Archive for the ‘Innovation’ Category

The Coming Disruption in Professional Services

Is there a way for advisory service companies, which provide accountants, lawyers, consultants and marketing experts to other businesses, to adapt to changing demands?

Some pundits, such as the Harvard scholar Clayton Christensen, have questioned whether traditional consulting firms will get less work as more innovative business models emerge.

I think challenges bring opportunities and that firms which change with the times will remain relevant and flourish.

Like many other sectors, the advisory service industry has had its ups and downs. Its current slowdown may herald the start of a darker period thanks to three significant trends:

1. Democratization of information

Prior to the Internet, advisory service firms offered clients knowledge and insight, which they couldn’t find elsewhere. Now, a lot of information is available for free, or at low cost on the web, and that includes expertise through freelancer portals like guru.com. To find critical facts and figures on market trends, customer research, or industry costs, organizations no longer need to hire a traditional advisory firm.

2. Fewer intermediaries

It used to be that if you needed top talent to address a business issue, you paid the price and dealt with a blue chip firm or hired a leader in the field. Today, a manager has many more options, often with lower costs and faster turnarounds. The rise of the freelance and sharing economy allows companies to find talent and knowledge as needed on a global basis.

3. The rise of machine learning

Machine learning, also known as artificial intelligence, has the potential to disrupt many facets of the professional services industry. Using machines for rote and even complex tasks can reduce the need to hire firms to do mundane tasks, or for an expert’s analysis, judgment and time. For example, judges and lawyers are increasingly resolving small claims through “e-adjudication” as opposed to using the expensive and time-consuming legal system.

Power of disruption

Despite these disruptive forces, traditional firms aren’t going away any time soon: the fact that they have a wide-range of services and expertise to offer, the changing regulatory and technological environment and fickle customer needs will ensure it. However, they need to evolve if they want to stay relevant to their clients, outflank competitors and maintain juicy margins.

Terry Donnelly, chief marketing officer for Canada of New York-based MDC Partners Inc., an advertising and marketing company, agreed.

“The traditional ad agency model is dying,” Toronto-based Donnelly said. “Marketers want leading edge, unique and practical solutions that drive measurable results and provide a durable and sustaining competitive advantage. MDC Partners recognized the ‘new normal’ early on and built a unique portfolio of agencies that retains the visionary founders as partners, motivated to do great creative work, versus the staid multinational agencies that regularly lose their best people.”

Advisory service leaders who want to better assist their clients and avoid disruption might want to consider these strategies:

1. Become a virtual provider

Companies can leverage their strengths such as client relationships and a trusted brand to create their own, on-demand virtual offerings as a complement to their traditional business. This model could mean acting as an online skills, data or problem-solving hub, and delivering of the best services to suit a client’s needs.

2. Get more involved in execution

While people and expertise may be plentiful, that’s not the case for excellent execution. Advisory service firms can offer follow-through and even take on line responsibilities through a shared service model. This could go beyond being an outsourcer to actually embed adaptable and skilled individuals and tools directly into the client’s workflow process.

3. Focus on capability building, not projects

Advisory services should focus their work on addressing long-term projects and needs instead of short-term contracts that deal with a specific issue. They could help clients build strategic capabilities to ensure competitiveness. One way to do this is to train people to do the work themselves.

As an example, a lawyer would not just draw up a contract based on the client’s needs and then walk away, rather they could give the client tools to become somewhat proficient in their own right.

In addition, companies could provide regular advisory support to make sure long-term goals are met.

Mitchell Osak is managing director, strategic advisory services at Grant Thornton LLP.

Mitchell.Osak@ca.gt.com

Twitter.com/MitchellOsak

Being a frugal innovator

Apple and Google recently created a buzz as they launched their latest phones with all sorts of new features.

Improved cameras, fingerprint sensors and gizmos to save battery life were among the offerings to win over the public.

Slick designs and major international product launches may make innovation seem like a sophisticated practice that’s easy for companies with big budgets and plenty of time, but what if you don’t have that luxury.
The reality is that some of the most successful innovators get significant results without outspending their rivals. For example, Procter & Gamble minimizes research and development (R&D) investment and time by getting product teams to tap into the creativity and problem-solving efforts of outside entrepreneurs, universities and start-ups.

Apple has launched some of the world’s most successful products despite spending less on R&D (as a percentage of revenues) than many of its competitors. And companies such as Amazon and Google have used quick, low-cost experiments to quickly gain consumer knowledge and to identify and scale winning ideas, while also to pulling the plug on white elephant projects.

Most companies need a practical approach to innovation that can be used regularly to get good results.

More than 15 years of client work and research has taught me there’s a middle way between ad hoc initiatives and building expensive innovation factories. We developed a system I call the Thrifty Innovation Engine (TIE), which offers companies an alternative approach.

