Business Innovation

Business Innovation Business Innovation in a Global Economyin a Global Economy

Srikanth Kannapan, PhDSrikanth Kannapan, PhD

May 5, 2005May 5, 2005

OutlineOutline

► Some Working DefinitionsSome Working Definitions► Industry DomainsIndustry Domains► Business DriversBusiness Drivers► Enablers & ChallengesEnablers & Challenges► Value ChainsValue Chains► Value Chain EvolutionValue Chain Evolution► Patterns of Business InnovationPatterns of Business Innovation►Dimensions of ComplexityDimensions of Complexity► Examples - DiscussionExamples - Discussion

Some Working DefinitionsSome Working Definitions

►GlobalizationGlobalization 17 million hits with a search engine17 million hits with a search engine Economic integration/interdependence of Economic integration/interdependence of

countriescountries►Trade liberalization (increased circulation of goods) Trade liberalization (increased circulation of goods) ►Financial liberalization (expanded circulation of Financial liberalization (expanded circulation of

capital)capital)►Expansion of travel patternsExpansion of travel patterns

► Business InnovationBusiness Innovation 0.5 million hits with a search engine0.5 million hits with a search engine A socio-techno-economic business evolutionA socio-techno-economic business evolution

► Internet CommerceInternet Commerce►OutsourcingOutsourcing

Industry DomainsIndustry Domains

► Major DomainsMajor Domains IT/Software: Enterprise Software, Embedded SoftwareIT/Software: Enterprise Software, Embedded Software Manufacturing: Electronics, Automotive, AerospaceManufacturing: Electronics, Automotive, Aerospace Telecom: Wireless, Data/VideoTelecom: Wireless, Data/Video Financial Services: Banking, Insurance, Asset ManagementFinancial Services: Banking, Insurance, Asset Management

► Emerging DomainsEmerging Domains Retail: CPG, Durables, ApparelRetail: CPG, Durables, Apparel Media / Entertainment: Publishing, TV, AnimationMedia / Entertainment: Publishing, TV, Animation

► Boundaries of InfluenceBoundaries of Influence Onsite physical actionOnsite physical action Emotional connectionEmotional connection Cultural affinityCultural affinity

Business DriversBusiness Drivers

►Financial ImperativesFinancial Imperatives Profitability & growth expectationsProfitability & growth expectations Increasing global purchasing power Increasing global purchasing power Highly diverse global cost basesHighly diverse global cost bases

►Growing CompetitionGrowing Competition

Enablers & ChallengesEnablers & Challenges

► EnablersEnablers Trade and finance liberalizationTrade and finance liberalization High speed communication linksHigh speed communication links Spreading competenceSpreading competence Expanding partnershipsExpanding partnerships

► ChallengesChallenges Bridging language and cultureBridging language and culture Transcending physical, political, social factorsTranscending physical, political, social factors Managing global partnershipsManaging global partnerships Building and operating distributed infrastructureBuilding and operating distributed infrastructure Attracting and retaining talentAttracting and retaining talent

Value ChainsValue Chains

► Value chains: A valuable conceptual tool to understand Value chains: A valuable conceptual tool to understand the effects of business innovation and globalizationthe effects of business innovation and globalization Map flow and dependencies of value-added activities in Map flow and dependencies of value-added activities in

businessesbusinesses Track flow of “parts”/products from source to consumptionTrack flow of “parts”/products from source to consumption Identify activities performed/to-be performed within/outside the Identify activities performed/to-be performed within/outside the

enterpriseenterprise Explore build/buy/expand options for enterprise components in Explore build/buy/expand options for enterprise components in

different global locationsdifferent global locations

► Value chains have different patterns for different Value chains have different patterns for different industriesindustries The Manufacturing Industry (Electronics, Automotive, Aerospace)The Manufacturing Industry (Electronics, Automotive, Aerospace) The Service Industry (Telecom, Financial, Retail)The Service Industry (Telecom, Financial, Retail) The Information Industry (IT/Software, Media)The Information Industry (IT/Software, Media)

