Traditional risk management processes rely on the evaluation of the impact vs. the likelihood of occurrence. As every innovator will tell you, Murphy has a permanent spot in their team. Given that, accurate assessment of the uncertainties the innovation process brings would be like walking on water. More importantly, attempts at managing those risks can stifle the innovation process. Using a mindful approach to risk management, organizations can improve the effectiveness of their development activities while fostering their innovations simultaneously. To start, evaluate your existing project risk management processes and update it using the following ideas.

1. Understand the nature of the risk: Start with a high-level breakdown of your project risk areas. For each item, identify:
   • the type of risk: schedule, cost, resource, market, brand, operations, …
   • the level of impact and to whom
   • the level of innovativeness: cost reduction, incremental improvement, major revision, product extension, next generation platform, technology/market newness to the firm, technology/market newness to the market, …
2. Assess your appetite for risk: Risk appetite is the amount of risk an organization is willing to take on in the pursuit of value, such as new innovative functionality, achieving market objective, financial results and so. Every organization, project and risk is different. With that, for each of the risks identified in #1, also assess your risk appetite. To facilitate an empowered decision making process, the risk appetite could incorporate trigger levels. For new technology implementation risk:
   • threshold #1 - 2 week schedule slip - managed within the project team
   • threshold #2 - 2-6 week schedule slip - managed within the Program Management Team
   • threshold #3 - 6-8 week schedule slip - managed within the Sales and Marketing Team
   • threshold #4 - 8+ week schedule slip - managed within the Business Unit Team
3. Prioritize, prioritize, prioritize: Incorporate this understanding of your risk areas and customer impact into your prioritization process. Life is about tradeoffs. For projects, this means deciding how to allocate your resources, manage your schedule, and how much of what functionality to implement. Your risk prioritization should align with your resource and budget allocation.
4. Agree on risk management strategy: For every risk area, you need to determine how to manage the risk:
   • nullify - make it a non issue by removing the risk area, such as by eliminating the new functionality
   • transfer - identify a 3rd party to transfer the risk to, such as through partnering
   • reduce - either through reducing the likelihood of occurrence or the potential impact. For technology projects, using roadmapping processes and agile development practices are a good way to reduce new product development risks
   • agree - “yes, it is a risk and that is OK”. However, combining this acceptance with risk appetite analysis would improve results.
5. Compile a risk portfolio heat map: Incorporate risk management as a portfolio in your strategic planning process. Colorful heat maps can visually demonstrate where your investments are along with where your risk lies.
6. Align organizational structure to support risk management strategy: Build an effective team, promote the right capabilities, rebalance resources, … In the process, make sure to support and reward your leaders based on the characteristics of the innovation and risk levels they are responsible for. In the end, if they are not rewarded for failing and learning from those failures, they won’t take risks. No risk, no great breakthroughs.

In addition, make sure the following key ingredients are necessary to achieve a healthy balance of risk and innovation.

1. Build a culture of accountability and responsibility for results. Don’t forget to manage the white space!
2. Foster an environment that enforces and encourages organizational learning and knowledge sharing. It will enforce an innovation focused culture with emphasis on furthering the capacity to innovate.
3. Emphasize the KISS Principle. Keep the risk management process simple, and incorporate it into everyday decision making activities and embed it into the DNA of how your organization works.
4. Change is hard . Build a systemic process to deliver and implement change.
5. Embed the following practices into your processes and culture to ensure success:
   • senior management commitment;
   • clear and stable vision;
   • information and knowledge exchange;
   • flexibility and the ability to improvise;
   • collaboration under pressure;
   • openness and transparency;
   • data/evidence driven decision making;
6. Improve your communication skills, as good communication is key to effectively dealing with risk. It will enable better decisions, better implementation, empowered teams, increase in trust, …

In summary, by ramping your risk management process to foster your innovation projects, you will:

• enhance overall innovation capacity of your organization;
• contribute to efficient use/allocation of capital and resources;
• develop and support your people, and increase your organizational learning;
• optimize operational efficiency while balancing for innovations and risk taking;
• improve your decision making, planning and prioritization;

Technorati Tags: risk management, innovation and risk

HP’s MediaSmart TVs have been fairly well reviewed, but that doesn’t translate into having consumers buy them. I often advise these types of vendors to start a wholly new brand when they are entering the market, since this allows consumer to develop their own fresh connotations around this new brand, instead of bringing whatever connotations have been associated with brands that may scream “IT” or “PC” rather than “great living room experience”. After all, who would have thought three years ago Vizio would gain a substantial amount of HDTV market share in the US,. while HP, Dell and Gateway would all flounder?