It’s based on the view that innovation is simply fresh thinking that comes from inside or outside of the organization, combined with actions to create market results through higher revenue, or lower cost.

Here’s how the process worked for a software client. This firm’s approach to innovation veered from rushing emergency product upgrades for single clients to funding ‘new venture’ business units that looked well beyond a two-year planning horizon. Neither approach delivered the expected business results, but they did generate plenty of politics and expenses to boot. We helped the client implement a TIE – a 120 day innovation germination and commercialization process.

Phase 1 – 10 days

Assessment, priority-setting and getting a team together

This was vital, as management didn’t have a clear picture of spending, or accountability. A small team of product managers, programmers, financial analysts and marketers looked at ideas and bucketed them according to potential customer appeal, capabilities, financial returns and ease of commercialization. The team then chose five ideas for customer feedback.

Phase 2 – 20 days

Market validation

We introduced the five ideas to 16 strategic and prospective clients and four industry leaders through a series of sessions. Our goal was to find out how each idea met customer needs, what features were important and how emerging technological trends could be used. Two of the ideas generated significant customer interest and were placed in the commercialization pipeline.

Phase 3 – 75 days

Commercialization

A small and highly motivated group of programmers were dedicated to each idea, along with a budget and internal mandate. This wasn’t a sideline project starved for internal support. The core project group continued to be accountable and provide input but were told to use a minimalist touch. Low cost, speed and client consultation were guiding principles. For example, the team was encouraged to use lean methods such as open source tools. Each team also collaborated with the clients to minimize risk and assure market acceptance.

Phase 4 – 15 days

Final steps

The team reviewed the process and what they learned to fine tune the framework, which included committed resources, defined practices, metrics and knowledge management policies. A system was also set up to track the business results and customer feedback and to cycle these findings back into the TIE knowledge bank.

Developing an innovation engine like this won’t guarantee your firm becomes the next Apple or Google, however it can help your efforts become more productive and ensure your great ideas are market driven and not long shots.

How great design can set you apart from competitors

If I could rank all of Steve Jobs’s business lessons, the importance of design in supporting business success would top my list.

Don’t take my word for it, though. Many global market leaders, and not just in fashion, electronics or luxury brands, drive growth by continuously enhancing product design. However, companies without a design heritage or capability can also use this strategy to improve revenue and brand image.

In a simplified process, designers working in collaboration with product managers and engineers take creative ideas and marry them with a customer’s requirements and the company’s goals. The integration of this effort hopefully leads to the creation of an aesthetically pleasing, functional and profitable product. Design is the sum total of the properties of a product or service made up of the form (i.e., the aesthetics around look, feel, sounds etc.) and the function (i.e., the practical benefits delivered). Good design can help a company create or dominate a category (think iPhone); poor design can kill a brand (remember the Edsel).

Design isn’t just the purview of high-end, iconic consumer brands such as Apple, Louis Vuitton, Nike, and Bang & Olufsen. Some B2B manufacturers such as IBM (laptops), Herman Miller (office chairs) and Olivetti (calculators) have used product design leaders to dominate their categories.

Then there’s successful and well-designed brands including IKEA, Samsung and Canada’s Umbria, which have proven neither price nor a Paris, New York or Milan address are required for using design competencies as a key differentiator.

Nor do you need a large investment or a creative studio to compete on design. Take, for example, the experience of one of my clients — a manufacturer of high performance automation systems. The company, challenged to build market share without resorting to price discounting, tweaked its product designs and saw an immediate boost to revenue and brand image. Research showed buyers perceived little difference between products (not unexpected since the systems looked remarkably similar) despite the fact that system performance and warranties varied significantly. Not surprisingly, pricing was their key purchase driver. To stand out, the company had to leverage other attributes.

Management agreed to run an experiment: redesign its product demo to make it visually appealing and high end, then gauge its success through prospect and client feedback. This involved some simple design changes — repainting certain components, enclosing messy cable assemblies and enhancing the documentation and packaging. The response from the sales team and prospects was overwhelming. Sales closing rates and perceived product value jumped. Based on these results, the CEO decided to redesign the entire lineup.

Leveraging design is not for the impatient, undisciplined or risk adverse. World-class firms build internal competencies and ensure they become part of their cultural DNA.

Three best practices to achieve this are:

Learn Acquire a deep and multifaceted understanding of your customers’ needs (including sub-conscious drivers of their behaviour), as well as an understanding of emerging trends, such as mobile computing. Be mindful of Sony founder Akio Morita’s observation that consumers often fail to see the appeal of a breakthrough product on first hearing about it (the Walkman in this case). Keep the creative juices flowing by being plugged in to what is happening in complementary industries and related fields such as technology, nature, entertainment and fashion.