Value Chains:Value Chains:Manufacturing IndustryManufacturing Industry

► Buy-SideBuy-Side Direct, IndirectDirect, Indirect

► Sell-SideSell-Side Market, Customer, ProductMarket, Customer, Product

► In-SideIn-Side Development, Production, InfrastructureDevelopment, Production, Infrastructure

Supply Chain(Direct)

Supply Chain(Indirect)

MarketInsight

CustomerRelationship

DistributionChain

Production

Offering/ProcessDevelopment

InfrastructureManagement

Value Chains:Value Chains:Services IndustryServices Industry

► Buy-SideBuy-Side Information, IndirectInformation, Indirect

► Sell-SideSell-Side Market, Customer, OfferingMarket, Customer, Offering

► In-SideIn-Side Development, Operations, InfrastructureDevelopment, Operations, Infrastructure

InformationSources


MarketInsight


DistributionChain

ServiceProvisioning &

Operations



Value Chains:Value Chains:Information IndustryInformation Industry

InformationSources


MarketInsight


DistributionChain

ProfessionalServices

Offering/IPDevelopment


► Buy-SideBuy-Side Information, IndirectInformation, Indirect

► Sell-SideSell-Side Market, Customer, OfferingMarket, Customer, Offering

► In-SideIn-Side Development, Services, InfrastructureDevelopment, Services, Infrastructure

Manufacturing IndustryManufacturing IndustryValue Chain Evolution - IValue Chain Evolution - I

► Sell-Side GlobalizationSell-Side Globalization Assess addressable market size and maturityAssess addressable market size and maturity Identify target segments and develop business plansIdentify target segments and develop business plans Build global partnerships and distribution channelsBuild global partnerships and distribution channels Expand sales in new geographiesExpand sales in new geographies



MarketInsight


DistributionChain

Production



Manufacturing IndustryManufacturing IndustryValue Chain Evolution - IIValue Chain Evolution - II

► Buy-Side GlobalizationBuy-Side Globalization Identify “best” sourcing strategy from global suppliersIdentify “best” sourcing strategy from global suppliers Build supplier partnerships and logisticsBuild supplier partnerships and logistics Consolidate/Integrate supply chains into production Consolidate/Integrate supply chains into production

systemsystem Continuously explore further sourcing optimizationContinuously explore further sourcing optimization



MarketInsight


DistributionChain

Production



Manufacturing IndustryManufacturing IndustryValue Chain Evolution - IIIValue Chain Evolution - III

► In-Side GlobalizationIn-Side Globalization Locate production infrastructure close to marketsLocate production infrastructure close to markets Optimize product-mix & production capacity to local marketsOptimize product-mix & production capacity to local markets Decentralize production operations, infrastructure managementDecentralize production operations, infrastructure management Localize indirect supply chain within global standardsLocalize indirect supply chain within global standards



MarketInsight


DistributionChain

Production



Manufacturing IndustryManufacturing IndustryValue Chain Evolution - IVValue Chain Evolution - IV

► Integrated GlobalizationIntegrated Globalization Develop technology/products aggregating global experienceDevelop technology/products aggregating global experience Locate centers for R&D closest to concentrations of competenceLocate centers for R&D closest to concentrations of competence Develop shared platforms for global marketsDevelop shared platforms for global markets Customize platforms to local marketsCustomize platforms to local markets



MarketInsight


DistributionChain

Production



Patterns of Business Patterns of Business InnovationInnovation

IndustryIndustry

ActivityActivityManufacturinManufacturin

ggServicesServices InformatioInformatio

nn

Sell-sideSell-side II

Supply-sideSupply-side IIII

OperationsOperations IIIIII

R&D/R&D/ProductProduct IVIV

~1980’s …

Services IndustryServices IndustryValue Chain Evolution - IValue Chain Evolution - I

► Sell-Side GlobalizationSell-Side Globalization Assess market size and maturityAssess market size and maturity Establish market presence and brandEstablish market presence and brand Establish sell-side partnerships and establish business Establish sell-side partnerships and establish business

plansplans Monitor market trends, calibrate expansionMonitor market trends, calibrate expansion

