© 2011 IBM Corporation This report is solely for the use of Client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside.

© 2011 IBM Corporation

This report is solely for the use of Client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the Client organization without prior written approval from IBM. This material was used by IBM during an oral presentation; it is not a complete record of the discussion.

Embedding Innovation to Drive Growth

July 2012

© 2011 IBM Corporation2

Outline

Understanding the Growth - Global

Innovation as an Enabler of Growth

Enabling Innovation

IBM’s Approach to Innovation

Appendix


-60%

-40%

-20%

0%

20%

40%

60%

-60% -40% -20% 0% 20% 40% 60%

10 year CAGR (%)

10 y

ear

ann

ual

ize

d T

SR

(%

)Revenue & Total Shareholder Return* Growth S&P Global 1200, 2001 to 2010

Successful organizations grow faster than their competitors and convert their growth into value, outperforming their peers

Median CAGR: 7.3%Median TSR : 5.5%

“Successful Growers”(No of Companies Qualified :339 Companies)

“Unsuccessful Growers”((No of Companies Qualified :193 Companies)

“Shrinkers”((No of Companies Qualified :345 Companies)

“Prudent Managers”((No of Companies Qualified : 204 Companies)

* Total Investment Return (TSR) is calculated by Datastream as follows for all industries:(Market Price Year End + Dividends Per Share + Special Dividend -Quarter 1 + Special Dividend-Quarter 2 + Special Dividend-Quarter 3 + Special Dividend-Quarter 4) / Last Year's Market Price-Year End - 1) *100.


When it comes to growth, an organization’s neighborhood does not necessarily dictate its destiny

Industry

Strong performers outgrow their industry by wide margins: Top performers in the slow-growth financial markets and insurance industry outpaced median growth rates for the high-growth Education and Pharma/Life Sciences industries.Amongst the top 10 sub sectors, Steel has emerged as the highest growth sector while Industrial Machinery has lowest median growth rate

Geography

Strong performers outgrow their geography by wide margins: Top growers in the slow-growth Japanese market outperformed the median growth rates in other high-growth Asian markets

Company size

Revenue growth is not a function of company size: Size is not a constraint. Larger companies can grow revenue as fast as smaller companies. TSR tends to diminish as company size increases, but successful growers overcome this tendency, and grow both revenue and TSR irrespective of company size

Resilience

Successful growers may not report growth of revenue each year above median but have the resilience to bounce back and deliver superior growth over a longer period: No one succeeds all the time. What distinguishes successful growers is not perfection, but the courage and conviction to recover from imperfections


S&P 500 in 1957 (year 1 for the index) S&P 500 in 2010 (year 54 for the index)

Of the 500 S&P companies in 1957, only 14% remain on the 2010 S&P 500 list

The ability to manage fundamental change is key to growth - history shows that failure rates are extremely high

Source: S&P Guide 2010 and S&P Library for 1957 data



Acquisitions

Acquisitions have historically failed to

create value

Gains are elusive at best

Takeovers have destroyed more than $200 billion in shareholder value in the US over the past 20 years*

Innovation

Innovation is the best opportunity for

sustainable growth

Gains are more profitable and longer lasting- Sustainable

advantage- Differentiation- Pricing power

Organic

Organic methods provide necessary but

incremental growth

Gains are often hard-won and therefore not always profitable

Successes are easily copied making gains short-lived

Already more than accounted for in stock valuations

Companies must meet growth expectations …but that is easier said than done

*Source: The National Bureau of Economic Research



“new ideas” refers to the issue of novelty or originality, whether it be ideas extrapolated from other circumstances, industries or contexts

“add value” refers to the necessity for innovation to benefit people, whether they be customers, shareholders, employees or society as a whole; innovation that does not add value is generally futile

Change that does not add value is not considered innovation within IBM’s definition

For IBM, innovation is not: Change that does not benefit anyone: this often constitutes

change for the sake of change which can be costly and can dilute value

Adopting leading practice: this is often good for business but is generally directed toward avoiding loss of value to more sophisticated competitors, instead of capturing new value

