your car, when you're shopping, and so on....nearly all our daily activities requires logic thinking......after all very few goes to the roof and and do bungee-jumping while taking the dishes....but when you want to wake up your sleepy right brain-half, - this could be a very good way to do it!!! I've facilitated several of creative workshops that started out with a beer-run!! Maybe this is out of limits at a workplace...but it is actually what it's all about if you want to become creative....break down the barriers of "how we do things around here", loose the tie and DANCE..!

Should we then all just go crazy to make profit?

Not at all....there's a meaning in calling it "SYSTEMATIC creativity". A facilitator has to take control of the process and add what's really needed....because logic capabilities are STILL crucial in this process...we just don't have to dig that deep to find them...everybody is able to criticize and judge things....it's much harder to develop something unique. Ideas are fragile and have to be nurtured....it's too easy to judge an idea and what seems to be a bad idea in the beginning can turn out to be the next milking cow for the company when we use systematic techniques to develop it into a concept. That's why it's CRUCIAL to separate the two thinking methods....whenever the group of people should be creative and use their right brain-half NOONE should be allowed to judge anything.....it sounds fairly easy, but believe me it's a hard job as a facilitator to maintain control in a creative workshop! We're so used to being rational that it comes to us as an instinct to evaluate...but nevertheless you could be killing a great idea if you fail to follow the "rules"....remember....ideas are fragile! We have to treat them right. After the creative process, which developed lots of ideas ofcourse, it's time to use logic to separate the good from the bad ones. In the beginning of a process you have hundreds of ideas and many of them are the same and some of them don't make sense, etc, etc.. After you've picked some of the best 10-15 ideas you can carry on to another creative process to further develop the ideas into concepts which makes it even easier to evaluate them afterwards.

It's a well used method to use this divergent/convergent split of the process. In the beginning of this blog post you can see a typical model of how to structure a full process.

If you think this is a little odd to read and maybe you are a little skeptic...then I hope that you've become a little bit interested in knowing if there is any truth in what I'm writing....Maybe you tell yourself..."why can't I just get people together in room and brainstorm over a subject"...well you could do that...and brainstorming is also the first example of a technique (rather simple) to be systematically creative...and it's a start and MUCH have been done since it was invented...for inspiration I will encourage all to read Edward De Bono's "six thinking hats" at least...For danish readers I would recommend Ole Striim, who has written "Kreativ problemløsning og praktisk idéudvikling". After all it's not all about the process....e.g. the place the workshop takes place is extremely important....very rarely it's a good idea to do it at your company...because people will often have a hard time breaking down the rational barriers....

I'm sure you will be convinced...or else....try to attend to a creative workshop once in a while...and feel the magic when a good facilitator can leverage upon everybodys creative potential and maximizing the energy in a room.

What the hell is Market Orientation?

Sorry for my language, but I hope that I can redeem myself by telling you that there is a well-respected article by Shapiro (1988) with the same title as mine : -)

Well…market orientation, close-2-customers, outside-in....is it really important?
Example comments on resistance from market orientation

1. "We should focus on what we're good at"
2. "Customers don't know what they want so I can't ask them!"
3. "If we're good enough, - customers will buy!"

You hear these comments nearly everyday when working with business development....it's seldom that you respond to them, because they all have truths build into them....but in my opinion, - they are far from wise! They all exhibit how hard it is to be market oriented.
The replies to the statements could be:

1. It makes perfectly sense to do what we're good at but if you cannot link this to any value creation for your customers you will not earn money
2. Customers can't always tell you what they want....but they can respond to something you show them. Developing everything to perfection before it reaches the market is like playing the russian roulette.
3. But how do you know if you’re good enough? You only know that when you confront your customers with your business.

So you see, - peoples lack of market orientation leads to an attitude that says .."I know what the customers want and I'm not bothered with competitors and other external forces. Nothing can rock me if I'm doing what I'm good at"....
In times of financial crisis, global warming and thousands of emerging markets and thousands of emerging business model innovations….it’s getting really hard for any manager to neglect the need to be market oriented!

The Value Proposition
I've found the value proposition to be extremely useful for people who wants to become more market oriented. The value proposition states "what value you are offering your clients in return for their money". Grasping the fact that IF you are successful in giving your clients superior value in return for their money then you will win, - makes it easy for everyone to understand it’s importance. To evaluate whether or not you have a superior value proposition you NEED to listen to the market….not just your current revenue. Being proactive in finding a neat value proposition is a killer for your competitors and a gift for your customers.

But…What the hell is market orientation?
To be honest, - it’s a very hard question to answer. I do think that this professor at CBS has got a very good clue to what it is: http://www.youtube.com/watch?v=Www-_jGrIQQ
He also refers to Shapiro’s (1988) article and lively talks about how CEO’s can tell everyone that they need to become more market oriented….and not knowing a bit of what they are talking about. The funny part of this story is that even though that many CEO’s don’t know what it means, - organizations become more market oriented and their results improve!