Build Assemble the right ingredients — talent, tools and processes — then give them the freedom to follow a vision consistent with the company’s goals. Collaboration is essential; designers should spend much of their time working directly with the product development and operational groups as well as external partners. Employing the right knowledge management systems and metrics will help ensure design excellence is institutionalized, cultivated and effectively managed long term.

Persevere Making these changes stick requires strong leadership, the pull of motivational values and goals and perseverance, not to mention a re-balancing of priorities. Internal alignment won’t always be easy especially when you are asking engineers and production managers to collaborate with designers. Finally, you need to be realistic. Not every new design, no matter how elegant, will be a hit with customers.

Mitchell Osak is managing director, strategic advisory services at Grant Thornton LLP. He can be reached at Mitchell.Osak@ca.gt.com Follow him at Twitter.com/MitchellOsak

The App Economy takes off

Mobile computing is growing so fast and evolving so quickly it is hard to make sense of it all. The most recent leap, which includes sharing platforms, wearables and mobile payments, are based on unique service applications (or apps) that run on a smartphone and seamlessly handle everyday activities.

Although still in its early days, the rise of the app economy will have profound implications on the nature of many industries, the ways consumers interact with businesses and how companies structure their operations.

Since the mid-1970s, the world has gone through a technological revolution roughly every 10 years. It’s then taken between seven and 10 years for the new technology to achieve mass market adoption. However, the app economy is different. Many of the upstarts in this sector quickly started making gobs of money, usurping their competition and expanding globally.
For example, service-sharing platforms Uber and AirBnB are disrupting traditional industry players and are significantly changing consumer behaviour and value expectations. Their rapid growth plus big upside make them worth more than the traditional taxi and hotel companies they compete against. This one example should be a clarion call for more traditional businesses battling it out in the consumer and corporate services markets.

The stakes are huge: Mobile commerce will account for 24.4% of overall ecommerce revenues (which are themselves growing rapidly) by the end of 2017, a study by marketing automation firm Hubspot found. Add incremental revenues from app-based sharing platforms and you are probably north of $100 billion in mobile ecommerce revenues in the U.S. alone.

Among the many facets to consider, I believe leaders ought to pay close attention to these two:

Service apps take over

For most people, life is increasingly centered around a mobile device and the services it enables. Increasingly, apps address your personal needs, often in ways never imagined. Uber and Lyft are replacing car ordering; TaskRabbit is handling our deliveries and dating apps such as Tinder are helping people find a life partner.

So too are people’s professional lives poised for change. A recent job-matching app, Switch, allows candidates to thumb through job listings: flick left if uninterested and right to register for a potential work match. Another swipe-if-you-like competitor, Jobr, uses information from LinkedIn to recommend jobs that candidates might find interesting. Since its launch last year, Jobr has submitted more than 100,000 job applications for its members each month.

Businesses are also jumping on the bandwagon, using apps to re-engineer traditional but important practices. Last year, Zappos, an online retailer based in Nevada, scrapped formal job postings and replaced them with a new site encouraging candidates to engage with each other and the firm in a way not dissimilar to online-dating forums.

Although the service apps business is growing rapidly, there is still plenty of upside left. Existing providers can drive higher usage and fees by adding new functionality, entering new geographic markets and retuning their service to appear less like a standalone, phone based-app. As well, there are many opportunities for a high-quality model in unexploited personal and corporate services categories.

Tightening the relationship

Apps are now the focal point between the customer and company. Companies can now engage deeper and longer term with its customers to create a 1:1 relationship, and with it higher revenues, loyalty and satisfaction thanks to three symbiotic forces: ‘always on’ connectivity via smartphones; advanced data analytics and; collaborative social technologies.

To fully leverage this opportunity, transaction-orientated businesses will evolve into service subscribers requiring them to engage throughout a customer’s or product’s life cycle irrespective of channel. In retail banking, for example, you might receive a message on your smartphone with your daily account balance, personalized RRSP advice in January, or ways to spend your credit card’s loyalty points.

To make long term engagement a reality, companies will need to redesign their service/product model (i.e. what and how they deliver value), pricing strategy and marketing programs, not to mention their technology infrastructure. Moreover, their apps will need to evolve beyond transaction-based functionality to include personalized content, multi-platform integration, location-based services and recommendation engines.