Value creation that does not comprise the application of new ideas: this can be good for the business, but falls within a context of incremental, ‘business as usual’

Innovation is “new ideas that add value”

Incrementalism is innovation’s worst enemy”- Nicholas Negroponte,

MIT Media Lab

Innovation is not ‘incrementalism’ and must create value

Source: IBM Research



Being perceived as an innovation leader does not always translate into leadership in shareholder returns

Bloomberg Businessweek 25 Most Innovative CompaniesBusiness Executive Rank, 2010

Source: Bloomberg Businessweek, BCG Research and Reuters. Businessweek, 2010. Financial Statement data for each company for 2006-2009 from Businessweek.com

* Revenue and operating margin growth is annualized based on 2006-2009 fiscal year earnings before interest and taxes, as a percent of revenues as they were originally stated.

** Stock returns are annualized, 12/31/06 to 12/31/09, and account for price appreciation and dividends.*** Shareholder Equity CAGR based on 2006-2009 fiscal years. Tata Group and Virgin Group removed

due to lack of financial data

Bloomberg Businessweek 25 Most Innovative CompaniesRe-ranked by Shareholder Equity Growth, 2010

Rank CompanyRevenue Growth*

MarginGrowth* TSR **

1 Apple 30% 62% 35.43%

2 Google 30% 28% 10.42%

3 Microsoft 10% 3% 2.48%

4 IBM 25 11% 12.40%

5 Toyota Motor 5% NA -23.06%

6 Amazon.com 32% 38% 50.60%

7 LG Electronics 8% 180% 31.43%

8 BYD 52% 57% 113.25%

9 General Electric -1% -15% -22.28%

10 Sony 7% NA -27.67%

11 Samsung Electronics 9% 1% 10.57%

12 Intel 0% -7% 2.97%

13 Ford Motor -10% NA -9.72%

14 Research in Motion 64% 68% 23.42%

15 Volkswagen 3% -1% -2.49%

16 Hewlett-Packard 8% 10% 8.50%

17 Tata Group Not Listed Not Listed Not Listed

18 BMW 4% -42% -8.36%

19 Coca-Cola 9% 8% 8.69%

20 Nintendo 63% 48% 21.08%

21 Wal-Mart 5% 5% 6.95%

22 Hyundai 5% 26% 23.36%

23 Nokia 3% -39% -13.99%24 Virgin Group Not Listed Not Listed Not Listed

25 Procter & Gamble 5% 7% 0.43%

Rank Company TSR***8 BYD 113.25%

6 Amazon.com 50.50%

1 Apple 35.43%

7 LG Electronics 31.43%

14 Research in Motion 23.42%

22 Hyundai 23.36%

20 Nintendo 21.08%

4 IBM 12.40%

11 Samsung Electronics 10.57%

2 Google 10.42%

19 Coca-Cola 8.69%

16 Hewlett-Packard 8.50%

21 Wal-Mart 6.95%

12 Intel 2.97%

3 Microsoft 2.48%

25 Procter & Gamble 0.43%

15 Volkswagen -2.49%

18 BMW -8.36%

13 Ford Motor -9.72%

23 Nokia -13.99%

9 General Electric -22.28%

5 Toyota Motor -23.06%

10 Sony -27.67%17 Tata Group Not Listed24 Virgin Group Not Listed

Top 5 BW

Innovation should translate into “Value” for customers and shareholders

Innovation as an Enabler of Growth : Bloomberg Businessweek Survey


Companies pursue three main types of innovation

Product, service and/or market innovation

Innovation around specific products, services, markets, segments or other go-to-market activities

Operational innovation

Innovation that improves the effectiveness and efficiency of core processes and functions

Business model innovation

Innovation in the structure and/or financial model of the business

“Innovation occurs at the intersection of invention and

insight. It’s about application of

inventions to solve problems”

- Sam J. Palmisano, Former IBM CEO and Co-Chair of the National

Innovation Initiative

Innovation is “new ideas that

add value”

Innovation as an Enabler of Growth : Types of Innovation


Dell redefined the PC value chain and industry model by using a direct to customer sales model

Customization of the PC could be done on the web and the same would be delivered to the customer custom made

A few examples of innovation across industries

Product, service and/or market innovation



P2P Free VoIP Application iPhone

Direct to Customer Model

Cross - docking Shared Services & Establishing COEs

Movement to shared services of end-to-end processes that cut horizontally across functional areas

Examples such as reporting, risk analysis, components of underwriting and claims etc.