It’s far more than “getting close to customers”
If you are interested in this subject and want to know what you can do to improve your market orientation you could read the Danish book “Luk Op” (English: “Open Up”) http://www.bogpriser.dk/work-88791389-luk-op/ by strategy professor Anders Drejer at Aarhus School of Business. He introduces a “strategic realtime scanning” model that somewhat sums it up. The thinking behind the model and the business development processes like “systematic creativity” is unique and very hands-on for most people.

More to come
Some of my next blogs at http://baldrian-business-development.blogspot.com/ I will introduce some of these topics:

1. Business Model Innovation
2. Systematic Creativity: Working professionally with crazy things
3. Leadership in Business Development

Please give inputs to other interesting topics.
Have a nice day!

What is Strategy? And what is a Business Strategy?

It's an obvious question to adress when dealing with or having the responsibility of developing strategies. Yet, this simple question is really confusing a lot of people in daily work and I think it would make sense to start out this blog with defining this.


What is Strategy?
Well to be honest, - strategy is really hard to do succesfully. Why? Because strategy concerns the future and trying to predict the future is getting harder and harder every second. This doesn't mean that we should give up, - but it might give us a clue on how market oriented and foresighted we really have to be when doing our strategic business development. Never before have markets been changing at this speed and it calls for more than well-thought-out plans. Well, - but let's get to the point...What is strategy really?


Strategy is simply answering the question: "Where should we go?"
The easiest and most pragmatic way to explain this, is to introduce another term that goes hand in hand with strategy, - tactics. It's always strategy and tactics that people get confused over and are having trouble defining their differences. Well, - I think that if you remember these very simple definitions in your head, you'll be able to act very sharp on what is strategy and what is NOT relevant in strategy development.

Strategy: "Where should we go?"

Tactics: "How do we get there?"

There are thousands of people that are struggling all over the world with "how do we get there?" issues and they will never be satisfied no matter how many prescious plans they build...and why? Because they didn't take the time to think about "where to go". Not having a target, a "vision" of where to go makes it impossible to point out the right initiatives.

Allright then, - what is a Business Strategy?
Ok, then but why at all bother with doing business strategies? Why should businesses need them? I've tried to formulate a "role" or "purpose" of the business strategy:

"...it is the role of the business strategy to link the organization successfully with it's environment"

If you link it succesfully, transactions take place and you earn money.

There are numerous of companies that are today finding themselves in more dynamic environments than they used to be. Hence they see the need for doing something new. New products that are better than the competitors. Entering new businesses. Taking market shares. A lot of them are seing this as strategy.....but for what? Making new products don't mean that it is going to sell? Entering a new business doesn't mean that you will be succesful. Taking market shares is not always a viable target if you cannot make money on the market....

What I'm trying to say here is, - that strategy in business is NOT just about setting targets. It's about creating a vision that can guide the right tactics to become succesful, - in a business context this means "earning a lot of money".

Business Strategy: "Where should we go with our business"?

Taking a theoretical approach
A business strategy is a way to set up your business system in relation to your environment.



A business system consists of three elements. Your Ressource Base, which is all of your assets, money, competencies, etc. your Activity System which Michael Porter would call "value chain". It's the linked set of activities that creates value for your customers. Value for your customers is the last element. Some people call it Product Offering, but I like Value Proposition better. This is the value that you are offering your clients in return for their money.



At this point, you can also see that the role of the product strategy is to link the organization to it's environment (market).



Two generic ways of developing business strategy
Strategy professors always seem to argue in two directions. Some people say:

"hey, - we've got all these ressoruces, this huge value chain and a lot of nice products and services, - let's push it to the market"

That's called an inside-out approach


others say...

"hey, - wait a minute. The market is really the ones that are paying our salaries. Let's centre our decisions around it and let the market shape our products and services, our value chain and what ressources and competencies to go for"

That's called an outside-in approach


When arguing it seems that none of the approaches have a 100 % fit with success. It seems that a synthesis between the two views should be found and should be related to the specific firms environment. All in all it comes down to: "how market oriented should we be?".

So...how should we develop business strategies??


Well you could try to look at the past and then calculate your future, - and hereby you can formulate the best strategy...in very stable environments this can surely be done (and has been done for a long time), but their are very few of those environments left and it all adds up to become more and more innovative and foresighted in your business strategy approach. If you continue to follow this blog, you'll also find out that I will introduce and talk about how you can develop innovative business strategies...."me-too strategies" that are rooted in "what we're able to do" instead of "what we must be able to do" ....are past.

Hope you've enjoyed reading my first post!