Technorati Tags: marketing, positioning, HP

“Positioning starts with a product. A piece of merchandise, a service, a company, an institution or even a person… But positioning is not what you do to a product. Positioning is what you do to the mind of the prospect. That is, you position the product in the mind of the prospect.”
–Ries & Trout; Positioning: The Battle for Your Mind, 20th Anniversary Edition

The fact is, our world is noisy and getting noisier by the day. Positioning can help to cut through the clutter and the noise. Positioning enables a company to establish itself in the minds of its customers, and shows how the firm fits within the competitive landscape. What comes to your mind when you hear “Think different” or “Highly advanced yet simple to use“?

“Being all things to all people is a recipe for mediocrity and below average performance.”
–Michael Porter

Ignoring the concept of positioning could either lead the firm to take on its competitors head on, or appear as if they are everything for anyone. Neither is effective. Remember Zune as the iPod killer? It is through positioning we can strategize how our strengths will help create a winning situation for us. And, it is through positioning that we touch up every tangible aspect of the product, price, place and promotion to support the overall strategy.

“Positioning is the act of designing the company’s offering and image so that they occupy a meaningful and distinct competitive position in the target customers’ minds.”
– Philip Kotler

Design is the integrating voice that brings differentiation and positioning together to establish the expectation of the unique value that customers would receive from you versus your competitors. Apple is about imagination, design and innovation, where their goal is to shape the technology to the customer’s needs, instead of forcing the user to adapt to the technology. With their famous 1984 ad, Apple is branded as a symbol of counterculture — rebellious, free-thinking and creative. This positioning is still reflected in their latest MacBook line:

• Dream on…. Ultra-low-end MacBook…. — There was a great deal of anticipation that Apple would deliver a low end Mac notebook, perhaps $800 or lower. As much as I would enjoy seeing an entry level MacBook, MacBooks are not cheap nor meant to be cheap. But, considering the level of quality and performance, they are affordable. Apple customers demand more and expect more. At least for now, we will have to settle for a $999 13″ white MacBook.
• Once there was one, now there is none — Apple’s one button mouse has been a controversy from the beginning. Now, Steve Jobs’ mantra of simplicity and focus replaces the current design with the multi-touch trackpad, redefining the concept of the mouse as-we-know-it. It is certainly rebellious, free-thinking and creative.
• Perception… 80% of reality — If it looks and feels expensive, people will pay more for it. Attractive things work better — attractiveness produces positive emotions, improving creativity. The unibody case, carved out of a single piece of aluminum, is the new look of the MacBook. It is attractive, and makes the product light and solid. If nothing else, giving the perception of higher quality.
• Environmental performance as much as product performance — A Forrester Research study highlights that 12% of US consumers, who are classified as bright greens by Forrester, are willing to pay more for green technology products, or products that come from company that is environmentally responsible. Interestingly enough, their study also highlights Apple’s customer base is the greenest among other major PC manufacturers (17%). The new MacBook continues on this path. You can read more on Apple’s 2008 Environmental Performance here.

Once you establish your position, the key is to maintain it. As Motorola demonstrated with RAZR, this is easier said than done. Today, iPhone outsells RAZR. Also, with time, as your product and industry evolves, so should your initial positioning. And, this too should be managed carefully. Apple positioned iPhone as an iPod with a phone feature, initially targeted at the consumer market. Not until the iPhone was firmly established did Apple take on RIM, repositioning itself for enterprise customers.