Revenue Model Peer to Peer Lending

CEP Bank

Toyota Production System

Gillette innovated the pricing model by giving away razors and making money on the blades

Goods trucked to a distribution center from suppliers are immediately transferred to trucks bound for stores—without ever being placed into storage.

TPS is comprised of two pillars, Just-in-Time and jidoka

VoIP product/service by Skype allows to offer cheap, customizable telephonic services over the Internet

The user interface is built around the device's multi-touch screen, including a virtual keyboard rather than a physical one

To transfer fund to non-bank account holder, go online, type in your cell phone number, their cell phone number and the $ amount

Peer-to-Peer Lending dis-intermediated established banks to promote lending between individuals

Innovation as an Enabler of Growth : Innovation Examples


Customer Intimacy & Market Penetration

Increase customer loyalty Improve price realization Gain wallet share Attract new customers Refresh products/services Increase geographic depth

Product & Service Innovation

Enter new product categories

Build services around products

Innovate faster/better

Diversification

Extend into new products and new markets simultaneously

New Markets &Channels

Extend into new customer segments

Enter new geographic/ global markets

Enter new channels

Pro

du

cts

Markets

Traditional

Tra

dit

ion

al

New

Ne

w

Product / service / market innovation



Product / service / go-to-market innovation brings to life new ways to solve the customer's problem

Innovation as an Enabler of Growth : Product, Service / Go-to-market Innovation





OperationsInnovation

Focuses on innovation applied to core

business operations, business processes and supporting Information Technology to improve

effectiveness, efficiency, and quality.

Core operations Go-to-Market /

Customer facing processes

Procurement / Suppliers / Logistics

Product / Service Development

General / Administrative (G&A) processes

Collaboration and Partnering Collaboration has become an essential underpinning of innovation for

business/enterprise and operations improvements World class collaboration is no longer informal, unstructured, or localized,

but rather aggressively driven by a strategy, encouraged by corporate culture, enabled by a technology-based infrastructure, is cross functional, and extends beyond the organization

For example, P&G has focused supply chain efforts on developing deeper relationships with major retailers and distributors, and they have begun initiatives to consolidate manufacturing in order to increase flexibility

Intersection of Business Insight and Technology Dramatic and differentiating innovation occurs not when technology is

simply applied as an enabler or support mechanism, but rather when technological capabilities and business/enterprise opportunities are highly integrated early in the envisioning stage of improvement lifecycles

Operational improvements, which have the potential to truly differentiate an organization, result from creating an operational environment that is not only efficient, but also has the ability to “sense and respond” to ongoing dynamic business/enterprise drivers, and to also provide key data mining capabilities to identify ongoing improvement opportunities

Operational innovations drive growth, boost profitability, set new standards and redefine how an enterprise competes….

Innovation as an Enabler of Growth : Operational Innovation


…But enterprises that have a greater focus on Business Model Innovation tend to outperform their peers over time

0%

20%

40%

60%

80%

100%

-1%

0%

1%

2%

3%

4%

5%

6%

Focus of innovation effortsUnder-performers and out-performers compared to peers

Median operating margin growth in excess of peers by businesses engaged in type of innovation, 5 year CAGR

CEOs report that out-performing businesses tend to have a greater focus

on business model innovation

Shareholder value can be enhanced significantly for out-performing firms engaged

in business model innovation

Prod / svc / mkt

Operational

Business model




Source: IBM CEO Study

Under-performers

Out-performers

By focusing on business model innovation, companies are more likely to become out-performers

