Bill McKendree shared his view on the essential role HR leaders must play to enable greater creativity at all levels and examples from his work with many diverse companies.

1. Giving HR the Innovation
Advantage
Prepared for:
Human Resources Leadership Forum
January 19, 2012
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2. Question
What is innovation?
Why is it important?
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3. “Innovation”
“Innovation” is:
A
The
Foundational
Introduction
A Creative An Change in or
of Something Causing
Process Outcome Adaption to
New or
What is Done
Different
Today
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4. Primary Environmental Drivers for Innovation
 The new market place is requiring companies to rethink the basics of their business
− The “theory of the business” may have changed (e.g., healthcare, investment management)
− The market place dynamics have changed, including, for example, consumer trust
− The economic model may have shifted where the end buyer now may weigh their purchases
differently
− The internet and social networking have permanently altered the ways in which people engage
in commerce
 The “maturity” of many industries and the companies within them
− “Maturity” shows up as single-digit growth primarily realized by stealing market share from
competitors
− The staying power of mature industries and companies is limited
“If you are not growing, you are dying.”
− Growth must be discovered by totally rethinking the current business to “squeeze” growth out of
it and by investing in new avenues of growth
 The rebalancing of our global economics is creating new opportunities, e.g., jewelry manufacturing
coming back to the US; the EU losing its financial might and corporations in other zones gaining
strength
− Slow growth and no one sure where growth will emerge
 The deepening of customer intimate core value propositions moving beyond: greater market
research, segmentation and extensions to distribution capabilities.
From: Firm decides and customers receive
To: Firm and customer participate in value creation resulting in a new experience for customers
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5. The Call to Action…
These and other environmental factors call
many to systemic innovation that goes
beyond just product, service and process
innovation
TO
Business model innovation
TO
Innovation in the customer/balance of power
equation
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6. Whole Systems View – The Operating Model
Strategy
Leadership
Culture Organizing
Structures
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7. Operating Model – Outcomes
Strategy
 Mission, vision, values
 Customer value proposition
 Growth strategies
 Strategic goals and objectives
 Scenario thinking and planning
 Scorecard and measurement system
Culture Organizing
Structures
Leadership
 Competency  Organizational design
requirements  Team alignment
 Macro work process
 Organization, team  Decision-making and
and individual accountability
behaviors processes and
structures
 Change navigation  Talent planning and
performance
 Organizational culture management systems
alignment  Physical space concept
design
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8. The 3 Levels of Innovation
Innovation 3
Customer/Balance of Power
(Value Co-creation)
“Urban Planner”
Innovation 2
Business Model
(Transformation)
“Architect”
Innovation 1
Operational Performance
(Process Improvement)
“Engineer”
Increasing degree of:
 Complexity
 Change
 Openness to new ideas
and possibilities
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9. Innovation 1 – Process Improvement
Intact work process: one in which all major steps occur within the same organization:
Step Step Step Step
1 2 3 4
Interactive work process: one in which the work, at some point during the process, is
handed off to another organization for one or more steps, then returned to the original
organization to complete:
Step
3
Step Step Step Step
1 2 4 5
Input work process: one in which major input is received from another organization during
the work process:
Step
2b
Step Step Step Step
1 2a 3 4
There can be many variations and combinations of these simple processes.
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10. Innovation 1 – Value Chain Innovation
Process Improvement
Product Product Sales & Customer
Example: Design Development Marketing Service
– Hold customer focus
– Xxx – Xxx – Xxx
Major groups
– Xxx – Xxx – Xxx
– Develop product designs
Activities – Competitor analysis – Xxx – Xxx – Xxx
– Customer input reports
– Xxx – Xxx – Xxx
Key – Product blueprints
– Xxx – Xxx – Xxx
– Competitor product
Deliverables information – Xxx – Xxx – Xxx
– Engineering – Xxx – Xxx – Xxx
Participants – Marketing – Xxx – Xxx – Xxx
– VP Product Group A – Xxx – Xxx – Xxx
– Product groups B & C – Xxx – Xxx – Xxx
Key Dependencies/ – Customer service reps – Xxx – Xxx – Xxx
Interfaces – Sales reps – Xxx – Xxx – Xxx
Key – Xxx
– Xxx
Decisions – Xxx
Key Interfaces and Handoffs
Key Customer Touch Points
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11. Examples
For each boat:
1. Fertilize the soil
1. Locate the wood
2. Plant the seeds
2. Loft the plans to scale
3. Water and nurture
3. Frame the ribs off the
4. Aerate soil
scale
5. Harvest
4. Cut and lay the planks
5. Seal the seams
1. Float seeds in water 1. Build one mold to
sponge accommodate infinite
2. Hang in damp air number of boats
3. Harvest 2. Lay fiberglass within it
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12. Innovation 2 – Business Model Innovation
Leadership Role and Performance
Theory of the Business
 Go-to-Market
 Critical Touch
Competitive Points Stratecution
Strategy  Core
 Capabilities
 Org Design
 Product / Service
Chain
 Customer Chain
 Supply Chain
 Knowledge Chain
Culture
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13. Example
Cisco Systems turning its structure on its side to transform its “go-to-market”
1. Business architecture
2. Value Stream
3. Ability to add or shrink product lines cost effectively
Functions, e.g., Engineering, Functions, e.g., Engineering,
Manufacturing, Sales Manufacturing, Sales
Product Lines
Functions, e.g., Engineering,
Product Lines
Product Lines
Manufacturing, Sales
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14. Examples
Health Plan Enabling Information
Theme Parks Company Entertainment Company
Hardware Company Services Company
TO
Running Shoe Company Mindset Company
Coffee Company Lifestyle Company
“Wax to Glass” Fragrance
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15. The 3 Levels of Innovation