In summary, positioning is the course you navigate for your firm and your customers. It is entangled into everything your firm is about, the products it produces, how it produces them, how they are marketed and to whom they are targeting. Learn from Hewlett-Packard the engineering company, producing great engineering products (measurement equipment, calculators, …). It semi-transitioned to HP the computing company, selling commodity PCs and peripherals; and then again to HP the consumer electronics company, selling plasma TVs and branded OEM digital cameras. It is all about positioning: some tell great stories and others are lost in the noise.

Technorati Tags: positioning, Apple, MacBook

Core competency originates from C. K. Prahalad and Gary Hamel in their 1990 paper “The Core Competence of the Corporation.” Prahalad and Hamel highlight core competency as a source of uniqueness that a company can do uniquely well, offering a competitive advantage as competitors can’t quickly copy. A core competency can take various forms: know how, process, manufacturing, relationship, development methodology, culture, talent management, branding, marketing, distribution, research & development, …

Prahalad and Hamel emphasize 3 conditions to test if a competence is true core competence. It is possible to have core competency that doesn’t meet all the required criteria, however any competitive advantaged gained will only be temporary.

1. Must be relevant — core competence must be uniquely valued by your customers, so that they will not only choose your product but be willing to pay more for them. If not, it has no effect on your competitive position.
2. Difficult to imitate — core competence must be difficult for competitors to imitate, as it ensures your products are better than your competitors. It also enables you to sustain your competitive position as you continue to improve your competency.
3. Leveraged to many products and markets — core competency must enable entrance into new markets to sustain growth.

As I mentioned before, Steve Jobs’ core value of developing easy-to-use technology for individuals, coupled with his love of design excellence (where design is the function), has shaped Apple’s innovation strategy: shape the technology to the customer’s needs, instead of forcing the user to adapt to the technology. Apple’s design philosophy starts with the belief, understanding that the purpose of the design is to create things that benefit people.

Apple’s core competencies of innovative culture, successful entry into new markets, human centered design and development have contributed to Apple’s successful execution. I expect the new product line to be attractive, following on Apple’s tradition. Studies have shown that we respond positively towards attractive things and tolerate their minor annoyances: they work better, create positive emotions, encourage creativity and the attractiveness produces positive emotions, causing mental processes to be more creative. For those who watched Jobs’ iPod announcement during the September event, you might remember Jobs’ highlighted Apple’s environmentally friendly design changes to iPod line: packaging, materials, high degree of recyclability, … The core competency of environmentally friendly design and packaging has been a visible focus area of Apple over the years. I am looking forward to hearing more about this during tomorrow’s event.

Understanding and developing your core competencies is all about focus, recognizing where your uniqueness is valued by your customers, where your competitors cannot catch up, and learning to stop being all things to everyone. Building your core competencies takes time. So, recognizing what you will need to work on today to be more successful tomorrow is just as important in your core competency analysis. The following steps will help identify the core competencies that you currently have as well as those you need to start building for tomorrow.

1. Brainstorm a list of your existing competencies, your strengths as well as factors that you feel are important to your business, to your customers and to your market. Identify and cluster any common themes from this activity.
2. For each of the common theme identified, take it a step further and determine the driving competence in that area. Your ‘relationship management‘ might really highlight the strength of your ‘customer data and analytics tools‘, your ‘retail partners‘ might be driven by your ‘retail partner training programs‘, ‘embedded development‘ might be more about your ‘home grown tools and optimization suite for performance and quality assurance.’
3. Once your list is complete, evaluate each of these items against Prahalad and Hamel’s 3 conditions to test if a competence would be considered a true core competence.
4. Review the final list that only has true core competencies and build an action plan for each item.
• If the competency identified is one of your existing competencies and strengths, great! Put together a development plan to further that competency and exploit it effectively.
• If the competency identified is not a current capability, then evaluate if a) it should be developed internally; or b) if you could partner/outsource to obtain it.

I heard somewhere that it takes 10 years for someone to be recognized as an expert in her field. Regardless of the time, building your core competency and ensuring that it provides sustainable differentiation takes effort and focus. Make sure to have the proper focus and development plan to maintain your competitive edge.

Technorati Tags: core competency, Apple