Business Innovation in a Global Economy

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Business Innovation in a Global Economy

• Srikanth Kannapan, PhD
• May 5, 2005

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Outline

• Some Working Definitions
• Industry Domains
• Business Drivers
• Enablers Challenges
• Value Chains
• Value Chain Evolution
• Patterns of Business Innovation
• Dimensions of Complexity
• Examples - Discussion

3
Some Working Definitions

• Globalization
• 17 million hits with a search engine
• Economic integration/interdependence of countries
• Trade liberalization (increased circulation of
  goods)
• Financial liberalization (expanded circulation of
  capital)
• Expansion of travel patterns
• Business Innovation
• 0.5 million hits with a search engine
• A socio-techno-economic business evolution
• Internet Commerce
• Outsourcing

4
Industry Domains

• Major Domains
• IT/Software Enterprise Software, Embedded
  Software
• Manufacturing Electronics, Automotive, Aerospace
• Telecom Wireless, Data/Video
• Financial Services Banking, Insurance, Asset
  Management
• Emerging Domains
• Retail CPG, Durables, Apparel
• Media / Entertainment Publishing, TV, Animation
• Boundaries of Influence
• Onsite physical action
• Emotional connection
• Cultural affinity

5
Business Drivers

• Financial Imperatives
• Profitability growth expectations
• Increasing global purchasing power
• Highly diverse global cost bases
• Growing Competition

6
Enablers Challenges

• Enablers
• Trade and finance liberalization
• High speed communication links
• Spreading competence
• Expanding partnerships
• Challenges
• Bridging language and culture
• Transcending physical, political, social factors
• Managing global partnerships
• Building and operating distributed infrastructure
• Attracting and retaining talent

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Value Chains

• Value chains A valuable conceptual tool to
  understand the effects of business innovation and
  globalization
• Map flow and dependencies of value-added
  activities in businesses
• Track flow of parts/products from source to
  consumption
• Identify activities performed/to-be performed
  within/outside the enterprise
• Explore build/buy/expand options for enterprise
  components in different global locations
• Value chains have different patterns for
  different industries
• The Manufacturing Industry (Electronics,
  Automotive, Aerospace)
• The Service Industry (Telecom, Financial, Retail)
• The Information Industry (IT/Software, Media)

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Value ChainsManufacturing Industry
Offering/Process Development
Supply Chain (Indirect)
CustomerRelationship
Market Insight
Production
Supply Chain (Direct)
Distribution Chain
InfrastructureManagement

• Buy-Side
• Direct, Indirect
• Sell-Side
• Market, Customer, Product
• In-Side
• Development, Production, Infrastructure

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Value ChainsServices Industry
Offering/Process Development
Supply Chain (Indirect)
CustomerRelationship
Market Insight
Service Provisioning Operations
InformationSources
Distribution Chain
InfrastructureManagement

• Buy-Side
• Information, Indirect
• Sell-Side
• Market, Customer, Offering
• In-Side
• Development, Operations, Infrastructure

10
Value ChainsInformation Industry
Offering/IP Development
Supply Chain (Indirect)
CustomerRelationship
Market Insight
Professional Services
InformationSources
Distribution Chain
InfrastructureManagement

• Buy-Side
• Information, Indirect
• Sell-Side
• Market, Customer, Offering
• In-Side
• Development, Services, Infrastructure

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Manufacturing IndustryValue Chain Evolution - I
Offering/Process Development
Supply Chain (Indirect)
CustomerRelationship
Market Insight
Production
Supply Chain (Direct)
Distribution Chain
InfrastructureManagement

• Sell-Side Globalization
• Assess addressable market size and maturity
• Identify target segments and develop business
  plans
• Build global partnerships and distribution
  channels
• Expand sales in new geographies

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Manufacturing IndustryValue Chain Evolution - II
Offering/Process Development
Supply Chain (Indirect)
CustomerRelationship
Market Insight
Production
Supply Chain (Direct)
Distribution Chain
InfrastructureManagement

• Buy-Side Globalization
• Identify best sourcing strategy from global
  suppliers
• Build supplier partnerships and logistics
• Consolidate/Integrate supply chains into
  production system
• Continuously explore further sourcing optimization