Much greater complexity
Innovation 3
Rapidly emerging Customer/Balance of Power
Driven by social (Value Co-creation)
networking engines
Innovation 2
Business Model
(Transformation)
Familiar Domain Innovation 1
Operational Performance
(Process Improvement)
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16. Innovation 3 - Customer/Balance of Power Innovation
Value Co-creation
Vast
“And Growing”
Research and Shared Innovation
Analytics “Value Co-creation”
Variables to Consider
Business Model
Innovation
“Transformation” Balance of
Many
Power
Known Unknown
Operations Linear Non-Linear
Innovation Recipient Participant
“Process” Exploit Explore
Scenarios
Few
Low Multiple Alternatives High
“And Epic”
Degree of Uncertainty
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17. Value Co-creation Example – Healthcare
Healthcare “Doctor as Expert” To “Family Home Medical Model”
What’s different?
 Patient and patient’s family are integrally involved in the healthcare plan for an individual
The individual takes on responsibility
The individual makes choices
The family takes on responsibility
 Greater access to information for all
 Emphasis shifts to home care
In aggregate, this results in the patient and the family building a unique path to healthcare for the
family member.
Hence, the value creation has been altered with the patient dramatically more engaged in the
experience.
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18. Value Co-Creation Example – Big Box Home Improvement Retailer
Past Future
 Growth by adding new stores  Target creative customer
 Competed on pricing/selection  Online access
 Individual store-based Personal database
execution
Dramatic
Change Interactive design
 Helpful Associates ask, “Which (text, voice, video)
product/aisle…?” Integrated with stores
 Growth slowed from market  What are you envisioning vs.
saturation and the recession what do you need?
 Consumer and Associate design together
 Mass customized experience
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19. Innovation is Not Simply Being More Visionary or Creative…
In our experience, successful innovation is…
 Recognizing your unique innovation requirements for success.
…Innovation is not a one-size-fits-all program
 Architecting your operating model for creativity and discipline
…Both are required for long-term success
 Starting small, testing, iterating, validating and then investing for scale
…Build a portfolio of early stage ideas and continue investments based on data
 Maintaining a consistent pace with the appropriate guiding metrics
…Innovation is not a sprint or a single brilliant idea; it’s hard work
 Focusing on the day-to-day, but creating time to step back and observe the market for
foundational changes and adjusting your course accordingly
…Leadership must create the strategic “container” in which relevant innovation can occur
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20. Leadership Competency Implications
Capabilities
Developable, yet differentiating skills and knowledge-
based elements that leaders acquire through
education and experience. Capabilities are what
people have learned to do, involving how people think
and their knowledge on a variety of topics, including
management practices.
Characteristics
Innate operating and interaction styles. Characteristics,
although particularly instinctive, may be strengthened or
modified to a degree through awareness, practice and
reinforcement.
Capacities
Differentiating attributes that influence a leader’s
intellectual, emotional, and physical strength,
endurance and perseverance. Capacities tend to be
more “hard-wired” and less malleable. While not totally
within a leader’s control, capacity can expand or
contract depending on the situation.
Core Motives
Recurrent concerns that energize, orient and select
behavior. They are so deeply rooted that they are
often beyond our consciousness.
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21. Leadership Competency Implications
The “4C’s” Competency Model
Characteristics Capabilities Core Motives Capacities Innovation Level
Innovation 3
Collaboration Wildly Open to
Enablement Customer/Balance of Power
Co-Creation the Unknown
(Value Co-creation)
Capabilities
Innovation 2
Open to New
Inclusion Enablement Business Model
Ideas
(Transformation)
Focused on Innovation 1
Structuring Authority
Known Operational Performance
Delegation Control
Domain (Process Improvement)
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22. The Implications for HR
The HR Value Pyramid
Clarify Strategic
and Culture Goals
Individual and Executive
Team Performance
Organization Design, Effectiveness and
Change Navigation
Employee Engagement
Integrated Talent Management
HR Performance
Compensation Staffing Development
Analytics Management
Employee Services and Infrastructure
the clarion group
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23. The 3 Levels of Innovation and the Implications for HR
Innovation 3
Customer/Balance of Power
Clarify Strategic (Value Co-creation)
and Culture Goals
Individual and Executive
Team Performance
Organization Design, Effectiveness and
Change Navigation Innovation 2
Business Model
(Transformation)
Employee Engagement
Integrated Talent Management
HR Performance Innovation 1
Compensation Staffing Development
Analytics Management Operational Performance
(Process Improvement)
Employee Services and Infrastructure
the clarion group
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24. Individual Innovation Assessment Worksheet
What are the external trends/issues driving your organization’s need for innovation?



Of the three levels discussed, which are needed by your organization and why?
 Operational –
 Business Model –
 Value Co-Creation –
What are the implications for HR in your organization? What must your HR organization
do differently or better?



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25. HRLF Innovation Program Topics Planned for 2012
Strategy
Strategy: Using Innovation to Stimulate
Business Growth at Prudential Retirement with
Helen Frye and Sean McLaughlin
(November 13 – AM Meeting)
Leadership Organizing
Culture Managing Talent in an
Structures
Age of Uncertainty
with Peter Cappelli,
The Wharton School
Innovate or Perish: (June 5 – PM Meeting)
Building a Culture of Talent Acquisition:
Innovation with Jay Innovative Solutions to
Jamrog, SVP Research Recruiting with
i4cp HireVue and a Panel
of Experts
(March 27 – PM Meeting)
(September 20 – AM
Meeting)
HR Practices: Creating a
Mindset of Innovation with
Jatin DeSai from the DeSai
Group (May 1 – AM Meeting)
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