To avoid disruption and to capitalize on opportunities, companies should already be exploring and investing in apps applicable to their market and relevant to their customers. But they will also need to be mindful of getting it right: thoroughly understanding customer needs, designing a seamless customer experience, building practical data analytics capabilities and delivering compelling and relevant content. However, to truly take advantage of the app economy, leaders will also need to be mindful of the impact of emerging technologies like wearables and mobile payment services.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

The Internet of Things is here

We are entering the age of the “Internet of Things,” where sensors, computers and devices are connected in a self-managing ecosystem. At home, this could mean your alarm clock communicating with your coffee maker or your thermostat communicating with your window blinds. In business, this could mean your barcode scanners communicating with your suppliers or your assembly lines communicating with to your repairmen.

In other words, the Internet of Things automates an entire activity, such as building management, medical diagnostics, logistics or manufacturing.

For example, Apple has developed an Internet of Things ecosystem that enables various devices to communicate with each other with the express goal of one day “owning the living room.” Google is also aiming to enter the space by developing driverless cars and increasingly sophisticated remote home monitoring systems.

Some of the technological drivers behind The Internet of Things include: the rise of affordable, high-performance computing, the availability of inexpensive and accurate sensors, widespread access to high-speed wifi, the emergence of sophisticated algorithms and the ability to tie everything together through software interfaces.

The Internet of Things affords tremendous opportunities for increasing productivity, inventing new services and freeing up human capital to re-focus efforts on strategic rather than menial initiatives. Firms that are first movers in the space and that are able to develop the right business models will not only resolve big customer problems and cut costs but also recast the markets in which they operate.

In short: The Internet of Things is coming to every market that has been — or can be — digitized.

Case Study: Sahara Force India Formula One

Competing in the Formula One circuit is one of the most challenging and technologically advanced undertakings in the world. Increasingly, advantage goes to the team that can better leverage insight drawn from data generated in practice and during races to execute real-time enhancements to the car and provide critical information to the driver.

That’s why Sahara Force India partnered with Univa, a cloud-technology vendor, to create an integrated, closed-loop platform of sensor feedback, advanced data collection and analysis and on-the-fly hardware and software optimization.

“Sahara Force India is second-to-none in pushing boundaries to achieve speed, innovation and capability,” says Gary Tyreman, chief executive of Univa. “Leveraging the Internet of Things enables SFI to reduce development engineering time and money, and take in-race performance to levels which once were considered impossible.”

Here’s how it works: The Sahara Force India analytics team monitors and models car performance in race conditions, generating more than one terabyte of data over the course of a typical race. Trackside engineers and the driver then use insight derived from this influx of information to adjust things such as brake sensitivity and suspension, thereby improving car performance and informing seasonal development plans.

This raises an important point. The Internet of Things requires more than an investment in connectivity-enabled hardware and software. It also requires developing the human knowhow to manage, draw insight from and optimize the system based on the data that’s being captured.

How you can benefit from the Internet of Things

For many firms, the Internet of Things poses a significant threat due to its disruptive nature. For others, it stands as a significant opportunity to outflank the competition. But regardless of how each firm reacts to the rise of the Internet of Things, the fact remains: every company will be affected. This is because the need to serve customers better, faster, with greater ease and at a lower cost will invariably spur Internet of Things investments and strategies.

With that in mind, here are five things you should consider before implementing an Internet of Things strategy:

  1. List the current and emerging needs of customers, suppliers and distributors that your firm is not currently equipped to provide.
  2. Identify how an Internet of Things offering might address those issues and generate value within your enterprise and market. For example, you may want to improve your understanding of customer behaviour in order to improve service.
  3. Think more broadly about an Internet of Things offering than bottom line impact. How could it position your firm for future competitiveness?
  4. Consider your potential Internet of Things offering in terms of its key components: software, hardware and people. Can you leverage existing resources to cut costs?
  5. Analyze how your organization would need to be restructured in order to deliver a successful Internet of Things offering.

For more information on our services and work, please visit the Quanta Consulting Inc. web site

Internet of Things offering than bottom line impact. How could it position your firm for future competitiveness?

Consider your potential Internet of Things offering in terms of its key components: software, hardware and people. Can you leverage existing resources to cut costs?
Analyze how your organization would need to be restructured in order to deliver a successful Internet of Things offering.

Digitally disrupting your company

Disrupt or be disrupted. This is the stark choice with which many senior managers are faced as emerging technologies and corresponding behaviours continue to reshape the marketplace.

Given the choice, most would understandably choose the former. The problem, of course, is that many organizations are crippled by organizational inertia. Market leaders and public companies are particularly vulnerable, as they tend to possess deeply entrenched operational structures, revenue models and cultural values. Either they don’t see the change coming or, more likely, can’t muster the organizational willpower required to do anything about it.

Case study: OLG

Five years ago, Ontario Lottery and Gaming Corp. found themselves in this position. Senior management observed that Millennials are less interested than previous generations in gambling the old-fashioned way. Natives of the Internet and accustomed to the conveniences afforded by smartphones, many were turning away from corner-store kiosks and toward online poker and other “casino-style” games that can be found easily, if illegally, on the Internet.