More than two thirds of the CEO’s interviewed have indicated towards having a strong BMI focus

Products/services /markets

Operations Business model

Innovation as an Enabler of Growth : Business Model Innovation


Business Model Innovation is focused around 3 areas, with Enterprise Model Innovation gaining more focus with the CEO’s

Bu

sin

ess

Mo

del

In

no

vati

on

IndustryModel Innovation

RevenueModel Innovation

EnterpriseModel Innovation

Changing the way your industry works or

changing your value chain

Changing your value proposition or the way you price for products

or services

Changing what you do and where you

collaborate

Changed the value chain in the home furnishings

It pushed final construction back to the customer to facilitate ‘ready to sell’ packaging

Movie rental costs and late return fees were high

Moved from rental to a subscription revenue basis

illycaffé has partnered with various other companies along its value chain, such as manufacturers of coffeemakers and others, to improve the overall coffee-drinking experience

Innovation as an Enabler of Growth : Business Model Innovation


Innovation models (Archetypes) are a unique mix of cultural and operational traits that represent how the companies innovate

Inn

ova

tio

n A

rch

etyp

es

Marketplace of Ideas

An IBM research study of 174 organizations across 24 countries and a broad set of industries, identified four unique innovation models (or archetypes) that represent how companies innovate

The Visionary Leader

Innovation through Rigor

Innovation through Collaboration

Enabling Innovation : Innovation Archetypes

Source: IBM Innovation Archetype research and analysis

A company’s innovation culture and archetype needs to be fully understood to embed innovation


The nature of an organization, its innovation archetype, will determine how innovation structures are embedded

Employees are charged with creating new ideas, shopping them around to gain support, and implementing them rapidly to test feasibility and market acceptance. It is an environment that is somewhat chaotic by design

Innovation strategy is built into the business strategy

Vision of the organization and innovation vision are intertwined

Well-stated innovation goals for individuals

Formal project management Environment that

allow experimentation Employees recruited for

creativity and passion Decentralized internal

collaborative approach for idea stage gating

Decentralized virtual team responsible for idea development and execution

Formal structural unit for driving innovation culture

Marketplace of ideas

Arc

het

ype

Ch

arac

teri

stic

s

Arc

het

ype

Ove

rvie

w

This archetype revolves around a senior executive who understands the future better than customers may, motivates employees to zealously pursue that vision, and keeps generating ideas that are unexpected and profound

Innovation strategy is around the entire business and prescriptive for employees

Innovation vision driven through top leadership

Fast implementation of select innovation ideas

Portfolio maps and strategic plans to link executive vision to daily activities

Few inter-dependencies with outside parties

Adept at the teamwork necessary to execute leaders’ plans

Centralized decision making for innovation stage gating

Centralized monolithic structure for executing innovation vision

Companies create processes designed to produce results systematically. Strategically, they pay relatively high levels of attention to the landscape in which the innovation is to take effect. Tactically, they focus on project execution, seeking efficient and fast implementation

Innovation strategy is around specific focus areas of innovation

Innovation vision is practical, tactical and pragmatic

Fewer innovation ideas, with strong formal vetting process

Strong focus on cross-functional teams for execution

Diffused product lines; little control for a small set of visionary individuals

Small groups dedicated to problem-solving

Strong team culture Robust process around

innovation lifecycle Established R&D at business

unit level Strong idea execution

capabilities

Companies that team with outside firms to evaluate a wide range of opportunities, rapidly select the ones to trial, and frequently implement the idea through these partners

Innovation strategy is explicit around the ecosystem partners

Innovation vision is somewhat well defined to ecosystem partners who work towards a common goal

Robust stage gating and implementation mechanism

Frequent pilots and trials, involving partners and customers

Understanding of customer needs and partner participation

Employee are empowered to make deals with outside vendors

Organization structured around innovation ecosystem (e.g. vendor joint innovation labs, open innovation, etc)

Visionary leader

Innovation through rigor

Innovation through collaboration

Source: IBM Innovation Archetype research and analysis

Enabling Innovation : Innovation Framework implications across Archetypes


Envisioning itself as “The Innovation Company of the 21st Century” IBM made innovation pervasive . . .