InformationSources


MarketInsight


DistributionChain


Operations



Services IndustryServices IndustryValue Chain Evolution - IIValue Chain Evolution - II

► In-Side GlobalizationIn-Side Globalization Leverage global centers of competence for services deliveryLeverage global centers of competence for services delivery Develop outsourcing partnerships for infrastructure Develop outsourcing partnerships for infrastructure

managementmanagement Implement global standards for indirect supply chain – esp. HRImplement global standards for indirect supply chain – esp. HR

InformationSources


MarketInsight


DistributionChain


Operations



Services IndustryServices IndustryValue Chain Evolution - IIIValue Chain Evolution - III

► In-Side GlobalizationIn-Side Globalization Develop offerings/processes aggregating global Develop offerings/processes aggregating global

experienceexperience

InformationSources


MarketInsight


DistributionChain


Operations




IndustryIndustry



nn

Sell-sideSell-side II II

Supply-sideSupply-side IIII IIII

OperationsOperations IIIIII IIII

R&D/R&D/ProductProduct IVIV IIIIII

~1980’s … ~1990’s …

Information IndustryInformation IndustryValue Chain Evolution - IValue Chain Evolution - I

InformationSources


MarketInsight


DistributionChain




► Sell-Side GlobalizationSell-Side Globalization Assess market size and maturity, establish market presence and brandAssess market size and maturity, establish market presence and brand Establish sell-side partnerships, establish business plans, monitor & Establish sell-side partnerships, establish business plans, monitor &

expansionexpansion► In-Side GlobalizationIn-Side Globalization

Leverage global centers of competence (on-site & remote)Leverage global centers of competence (on-site & remote)► Professional Services, Infrastructure Management, SupportProfessional Services, Infrastructure Management, Support

Information IndustryInformation IndustryValue Chain Evolution - IIValue Chain Evolution - II

InformationSources


MarketInsight


DistributionChain




► In-Side GlobalizationIn-Side Globalization Expand scope to collaborative offering/IP developmentExpand scope to collaborative offering/IP development

► R&DR&D► Product/Services Development, Product/Services ManagementProduct/Services Development, Product/Services Management


IndustryIndustry



nn

Sell-sideSell-side II II II

Supply-sideSupply-side IIII IIII II

OperationsOperations IIIIII IIII II

R&D/R&D/ProductProduct IVIV IIIIII IIII

~1980’s … ~1990’s … ~2000’s …

Globalized Business Innovation Globalized Business Innovation Dimensions of ComplexityDimensions of Complexity

People

► PeoplePeople Communication – language, idiom, accentCommunication – language, idiom, accent Coordination – ownership, time zones, hand-offs, shiftsCoordination – ownership, time zones, hand-offs, shifts Competency – technical, product, process, proprietaryCompetency – technical, product, process, proprietary Training – Classroom, OJT, Experiential – onsite/remoteTraining – Classroom, OJT, Experiential – onsite/remote Culture – Work, Play – Individual, GroupCulture – Work, Play – Individual, Group


Process

► ProcessProcess Data Flow – Access, IntegrationData Flow – Access, Integration Work Flow – Correct, Complete, TimelyWork Flow – Correct, Complete, Timely Travel – Set-up, Operations, RevitalizeTravel – Set-up, Operations, Revitalize Organizational Practices – Career PathsOrganizational Practices – Career Paths

People

► CommunicationCommunication► CoordinationCoordination► CompetencyCompetency► TrainingTraining► CultureCulture


People

Technology

Process

► TechnologyTechnology Data Connectivity, HardwareData Connectivity, Hardware Applications/Tools ArchitectureApplications/Tools Architecture Software LicensingSoftware Licensing


► Data FlowData Flow► Work FlowWork Flow► TravelTravel► PracticesPractices

Globalized Business Innovation: Globalized Business Innovation: Dimensions of ComplexityDimensions of Complexity