At the same time, the OLG found itself struggling to hold on to its existing customers. Not only were fewer Americans visiting their casinos, U.S. competitors were also making inroads in luring Canadians south of the border. Both trends spelled a slow slip into irrelevance for the crown corporation.

So they decided to do something about it.

Rather than merely mitigate risk, senior management sought to develop a digital strategy that would enable them to capitalize on these trends. They began by asking the following questions:

  1. What business are we in?
  2. What business should we be in?
  3. How can technology facilitate this transformation?

What they concluded was that they are in the lottery and gaming business, not (merely) the casino and scratch-card business. “OLG’s goal is to provide the games our customers want to play where they want to play them,” says Tom Marinelli, OLG’s acting president and CEO. “As we transform, our advances in technology are giving us a new opportunity to continue to be relevant to our customers.”

In response to changing customer needs and demands, the OLG began work on an online lottery and gaming hub. Set to launch this year, PlayOLG.ca will provide online gaming and sell digital lottery tickets. The idea is that by matching or exceeding the experiences offered elsewhere on the Web in a manner that is both secure and legal, the OLG will be able to attract younger adult customers and fend off illegal international competitors.

The execution strategy for PlayOLG.ca was informed by paying close attention to how the Internet and mobile technology are affecting the gaming and lottery business at large. In doing so, they identified and implemented a set of best practices. Here’s what they came up with:

  • Place technology-savvy leaders at the forefront. For the OLG, this meant selecting Mr. Marinelli, who has a background in both IT and operations, to lead the transformation.
  • Consider change holistically, involving all stakeholders. Because the lottery and gaming industry is highly complex and regulated, all aspects and implications must be considered when implementing any kind of change. The concept of “responsible gambling,” for example, must be applied to all customer-facing products.
  • Communicate plans regularly to employees. With up to 30% of the OLG’s 8,000 employees unionized, poor communication could very well spell disaster.

Even with these pivots, the future of the OLG is uncertain. Currently they’re seeking new ownership, with both Bell and Rogers rumoured to be potential buyers. But whether the OLG stays public or goes private, going digital will surely go a long way toward ensuring the long-term viability of the organization.

Takeaways

Many of the lessons learned by the OLG can be of value to other organizations similarly faced with disruption. To undertake a digital transformation initiative of your own, you should begin by asking yourself the following questions:

  1. How can a new technology help improve operations or better serve customers?
  2. How difficult will deployment be, and at what long-term cost?

To answer these questions, you’ll need to develop a 360-degree view of both your organization and the market in which you are situated.

  • Where are we going as a company?
  • What capabilities and organizational model do we need to adopt in order to capitalize on the new technology?
  • How will customers and other channels be affected by the new technology?
  • What is the potential economic impact of the new technology?
  • What can we learn from other firms’ experiences?

Regardless of what your answers are, any digital transformation of a scope similar to that of the OLG will require the following: support from the board, enterprise-level expertise in adopting and managing emerging technology, a clear understanding of where profitability comes from and a functioning capital and resource allocation process. Above all, however, a successful digital transformation requires just two things: strong senior management and a willingness to change.

For more information on our services or work, please visit the Quanta Consulting Inc., web site.

Using behavioural economics to trigger action

Behavioural economics posits that all human behaviour, including in business, is shaped by irrational and unconscious influences, such as bias, social pressure and cognitive inertia. The notion of psychology as a driver of economic action is not new: As an academic discipline behavioural economics dates back to the 1970s, and the foundational principle back at least to Adam Smith’s The Theory of Moral Sentiments (1759). Behavioural economics has, however, only in recent years found widespread currency within the business world, spurred by a plethora of bestsellers, including Thinking Fast and Slow (2011) by Daniel Kahneman and Predictably Irrational (2oo8) by Dan Ariely.

Increased interest from the business community is due to the insights gleaned from the discipline, which have been used to successfully “nudge” customer behaviour in a variety of sectors, such as wealth management, insurance, customer products and retail. Specifically, behavioural economics has been used by product managers to guide consumers toward certain product choices (i.e., “choice design”), by marketers to develop brochures and Web sites that more persuasively communicate marketing messages and by service managers to design better support experiences.