. . . By developing a philosophy and operating approach . . .

IBM Philosophy

Innovation is at the intersection of technological invention and business insight leading to the creation of differentiated products and services for our clients

IBMers at all levels are responsible and accountable for innovation

We innovate in everything we do (through markets, offerings, business / enterprise models, operations, and enablers)

Idea Generation, Development and Funding

Ideas are generated, filtered, tested, and refined at the individual, team, and unit levels

Development of these ideas is either funded by IBM organizations or in collaboration with external partners

The outputs are innovative products, services, technologies, and new business models that create competitive advantage


. . . Seeing every IBMer as an innovator . . .

Ginni Rommetty champions and advocates IBM innovation

There is no single executive reporting to the CEO with innovation accountability

Innovation is part of every business unit’s strategic focus and every employee’s responsibility We are lowering the center of gravity – shifting our resources and decisions closer to the client

Employees

Innovation Accountability

Innovation Responsibility

Lower center

of gravity

All levels

Ginni RomettyIBM CEO

Global Services

Innovation Accountability and Responsibility in IBM

Enterprise-wideSales & DistributionCorporate Technology

and Manufacturing Integrated Supply Chain

SoftwareSystems and

Technology Group

CorporateStrategyMarketingFinanceHuman ResourcesCommunicationsLegal

Employees Employees


And establishing innovative programs for idea generation and innovation management that are models for our client work

Institute for Business Value

RESEARCH SERVICES & “FIRST OF A KIND”

Global Technology Outlook

ThinkPlaceThinkPlace


In summary, innovation creates value by operating at the intersection of invention and opportunity and can be managed


• Successful innovation creates sustainable growth for organizations

• There are core capabilities and processes that are common to all successful innovators

• Successful innovators have clear archetypes that represent how they innovate …

1. Marketplace of Ideas

2. Visionary Leadership

3. Innovation through Rigor

4. Innovation through Collaboration

• … and regardless of how they innovate, they all focus on:

1. Senior Management involvement in innovation

2. High client satisfaction & use of client ideas

3. Ways to leverage internal — and external — ideas

4. Use of staged processes to track innovations and pilot before launch

5. Effective use of cross functional teams


Outline

Understanding the Growth


Enabling Innovation

Starting the Innovation Journey

Appendix


Innovation Enablers Elements that enable execution

of the overall innovation process

Innovation Management & Governance Structures, processes, policies,

frameworks and tools used to manage innovation

Innovation Agenda Overall direction, life-stage, mix, characteristics

and value proposition around innovation

Business Strategy Overall objectives of the business as

defined by corporate vision, mission etc.Strategy

InnovationAgenda

Innovation Management & Governance

Innovation Enablers

There are structures (activities, processes, enablers, linkages, etc.) that promote effective innovation within an organization

Innovation Enablers Elements that enable execution

of the overall innovation process

Innovation Management & Governance Structures, processes, policies,

frameworks and tools used to manage innovation

Innovation Agenda Overall direction, life-stage, mix, characteristics

and value proposition around innovation

Enabling Innovation : Innovation Framework


Business Strategy

Portfolio Management

Innovation Organization Management

Risk/Benefit Evaluation

Project Management


Knowledge Management

Business Value

Analysis

Incentives and Rewards

Communi-cations

Innovation Agenda

Innovation Strategy Vision

Innovation Mix

Innovation Model

Definition

Value Proposition

Innovation Enablers

Talent Culture Internal Collaboration

External Collaboration

Tools & Frameworks Infrastructure

Element Objectives

Selecting the desired innovation lifecycle stage (i.e. pioneer, leader, disruptor, consolidator, follower)

Establishing the organization’s overall direction regarding Innovation and ensuring alignment with defined business strategy