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Manufacturing IndustryValue Chain Evolution - III
Offering/Process Development
Supply Chain (Indirect)
CustomerRelationship
Market Insight
Production
Supply Chain (Direct)
Distribution Chain
InfrastructureManagement

• In-Side Globalization
• Locate production infrastructure close to markets
• Optimize product-mix production capacity to
  local markets
• Decentralize production operations,
  infrastructure management
• Localize indirect supply chain within global
  standards

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Manufacturing IndustryValue Chain Evolution - IV
Offering/Process Development
Supply Chain (Indirect)
CustomerRelationship
Market Insight
Production
Supply Chain (Direct)
Distribution Chain
InfrastructureManagement

• Integrated Globalization
• Develop technology/products aggregating global
  experience
• Locate centers for RD closest to concentrations
  of competence
• Develop shared platforms for global markets
• Customize platforms to local markets

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Patterns of Business Innovation
1980s
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Services IndustryValue Chain Evolution - I
Offering/Process Development
Supply Chain (Indirect)
CustomerRelationship
Market Insight
Service Provisioning Operations
InformationSources
Distribution Chain
InfrastructureManagement

• Sell-Side Globalization
• Assess market size and maturity
• Establish market presence and brand
• Establish sell-side partnerships and establish
  business plans
• Monitor market trends, calibrate expansion

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Services IndustryValue Chain Evolution - II
Offering/Process Development
Supply Chain (Indirect)
CustomerRelationship
Market Insight
Service Provisioning Operations
InformationSources
Distribution Chain
InfrastructureManagement

• In-Side Globalization
• Leverage global centers of competence for
  services delivery
• Develop outsourcing partnerships for
  infrastructure management
• Implement global standards for indirect supply
  chain esp. HR

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Services IndustryValue Chain Evolution - III
Offering/Process Development
Supply Chain (Indirect)
CustomerRelationship
Market Insight
Service Provisioning Operations
InformationSources
Distribution Chain
InfrastructureManagement

• In-Side Globalization
• Develop offerings/processes aggregating global
  experience

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Patterns of Business Innovation
1980s
1990s
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Information IndustryValue Chain Evolution - I
Offering/IP Development
Supply Chain (Indirect)
CustomerRelationship
Market Insight
Professional Services
InformationSources
Distribution Chain
InfrastructureManagement

• Sell-Side Globalization
• Assess market size and maturity, establish market
  presence and brand
• Establish sell-side partnerships, establish
  business plans, monitor expansion
• In-Side Globalization
• Leverage global centers of competence (on-site
  remote)
• Professional Services, Infrastructure Management,
  Support

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Information IndustryValue Chain Evolution - II
Offering/IP Development
Supply Chain (Indirect)
CustomerRelationship
Market Insight
Professional Services
InformationSources
Distribution Chain
InfrastructureManagement

• In-Side Globalization
• Expand scope to collaborative offering/IP
  development
• RD
• Product/Services Development, Product/Services
  Management

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Patterns of Business Innovation
1980s
1990s
2000s
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Globalized Business Innovation Dimensions of
Complexity

• People
• Communication language, idiom, accent
• Coordination ownership, time zones, hand-offs,
  shifts
• Competency technical, product, process,
  proprietary
• Training Classroom, OJT, Experiential
  onsite/remote
• Culture Work, Play Individual, Group

People
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Globalized Business Innovation Dimensions of
Complexity

• Process
• Data Flow Access, Integration
• Work Flow Correct, Complete, Timely
• Travel Set-up, Operations, Revitalize
• Organizational Practices Career Paths

• Communication
• Coordination
• Competency
• Training
• Culture

People
Process
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Globalized Business Innovation Dimensions of
Complexity

• Technology
• Data Connectivity, Hardware
• Applications/Tools Architecture
• Software Licensing

Technology

• Communication
• Coordination
• Competency
• Training
• Culture

People
Process

• Data Flow
• Work Flow
• Travel
• Practices

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Globalized Business Innovation Dimensions of
Complexity

• Financials
• Costs, Revenues
• ROI, Payback Periods

Financials
Technology

• Communication
• Coordination
• Competency
• Training
• Culture

People
Process

• Data Connectivity, Hardware
• Applications/Tools Architecture
• Software Licensing