People

Technology

Process

Financials

► FinancialsFinancials Costs, RevenuesCosts, Revenues ROI, Payback ROI, Payback

PeriodsPeriods

► Data Connectivity, HardwareData Connectivity, Hardware► Applications/Tools Applications/Tools

ArchitectureArchitecture► Software LicensingSoftware Licensing



Globalized Business Innovation: Globalized Business Innovation: Dimensions of ComplexityDimensions of Complexity

People

Strategy/Change

Management

Technology

Process

Financials

► Costs, RevenuesCosts, Revenues► ROI, Payback ROI, Payback

PeriodsPeriods► Strategy & Strategy &

Change Change ManagementManagement Leadership & Leadership &

ManagementManagement Process Process

Owners and Owners and Task OwnersTask Owners

► Data Connectivity, Data Connectivity, HardwareHardware

► Applications/Tools Applications/Tools ArchitectureArchitecture

► Software LicensingSoftware Licensing



Globalized Business Innovation:Globalized Business Innovation:Dimensions of ComplexityDimensions of Complexity

People

Strategy/Change

Management

Technology

Process

Financials

► Costs, RevenuesCosts, Revenues► ROI, Payback ROI, Payback

PeriodsPeriods► Leadership & Leadership & ManagementManagement

► Process OwnersProcess Ownersand Task Ownersand Task Owners

► Data Connectivity, Data Connectivity, HardwareHardware

► Applications/Tools Applications/Tools ArchitectureArchitecture

► Software LicensingSoftware Licensing



Case in Point: Toyota InnovaCase in Point: Toyota InnovaNew ProductNew Product - 01/09/2004 - 01/09/2004

Toyota Launches Kijang Innova in Indonesia Toyota Launches Kijang Innova in Indonesia

KijangKijang Jakarta Jakarta

PT TOYOTA MOTOR MANUFACTURING INDONESIA PT TOYOTA MOTOR MANUFACTURING INDONESIA (TMMIN) and PT (TMMIN) and PT TOYOTA‑ASTRA MOTOR (TAM) TOYOTA‑ASTRA MOTOR (TAM) unveil in Indonesia today a new Innovative unveil in Indonesia today a new Innovative International Multipurpose Vehicle (IMV) called International Multipurpose Vehicle (IMV) called Kijang Innova.Kijang Innova.

Kijang Innova will be produced at Toyota’s Karawang Kijang Innova will be produced at Toyota’s Karawang plant in West Java, with annual production of plant in West Java, with annual production of 80,000 units a year. In addition to Kijang Innova 80,000 units a year. In addition to Kijang Innova production, TMMIN will also produce more than production, TMMIN will also produce more than 180,000 gasoline engines per year. Aside of being 180,000 gasoline engines per year. Aside of being sold in Indonesia, Kijang Innova and its gasoline sold in Indonesia, Kijang Innova and its gasoline engines will be also exported to other countries engines will be also exported to other countries worldwide soon starting this year with total export worldwide soon starting this year with total export volume of 10,000 and about 130,000 units a year volume of 10,000 and about 130,000 units a year respectively. Kijang Innova launching is aimed respectively. Kijang Innova launching is aimed even to further contribute to Indonesian even to further contribute to Indonesian economies through investment, employment and economies through investment, employment and export.export.

… … contdcontd

Case in Point: Toyota InnovaCase in Point: Toyota InnovaKijang Innova is the output of Global Quality Project (GQ Project) ‑ a business Kijang Innova is the output of Global Quality Project (GQ Project) ‑ a business

revolution that involves breakthrough improvements in the areas of revolution that involves breakthrough improvements in the areas of development, production, technology and services. This is a part of Toyota’s development, production, technology and services. This is a part of Toyota’s efforts to provide customers a global qualified MPV, which can meet efforts to provide customers a global qualified MPV, which can meet customers’ expectation both in Indonesia and global market.customers’ expectation both in Indonesia and global market.