Defining the desired mix of innovation (i.e. business model, products and services, segments and markets, operations, channels)

Defining the fundamental innovation model characteristics (i.e. formal vs. adaptive; specialized vs. disseminated; open to external ideas vs. closed; integrated in LOB vs. segregated in separate organization)

Determining and communicating the value proposition desired from innovation

Innovation Strategy

Vision

Innovation Mix

Innovation Model

Definition

Value Proposition

Innovation Agenda sets the overall direction for innovation and maintains alignment with business strategy



Element Objectives

Tracking, monitoring and analyzing the portfolio of innovation projects from inception to completion

Managing resources within the innovation organization

Developing criteria and benchmarks to evaluate risks associated with the innovation portfolio

Managing and reporting on individual projects against timeline and budget

Collecting, organizing, storing and distributing corporate innovation knowledge

Developing, tracking and reporting individual and organizational KPIs to asses the business value of innovation

Creating mechanisms to reward individual and team performance

Systematic internal and external communications around innovation




Project Management

Business Value

Analysis



Communi-cations

Business Strategy




Project Management



Business Value

Analysis


Communi-cations

Innovation Agenda


Innovation Mix

Innovation Model

Definition

Value Proposition

Innovation Enablers




Innovation Management and Governance aligns the structure, process, framework and tool to manage innovation



Element Objectives

People assets assigned to innovation, and through the company

Organization personality and innovation archetype as defined by assumptions, values, norms, behaviors

Amount of collaboration (both horizontally and vertically) within the organization across various LOBs and divisions

Amount of collaboration between the organization and other external businesses, institutions and/or people

Methods and tools to support the various phases of the innovation cycle

Systems, environments and internal IT processes in place to support development and testing of innovations

Talent

Culture

Internal Collaboration


Infrastructure

Tools & Frameworks

Business Strategy




Project Management



Business Value

Analysis


Communi-cations

Innovation Agenda


Innovation Mix

Innovation Model

Definition

Value Proposition

Innovation Enablers




Innovation Enablers provide the necessary support for execution of the overall innovation process



This Innovation Framework is supported by the Innovation Cycle which is a formal approach to developing innovation initiatives

Assessment of the organization and innovation experience

Sensing & Envisioning of inputs into the innovation process

Ideation around identified areas

Evaluationof ideas identified

Development of selected ideas

Realization of ideas through execution

Sensing and EnvisioningObtain inputs into, and scope the innovation effort through activities which may include trends analysis, scenario envisioning, area identification and selection

IdeationLeverage various techniques and tools to conceive ideas around the innovation areas

EvaluationPrioritize and select a set of high value ideas for each defined innovation area for future investment and development

Assessment of experienceIdentify and assess innovation capabilities, structures, processes, assets, tools, methods and innovation archetype (less comprehensive after first completed)

RealizationExecute, release or implement the idea

DevelopmentRefine selected ideas through additional research, compliance assessment, clear business model articulation, full business case development, etc.

2

3

4

1

6

5

INNOVATION CYCLE

The Innovation Cycle is a formal timeline and engine to drive and

capture innovative ideas and initiatives

IBM’s Innovation framework coupled with the Innovation Cycle creates a strong tool to embed innovation

Enabling Innovation : Innovation Cycle


The marketplace of ideas: case studies

15% of employee’s time is devoted to generation or development of new ideas Promotes a culture of ‘small company within a big company" by creating small autonomous business

units and product divisions Internal venture capital is available to support new ideas ‘Innovator’ (a collaborative tool) supports communication between internal and external teams, and

tracking of ideas

Follows three horizons approach (i.e. 70/20/10) for managing innovation portfolio (70% of time for regular job, 20% of time for job related innovation, 10% of time is open for any ideas)

Employees’ contribution to innovation is linked to their performance results Formal communication platforms are in place to enable internal collaboration (e.g. Google Projects,