The field can provide hundreds of potential “triggers” to augment behaviour, depending on the business objective, situation and context. Psychologists Robert Cialdini, Noah Goldstein and Steve Martin identify 50 different possible applications in The Small Big: Small Changes That Spark Big Influence (2014). Three among the list include:

  1. Leverage social proof: People will make the same decisions as a group with which they identify. Nudge people to adopt a new behavior by showing them a training video featuring their peers doing the same thing.
  2. Invoke first names: Get and keep people’s attention by frequently using their first name. A sales representative’s repeated use of a prospect’s name will cue their attention through the clutter of other sensory inputs and focus attention on the key message.
  3. The power of loss avoidance: Individuals strongly prefer avoiding losses to acquiring gains. Marketing studies have shown that consumers would rather avoid a $5 surcharge then get a $5 discount even though the net effect is the same.
    Case study: behavioural economics in action

Communications Case Study

A technology company was struggling with customer support issues, resulting in unsustainable levels of customer churn, high support costs and wasteful discounting. We were tasked with identifying the root cause of the problem and recommending fixes.

We reviewed the support scripts and escalation processes and listened to call records. Using the lens of behavioural economics to look for unconscious biases, explicit and implicit incentives and insidious social pressures, we discovered both that the existing scripts were ineffective and that the prescribed escalation process was not being followed by most service reps.

While management believed more resources and training were the answer, we convinced them to first experiment with a pilot program that featured rewritten scripts and process redesign. These changes included a variety of nudges to trigger the desired service experience, including:

  • Establishing a rapport from the get-go: People are more easily persuaded by those that they like and have some connection with.
  • Starting with the bad news but ending on a high note: Getting bad news out of the way shows empathy, acknowledges responsibility and allows for a good finish.
  • Following the script: Because a good process is only effective if it is consistently applied, we recommended having service reps formally and publically commit to following the revised protocol.

By implementing insights gleaned from behavioural economics, customer satisfaction scores increased, service escalations fell and cross-selling rates improved.

Behavioural economics for your business

As mentioned earlier, how you should apply behavioural economics insights to your business depends on your circumstances and your goals. However, here are five general tips to guide your strategy:

1.  Understand the business context:  What business problem are you trying to solve?
2.  Audit key customer decision points:Look for hidden bias, social and incentive pressures and opportunities to catalyze desired actions.
3.  Prioritize your opportunities: The economic, operational and brand impact of each decision should be considered.
4.  Identify suitable nudges:This should involve an optimized choice design that guides actions and decisions toward your desired result.
5.  Experiment, measure and scale: Only then will you discover the optimal strategy for your business.

For more information on our services and work, please visit our web site at Quanta Consulting Inc. 

Iron Dome innovation lessons

The old ditty ‘when Mother Nature gives you lemons you make lemonade’ tells us a lot about about being creative, particularly when innovation is critical to your corporate strategy — and survival. In the current conflict between Israel and Hamas, the lemons in questions are the hundreds of rockets being fired into Israel on a daily basis. Israel’s ‘lemonade’ was the development of the Iron Dome anti-missile system, which has quickly become one of the most impressive weapon-defence systems of the past 20 years. What lessons can businesses glean from the development of this world-class technology?

The Iron Dome was developed by Israeli defence contractor Rafael Advanced Defense Systems. Its development from ideation to deployment took about seven years, hundreds of workers, dozens of suppliers and more than $200M in investment (much of it supplied by the U.S.). The Dome’s purpose is straightforward and exceedingly difficult; the system is designed to track and intercept incoming short-range missiles with its own missiles before the attacking missiles strike their targets. Missiles that would have hit an unpopulated area are ignored, in order not to waste munitions. To date, the system has been very successful, intercepting approximately of 90% of the threats it faces. Rafael is currently looking to sell the system to a variety of countries.

Aside from its military success, the Iron Dome is a model of innovation commercialization under tight constraints. Below are seven lessons gleaned from a variety of public sources. The quotes below are from project team members and were anonymously cited (for security reasons) in the Times of Israel newspaper.

1. Create urgency

Contributing to the protection of your nation can be motivating. However, Rafael’s leaders put wood behind the arrow by making the Dome a strategic priority. The project’s constraints — tight timelines, technical challenges, and cost limitations — were clearly articulated so there were no role misalignments or executional misunderstandings.

2. Assemble the best people

Having the right mix of capable people is vital. Rafeal’s management assembled a technical dream team. According to one engineer, “The best people in the field came together for this project.” Patriotism was not the only motivator: “Many engineers were inspired by the technological challenges and … fought to participate in the project.” As it turned out, much of the team was, through design or chance, made up of very curious and creative individuals able to sustain a high workload and quickly solve problems.

3. Optimize the team size

Given the constraints, management decided that using a “lean, mean” team of motivated experts was the right tack. The modestly sized core development team — numbering in the dozens — was much smaller than what you would typically see on major initiatives in bigger organizations. The payoff was faster project speed, less politicking and reduced management complexity.