Kijang Innova is one of five IMV models developed by Toyota. IMV models will be Kijang Innova is one of five IMV models developed by Toyota. IMV models will be produced mainly in Indonesia, Thailand, Argentina and South Africa. Kijang produced mainly in Indonesia, Thailand, Argentina and South Africa. Kijang Innova will become a new generation of Toyota’s legendary multipurpose Innova will become a new generation of Toyota’s legendary multipurpose vehicle (MPV), Toyota Kijang, in Indonesia. The new global MPV brings vehicle (MPV), Toyota Kijang, in Indonesia. The new global MPV brings revolution in styling, comfort, performance, safety, value for money as well as revolution in styling, comfort, performance, safety, value for money as well as production quality at the most beautiful appearance.production quality at the most beautiful appearance.

Powered by latest 2.OL VVT‑i (Variable Valve Timing with Intelligent) engine for Powered by latest 2.OL VVT‑i (Variable Valve Timing with Intelligent) engine for gasoline types and the newly developed 2.5L D‑4D (Direct 4‑Stroke Diesel gasoline types and the newly developed 2.5L D‑4D (Direct 4‑Stroke Diesel Turbo Commonrail) engine for diesel types, Kijang Innova will provide Turbo Commonrail) engine for diesel types, Kijang Innova will provide sophisticated power. good fuel efficiency, as well as excellence in sophisticated power. good fuel efficiency, as well as excellence in maneuverability and high level of riding comfort. As one of Toyota’s concern maneuverability and high level of riding comfort. As one of Toyota’s concern to a greener environment, Kijang Innova is ready to comply with European to a greener environment, Kijang Innova is ready to comply with European Emission Standard Step 2.Emission Standard Step 2.

… … contdcontd

Case in Point: Toyota InnovaCase in Point: Toyota InnovaToyota Innova launched in IndiaToyota Innova launched in India

Related stories:Related stories: InnovaInnova launch in Philippines launch in Philippines

24 Feb 200524 Feb 2005

The Toyota Innova was launched in India by Toyota The Toyota Innova was launched in India by Toyota Kirloskar Motors today.The MPV will be available Kirloskar Motors today.The MPV will be available in both petrol and diesel versions. There will be a in both petrol and diesel versions. There will be a total of 5 versions in seven colours.total of 5 versions in seven colours.

The company has said that the Toyota Innova will The company has said that the Toyota Innova will compete against the Chevrolet Tavera and the compete against the Chevrolet Tavera and the Mahindra Scorpio.That is yet to be seen. The Mahindra Scorpio.That is yet to be seen. The Chevrolet Tavera and the Mahindra Scorpio are Chevrolet Tavera and the Mahindra Scorpio are both priced much below the new Innova, and both both priced much below the new Innova, and both may slash their prices further if it proves that the may slash their prices further if it proves that the Innova will be a threat to them. Innova will be a threat to them.

Toyota officials said that the Innova is one of five Toyota officials said that the Innova is one of five models that have been designed as part of the models that have been designed as part of the IMV (innovative international multi-purpose IMV (innovative international multi-purpose vehicle) project, launched in September 2002. vehicle) project, launched in September 2002. Innova would be produced at Toyota Kirloskar Innova would be produced at Toyota Kirloskar Motor's plants in India. Motor's plants in India.

Other Industry ExamplesOther Industry ExamplesDiscussionDiscussion

► IT/SoftwareIT/Software Enterprise Software, Embedded SoftwareEnterprise Software, Embedded Software

► ManufacturingManufacturing Electronics, Automotive, AerospaceElectronics, Automotive, Aerospace

► TelecomTelecom Wireless, Data/VideoWireless, Data/Video

► Financial ServicesFinancial Services Banking, Insurance, Asset ManagementBanking, Insurance, Asset Management

► RetailRetail CPG, Durables, ApparelCPG, Durables, Apparel

► Media / EntertainmentMedia / Entertainment Publishing, TV, AnimationPublishing, TV, Animation

SummarySummary

►Business innovation now has global Business innovation now has global contextcontext

►Value chains help us understand Value chains help us understand dynamicsdynamics

► Innovation patterns provide Innovation patterns provide perspectiveperspective

►Complexity dimensions enables Complexity dimensions enables informed responseinformed response

Business Innovation

Business

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