Google Ideas, Google Caribou, Moma inside Google) Product requirements are kept as simple as possible so that features may evolve as users provide

feedback

Everyone from vice presidents to clerks are encouraged to come up with new ideas. All ideas are taken seriously, considered and often acted upon

Enables people to make their own decisions about store operations, including product mix and in-store displays

Corporate office sets execution guidelines around ‘what to do’. Employees makes decisions around ‘how to do’

Employees are given autonomy, including the ability to allow customers to taste products

Appendix : Innovation Archetype Examples


Visionary leader: case studies

Fung Hon-chu, who led Hong Kong’s Li & Fung Company, developed the “global sourcing solutions” business model whereby his company coordinated the design and production process for orders placed by American and European companies

Li & Fung relies on its partners to help solve problems, not just fulfill orders Business units are given substantial autonomy in operating their divisions Group’s leadership nurtures entrepreneurial behavior in the divisions so that division staff can be

creative in meeting customer needs

CEO formally defines the innovation vision to drive innovation across organization Every new product launch is driven by strategic decisions made by centralized team. Strategic

decisions carve a new path for new product launch Formal teams are in place for development and execution, but these teams are scattered and not

aware of end to end development and execution activities Follows a formal process to drive innovation during idea development and execution phases

It is CEO’s goal to first give direction, and then let sr. management team take control of the situation there after.

Managers are free to make decisions independently for growth and feel the same degree of ownership and values that any other manager in the Virgin group would feel

Radical innovation is governed through VML. BU’s are expected to execute the CEO’s vision and has autonomy in execution

Sr. leadership collective innovative thoughts and ideas are applied directly into business



Innovation through rigor: case studies

Over 50% of its employees are engaged in research and development Decisions are made with input from several sources in the company Formal product R&D function is to deliver timely solutions for anticipated and actual customer needs

by developing innovations in technologies, products, solutions and services It has set up over 20 joint innovation centers with top operators to transform leading technologies

into a competitive edge for customers and achieve business success

The firm succeeds through a mix of senior executive prioritization and team processes The company invests about 10 percent of its revenues in R&D – a very high figure for the industry –

and it devotes 15 percent of its R&D team to looking at needs and lifestyles more than 10 years from now

Output is rapidly prototyped and tested for usability The teams strive to break down stale cultural norms, and encourage junior members to challenge

senior staff

Chief Technology Office brings together the strongest forces within the company Innovation strategy incorporates elements such as technology strategy, resource optimization for

research and development, shaping the innovation process, and patent and standardization strategy, whereby consistent and rigorous application holds the key to success

Like technology planning, active patent management is also conducted in a strategic manner at Siemens

Structured consolidation of the innovative ability of numerous Siemens employees from diverse disciplines and regions to be achieved through so-called Innovation Jams



Innovation through collaboration: case studies

Collaboration with stores for innovation - Zara is in tune with its customers, who help it give shape to the ideas, trends and tastes developing in the world

A non-stop flow of information from stores conveys shoppers’ desires and demands, inspiring its 200-person strong creative team

Recipe of centralization and integration - vertically integrated business model that spans design, just-in-time production, marketing and sales, giving it more flexibility than its rivals to respond to changeable fashion trends

Technology-based local supply chain enables store managers to restock quickly and in smaller batches

More than 50 percent of product initiatives at Procter & Gamble involve significant collaboration with outside innovators

P&G's Connect+Develop open innovation strategy has established more than 1000 active agreements with innovation partners

The current structure is a network model that has P&G globally linked to external innovation assets to accelerate innovation through identifying ready to go ideas and effectively leveraging people outside of P&G’s base

Bharti created a highly specialized Telco business model by focusing only on its key differentiators – marketing, sales and distribution and partnering for everything else

The company deployed the technology and operates state-of-the art networks using the services of its partners like Ericsson, Nokia and Siemens

Bharti entered into a 10-year agreement with IBM to transform its processes and take on the management of its IT Infrastructure. The agreement construct makes innovation all pervasive in the entire Bharti organization


© 2011 IBM Corporation This report is solely for the use of Client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside.

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