4. Quickly evaluate issues

One pressing issue was how to collate and evaluate the numerous conceptual and technical ideas, and technology fixes. The team developed excellent screening tools to help analyze options and decide when to let go of an idea and move on. These methodologies avoided analysis paralysis, and accelerated the pace of experimentation and prototype development.

5. Experiment regularly

A culture of risk taking and continuous learning permeated the project team. Part of this culture involved running many experiments to test ideas and technology. Successful experiments were studied to distill technical shortcuts and share best practices. Failures were also systematically analyzed to avoid repetition. These practices minimized technical risk, avoided duplication and maximized speed.

6. Collaborate closely

The Iron Dome was developed in close collaboration with the users and other stakeholders to reflect real-world needs. One team member said, “Our relationship with the people in the field was unprecedented; this was essential for adapting the system to all the constraints in the field.” Given the need to quickly deploy the system, the Dome was designed with simplicity in mind so as to improve manufacturability and ease of transport.

7. Be entrepreneurial

For a prolonged period, the Iron Dome faced criticism from many circles — vested institutional interests, the media and military experts — around cost, potential effectiveness etc. The team used these concerns as a personal challenge, and to further refine their plans. According to one engineer, “Maybe we should thank the media, because when you read a cynical article, you say to yourself, ‘Let’s show them’ and you tackle the project, invigorated.” Another said, “In retrospect, it was the constraints, which seemed almost insurmountable, that led us to develop creative and successful solutions,” including engineering lower-cost parts from scratch and using components that were discovered in a toy car sold at Toys ‘R’ Us.

The development and effectiveness of the Iron Dome teaches companies that innovation success can be more about attitude, common sense and collaboration — the intangibles — than investment and size of R&D teams. Managers would be wise to consider these lessons.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

The art of innovation

What do innovative companies like Google, 3M, Apple, and P&G have in common? Many pundits will point to their breakthrough products, deep understanding of their customers, and healthy R&D spending. What is often overlooked, however, is how these firms create the right organizational environment for innovative practices and products to germinate and flourish. Since every firm and market is different, designing the right organizational mix is as much art as it is science.

We have identified four organizational success factors to incubate innovation and maximize R&D productivity:

  • Consistent leadership
  • Supportive Culture
  • Specialized innovation methods
  • Enabling management systems

Not every company, however, recognizes that great ideas need a supportive organization to bring them to commercial success. One Canadian banking leader, RBC, heeded these lessons 12 years ago when it launched their Applied Innovation (AI) model. Today, AI stands as one of the most unique innovation programs in the Canadian banking sector. Below are some of its secrets:

Leadership

RBC’s leadership from the CEO down sees innovation as a strategic enabler and necessary for a high-performance company. Its leaders prudently define the aim of innovation (to improve customer value and drive operational enhancements) that will drive their innovation strategy.

Culture

RBC’s innovation mission is to continually seek out ways to solve customer problems and improve operational efficiency and effectiveness. This mission has long been embedded within the corporate DNA and is supported by all business lines and functions. The treatment of “failure” is illustrative of its supportive culture. A failed innovation is not unfairly punished. When something is not working out, managers are encouraged to “fail fast,” in order to minimize losses and generate learnings.

In order to be a truly innovative company you must be able to provide employees with a safe environment to test ideas in real world situations,” says Avi Pollock, vice-president of innovation and strategic planning at RBC. “Not all ideas will be suitable for commercialization, you need to apply good judgement on when you move forward or withdraw.”

Innovation Methods

AI is a centralized group with an enterprise-wide mandate. Various methods support innovation. One important asset is the innovation lab, where technology vendors are brought in to demonstrate functionality and collaborate with the RBC team to run pilot programs. By making something that can be seen, touched and felt, the lab allows RBC businesses to try new things in a safe environment.

Recognizing that good ideas reside everywhere, RBC opens up its innovation process to bring in external ideas and practices. One interesting example is its Prototyping competition. On June 7, 2014 the event will give students 24 hours to build a prototype app that solves a pressing business or customer problem. Competitions like this bring in breakthrough ideas, build the RBC brand and identify capable people to recruit.

Management systems

Innovation goals are embedded within AI team’sperformance tracking system. These seek to balance focus and funding around a short and long term time horizon. Though driven by business needs, the systems encourage business alignment, close collaboration and regular communication between the AI team and all business and functional teams.

RBC’s AI model has helped produce some impressive customer and operational wins:

Extending to the Branch: Retail banks are always challenged with ensuring adequate coverage at each branch of key services like wealth management advice and non-English language support. The innovation idea (which came out of the Next Great Innovator student competition) is to deliver these services through remote video and tele-support from a centralized location. To refine the service, RBC’s innovation lab developed a pilot project with real customers, advisors, issues under actual conditions. To date, this innovation has led to the enablement of 50 branches across Canada that can now offer clients real time video conferencing meetings with financial experts. Client feedback has been very positive, and this innovation has allowed RBC to differentiate its ability to offer financial advice to customers.

