I n the IBM 2006 Global CEO Study [1], which was based on interviews conducted with 765 corporate and public sector leaders worldwide, 65 percent of leaders anticipated fundamental change in their industries in the next two years [2]. As a strategic response, many CEOs are innovating in operations and/or products and services. But firms that were financial outperformers put twice as much emphasis on business model innovation as underperformers (see Exhibit 1). As one CEO told us, ''Products and services can be copied; the business model is the differentiator'' [3].But what exactly does the term business model innovation encompass? And what type yields the best results? To find answers, we first identified three main types of business model innovation, which can be used alone or in combination: innovations in industry models, in revenue models and in enterprise models. We then compared these three types of business model innovation across 35 best practice cases. A key finding was that each type of business model innovation, with the right strategy and strong execution, can generate success.Another important finding was that innovations in enterprise models that focus on network plays (i.e. external collaboration and partnerships) seem to be the most common, with 15 of the 35 cases we studied, or almost half, using this type of business model innovation. Moreover, we found that companies using network plays realized similar financial results as companies that used other strategies. We also found that while network plays are being used by diverse companies in different industries and regions and of varying age, size and other characteristics; this tactic has been a particularly useful strategy for older companies.
combination of two time-tested programs for achieving operational excellence in major US companies is helping leaders discover innovation opportunities and promote a company-wide culture with an inclination toward innovation. Called a lean Six Sigma approach or sometimes just Six Sigma, such a program, if focused not just on efficiency but also on growth, can serve as a foundation for innovation throughout an organization. Simply put, such a lean Six Sigma program is not just about doing things better, it is a way of doing better things. Used effectively it can enhance innovations in products, services, markets and even a company's underlying business model, as well as improve operations.Recently consultants from the IBM Operations Strategy Consulting Practice and the IBM Institute for Business Value analyzed the innovation records of several leading companies that have implemented operations strategies based on lean Six Sigma management techniques. Using this approach, the companies have established disciplined working environments focused on customer needs, detailed data analysis and facts, not theories. Over the past five years, some companies have achieved impressive results.For example, at Caterpillar Inc., stagnant revenue growth prompted the company to undertake a massive transformation in January 2001. Note that Caterpillar launched its initiative before the term ''lean Six Sigma'' came into common use and continues to refer to the methodology as ''Six Sigma.'' Guided by this method, the company developed a strategic vision that outlined a roadmap for change based on fact-based analysis. Caterpillar's ongoing initiative also led to product innovations, such as its phenomenally successful low-emissions diesel engine, and to redesigned processes, including a streamlined supply chain. By 2005, revenues had grown by 80 percent.An analysis of Caterpillar and other companies that used lean Six Sigma programs to achieve broad-based innovation and superior financial performance identified several distinguishing characteristics of their approaches that set them apart from those with a traditional operational improvement mindset. Successful innovators had:B An innovation vision based on factual customer and market insights. Leaders crafted a compelling vision based on a keen understanding of market demands and their own capabilities. Their objectives were explicit and few in number to enable focus.B Leadership committed to perpetual innovation. CEOs and business unit leaders played active, enthusiastic roles. They were clearly committed to making an indelible organizational change, not just launching another initiative.B Alignment across the extended enterprise. The strategic innovation vision was used as a unifying force to align efforts in disparate business units and influence supplier and customer relationships.
T o innovate, many high performing firms are collaborating beyond their organizations -with their extended networks of suppliers, customers, business partners and others. Such collaboration, however, is not easily accomplished. In fact, about 50 percent of strategic alliances fail. [1] Here is a framework for managing these alliances -the ABCs of collaborative innovation -that can improve the chances of success. Indeed, the strongest collaborators in a recent IBM study were also the strongest financial performers.In the study, while 76 percent of CEOs cited the importance of enabling collaborative innovation, only 51 percent reported that they were achieving this goal. One big challenge is that, as organizations become more global, they face more complex issues related to culture, regulation, technology and other areas. Further, with the growing trend toward extended enterprise models, involving more external partnerships, collaborative innovation is even harder to manage successfully. We believe collaboration problems across organizations are key factors contributing to the demise of strategic partnerships. Know your ABCs: a framework for collaborative innovationTo avoid the pitfalls of collaborative innovation, our research and experience show the best building blocks are: alignment, boundaries and commitment, which we call the ABCs. Alignment entails synchronizing the strategic vision and innovation goals with the implementation of these throughout the organization, focusing on collaboration both vertically and horizontally. Managing boundaries enables collaboration across organizations, establishing structures and processes regarding governance, operations and technology. Finally, an ongoing commitment is required to orchestrate and systematize collaboration for innovation throughout the organization and its extended enterprise over time. These ABCs can be done separately or in combination, depending on the capabilities, strategic goals and innovation objectives of the organization. A ¼ alignmentAlignment is a key step in ensuring that the business strategy is communicated and enabled throughout the organization both vertically and horizontally. Alignment requires looking at the organization from the perspective of innovation objectives, and then using the insights gained to position the organization to meet those objectives.B Vertical alignment translates the business strategy's innovation objectives into an organizational strategy and an implementation plan. Once translated, the business strategy provides a strategic roadmap for change.B Horizontal alignment typically requires the creation of a new organizational unit or the redefinition of existing ones. Key here is the elimination of structures and processes that
Our research shows that while we are living in an era of vast opportunity for innovation and growth, executives are deeply worried about their organizations' abilities to capitalize on this transformation and thrive.
Purpose The authorseeks to identify what strategies are successful companies using to navigate this ever-evolving retail landscape? And what strategies and best practices can be learned from the retail sector for thriving amid major economic transformations such as the current one? Design/methodology/approach To help explain the divergence in performance across U.S. retailers given the same general macro context, the research focused on four companies – Target, Kohl’s, JC Penney and Sears. Findings Successful retailers focused on using technology to build value for customers first, and as a result shareholder value ensued. Practical implications One key indicator of the connection between a company and its customers is the effectiveness of its social media presence. Originality/value The article presents evidence that in order o leverage the full power of technology, retailers must make strategic investments in technology that enable them to understand who their customers are; determine what their customers most need and offer products and services that address these needs seamlessly in stores and online.
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