• Data Flow
• Work Flow
• Travel
• Practices

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Globalized Business Innovation Dimensions of
Complexity

• Costs, Revenues
• ROI, Payback Periods

Financials

• Strategy Change Management
• Leadership Management
• Process Owners and Task Owners

Strategy/ Change Management
Technology

• Communication
• Coordination
• Competency
• Training
• Culture

People
Process

• Data Connectivity, Hardware
• Applications/Tools Architecture
• Software Licensing

• Data Flow
• Work Flow
• Travel
• Practices

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Globalized Business InnovationDimensions of
Complexity

• Costs, Revenues
• ROI, Payback Periods

Financials

• Leadership Management
• Process Ownersand Task Owners

Strategy/ Change Management
Technology

• Communication
• Coordination
• Competency
• Training
• Culture

People
Process

• Data Connectivity, Hardware
• Applications/Tools Architecture
• Software Licensing

• Data Flow
• Work Flow
• Travel
• Practices

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Case in Point Toyota Innova

• New Product - 01/09/2004
• Toyota Launches Kijang Innova in Indonesia 
• Kijang  Jakarta
• PT TOYOTA MOTOR MANUFACTURING INDONESIA (TMMIN)
  and PT TOYOTA-ASTRA MOTOR (TAM) unveil in
  Indonesia today a new Innovative International
  Multipurpose Vehicle (IMV) called Kijang Innova.
• Kijang Innova will be produced at Toyotas
  Karawang plant in West Java, with annual
  production of 80,000 units a year. In addition to
  Kijang Innova production, TMMIN will also produce
  more than 180,000 gasoline engines per year.
  Aside of being sold in Indonesia, Kijang Innova
  and its gasoline engines will be also exported to
  other countries worldwide soon starting this year
  with total export volume of 10,000 and about
  130,000 units a year respectively. Kijang Innova
  launching is aimed even to further contribute to
  Indonesian economies through investment,
  employment and export.

contd
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Case in Point Toyota Innova

• Kijang Innova is the output of Global Quality
  Project (GQ Project) - a business revolution that
  involves breakthrough improvements in the areas
  of development, production, technology and
  services. This is a part of Toyotas efforts to
  provide customers a global qualified MPV, which
  can meet customers expectation both in Indonesia
  and global market.
• 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 Innova will become a new generation of
  Toyotas legendary multipurpose vehicle (MPV),
  Toyota Kijang, in Indonesia. The new global MPV
  brings revolution in styling, comfort,
  performance, safety, value for money as well as
  production quality at the most beautiful
  appearance.
• 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 Turbo Commonrail) engine for
  diesel types, Kijang Innova will provide
  sophisticated power. good fuel efficiency, as
  well as excellence in maneuverability and high
  level of riding comfort. As one of Toyotas
  concern to a greener environment, Kijang Innova
  is ready to comply with European Emission
  Standard Step 2.

contd
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Case in Point Toyota Innova

• Toyota Innova launched in India
• Related stories Innova launch in Philippines
• 24 Feb 2005
• The Toyota Innova was launched in India by Toyota
  Kirloskar Motors today.The MPV will be available
  in both petrol and diesel versions. There will be
  a total of 5 versions in seven colours.
• The company has said that the Toyota Innova will
  compete against the Chevrolet Tavera and the
  Mahindra Scorpio.That is yet to be seen. The
  Chevrolet Tavera and the Mahindra Scorpio are
  both priced much below the new Innova, and both
  may slash their prices further if it proves that
  the Innova will be a threat to them.
• Toyota officials said that the Innova is one of
  five models that have been designed as part of
  the IMV (innovative international multi-purpose
  vehicle) project, launched in September 2002.
  Innova would be produced at Toyota Kirloskar
  Motor's plants in India.

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Other Industry ExamplesDiscussion

• IT/Software
• Enterprise Software, Embedded Software
• Manufacturing
• Electronics, Automotive, Aerospace
• Telecom
• Wireless, Data/Video
• Financial Services
• Banking, Insurance, Asset Management
• Retail
• CPG, Durables, Apparel
• Media / Entertainment
• Publishing, TV, Animation

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Summary

• Business innovation now has global context
• Value chains help us understand dynamics
• Innovation patterns provide perspective
• Complexity dimensions enables informed response