Workplace of the future: Born out of the 2009 Next Great Innovator competition, this operational innovation was designed to boost employee communication, collaboration and engagement across the enterprise. The initiative, RBC Connect, featured an internal social networking platform with supporting practices and processes. The results have been impressive. Employee active-usage rates are 60%, four times the benchmark for social platform adoption. Quality of communication has also exceeded expectations. Users contributing content exceeds 40% versus 10% on typical internal collaboration platforms.

Cool ideas are just the first step in launching breakthrough innovation. Whether you are leader-inspired like Apple or serial experimenters like Google, your company will need a supportive organization to capitalize on the promise. Achieving this will require leaders to regularly communicate their innovation vision throughout the enterprise, break down internal silos, employ the right assets and methods and optimize their cultural, management and recruiting practices.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Digital transformation’s first step

Most leaders we speak with are considering how to use digital technologies to improve business and financial performance. Research shows that digitally transforming a customer interaction or operational process can significantly improve bottom-line performance and enhance competitiveness. To exploit the potential of digital technology, the optimal strategy is to identify high-potential/low-risk opportunities, find enterprise-wide technological solutions and learn as you implement.

Digital business can be a game-changer. According to a multi-industry McKinsey study, digitizing the customer experience can boost sales and profits an average 20% over five years. From an operational perspective, leveraging digital technology can drive cost reductions, leading to a 36% improvement in profits after five years.

Digital technology can impact every facet of a company’s business model. Two areas in particular can yield significant value:

  • Improve the customer experience: Digital technology enables customers to get information and tools when they want it, as they want it. For example, the rapid rise of mobile computing has triggered major changes in buyer behaviour. Banks have responded by delivering their products and services through “always on” and data-driven mobile channels — and enabling more targeted and timely cross-selling of complementary products.
  • Automate manual back-office tasks: Digitizing boring, repetitive and error prone tasks can reduce cost and improve cycle times. One of our clients reaped major efficiencies by automating basic-level customer service (through enabling customer self-service) and the review and payment of expense reports.

Every sector can benefit from enabling digital technology. In fact, some of the necessary ingredients are already in place. Specifically, many firms already incorporate digital technologies like Big Data analytics, ERP systems, and cloud services. Unfortunately, these tools are often deployed selectively within a line of business or functional silos with little consideration paid to the bigger enterprise-wide impact, standards etc.

Nominate champions

Digital transformation can be the most difficult business shift many companies face; it is part technology adoption, part process redesign and part behavioural/cultural change. This transformation should be not undertaken without strong leadership at the C-suite and board levels; it is vital that these mission-critical initiatives have senior champions who possess an organization-wide and holistic customer view. Some firms have gone so far as to create the role of a Chief Digital Officers to lead digital efforts.

Understand the impact

The return on your digital investment can be compelling — and difficult to accurately estimate. Firms can not rely only on aggregated numbers like McKinsey’s; they need to undertake a wide-ranging business-case analysis that considers the full range of benefits including cost savings, improvements in customer satisfaction and higher cross-selling rates. The business impact should be measured through digital targets to evaluate progress and influence future investment and roll-out decisions.

Take an end-to-end view

Maximizing the value of digital requires a consideration of scope and scale that cuts across the firm. For example, automating sales activities will have important implications for inventory availability, product design and marketing channels. Managers also need a 360-degree view of organizational issues like available skills, cultural impact and change requirements.

In the above areas, we have found that companies need a detailed view of user needs and behaviour as well as formal and informal workflows. Digital transformation will often precipitate a need to refine processes, the nature of the service, and in some cases, the operating structure.

Carefully choose your opportunity

Leaders need to prioritize what to digitize. Trying to bite off more than you can chew may ruin the business case, quickly bog down implementation, and lead to conflict over scarce resources. On the other hand, having too narrow a focus may leave significant value on the table. Whatever the choice, managers must ensure the potential business value is compelling, the selected initiatives align to business priorities and they have the right resources and partners to execute. Leaders also have to accept that over time, some lines of business, activities or jobs will be displaced by digital technologies; these shifts — often sudden — can have important organizational ramifications.

Going digital is a journey. Hype may turn transformation into a sprint but in reality it should be seen as a marathon. Starting with a digital pilot is prudent for the technologically risk averse or inexperienced. In some cases like iTunes or Netflix, digitally transforming a product may call for a totally new business model. Managers will maximize digital’s value when they: select “low hanging fruit” opportunities, prudently invest based on the right risk/reward profile, get their workflows optimized and ensure the right resources and change methodologies are employed.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.