`VI-III RoR Meeting San Diego, CA November 1, 2003

This IRI meeting What does your company think innovation is? Who is responsible for innovation? What are your company’s innovation goals? How innovative is your company? What is the process you use to innovate?

VI-I Defined innovation Interviewed innovative and non-innovative companies Developed a Value Innovation Process model Developed the Value IQ Tool The Incredible Human Histogram

From RoR 99-7 Value Creation Value Innovation Technology Innovation Key Academic Experts: Hamel, Prahalad, Kim, Mauborgne, Markides, Matheson, Quinn, and Christianson RoR revised model

Value Innovation Process Hamel’s 10 Rules Environment The two drivers The Process Culture Value Innovation Value Creation

VI-II Value IQ Tool 1. Reviewed and revised 2. Validated and refined CIMS, Linda Aiman-Smith Air Products, 462 respondents questions ROBUST DECISIONS INCENTIVES IMPLEMENTING IN THE FACE OF RISK AND UNCERTAINTY Instructions: For each Principle, read each question or statement and review the two descriptors provided (for the conventional and value innovation organizations). Rate your company using these descriptors on a seven point scale (-3. –2, -1, 0, +1, +2, +3). If the descriptor for the conventional organization describes your company then insert a –3 in the score column. When you have completed scoring for the 50 questions/statements, transcribe the results into the summary table above. At the outset we will not be able to identity where your company sits relative to a population of companies; however, we expect over time to build a database so that we will be able to in the future. OPEN CULTURE Conventional Organization (-3) Value Innovation Organization (+3) Score A. How empowered are people to question the value of activities? People are discouraged from questioning the value of a task. They fear or have experienced unresponsiveness or backlash. Inquiring into how the task creates value is a legitimate way to question. Activities not adding value are modified or stopped. B. How many alternatives are considered in decision-making? How are perspectives integrated into decisions? Limited options are evaluated simultaneously. Projects progress sequentially. Preferred alternative often dominated by politics. Few perspectives are represented. Additional ideas are discounted and rarely listened to. People are expected to explore alternative strategies and plans. Detailed plans are developed only for the selected strategy. Different perspectives are incorporated and diversity of thought is encouraged. The organization has developed a listening culture. C. How open is the organization to opportunities beyond the current business model? The focus is on the improvement of the core business. Non-core businesses are divested. Unusual opportunities are approached with a “How can we…?”, rather than a “This won’t work” attitude. Organization is flexible enough to try, and fail often and honorably. The company encourages revolutionaries. D. How easy is it to get information? People must work hard to get information. They feel out of the loop on critical issues. Information is used as a source of personal power, or, is kept in business “silos”. People obtain information readily. There are few secrets and channels of information flow are abundant. People are encouraged and trusted to seek and use information appropriately. E. How is knowledge managed? There is no formal approach. Informal practices exist leading to errant assumptions or misinformation. There are numerous communities of practice and formal tools to retrieve, sort and convey information.

VI-III Co-Chairs David Roberts, Air Products Dick Lee, Emeritus, Co-chair VI-I Team Members Jim Scinta, Co-chair VI-II Nina Goodrich, Co-chair, VI-II Tom Dillon, Co-chair, VI-I Barbara Bachman, Tom Basalno, Michael Pickett, Debra Steich and others ROBUST DECISIONS INCENTIVES IMPLEMENTING IN THE FACE OF RISK AND UNCERTAINTY Instructions: For each Principle, read each question or statement and review the two descriptors provided (for the conventional and value innovation organizations). Rate your company using these descriptors on a seven point scale (-3. –2, -1, 0, +1, +2, +3). If the descriptor for the conventional organization describes your company then insert a –3 in the score column. When you have completed scoring for the 50 questions/statements, transcribe the results into the summary table above. At the outset we will not be able to identity where your company sits relative to a population of companies; however, we expect over time to build a database so that we will be able to in the future. OPEN CULTURE Conventional Organization (-3) Value Innovation Organization (+3) Score A. How empowered are people to question the value of activities? People are discouraged from questioning the value of a task. They fear or have experienced unresponsiveness or backlash. Inquiring into how the task creates value is a legitimate way to question. Activities not adding value are modified or stopped. B. How many alternatives are considered in decision-making? How are perspectives integrated into decisions? Limited options are evaluated simultaneously. Projects progress sequentially. Preferred alternative often dominated by politics. Few perspectives are represented. Additional ideas are discounted and rarely listened to. People are expected to explore alternative strategies and plans. Detailed plans are developed only for the selected strategy. Different perspectives are incorporated and diversity of thought is encouraged. The organization has developed a listening culture. C. How open is the organization to opportunities beyond the current business model? The focus is on the improvement of the core business. Non-core businesses are divested. Unusual opportunities are approached with a “How can we…?”, rather than a “This won’t work” attitude. Organization is flexible enough to try, and fail often and honorably. The company encourages revolutionaries. D. How easy is it to get information? People must work hard to get information. They feel out of the loop on critical issues. Information is used as a source of personal power, or, is kept in business “silos”. People obtain information readily. There are few secrets and channels of information flow are abundant. People are encouraged and trusted to seek and use information appropriately. E. How is knowledge managed? There is no formal approach. Informal practices exist leading to errant assumptions or misinformation. There are numerous communities of practice and formal tools to retrieve, sort and convey information.

VI-III Objectives Define “Front-End” and establish central database – Anonymity? Internal and external benchmarking - IRI RoR and other member companies By industry? By functional area? Benchmark “innovative” companies Walmart Southwest airlines mTV Virgin Best Buy ROBUST DECISIONS INCENTIVES IMPLEMENTING IN THE FACE OF RISK AND UNCERTAINTY Instructions: For each Principle, read each question or statement and review the two descriptors provided (for the conventional and value innovation organizations). Rate your company using these descriptors on a seven point scale (-3. –2, -1, 0, +1, +2, +3). If the descriptor for the conventional organization describes your company then insert a –3 in the score column. When you have completed scoring for the 50 questions/statements, transcribe the results into the summary table above. At the outset we will not be able to identity where your company sits relative to a population of companies; however, we expect over time to build a database so that we will be able to in the future. OPEN CULTURE Conventional Organization (-3) Value Innovation Organization (+3) Score A. How empowered are people to question the value of activities? People are discouraged from questioning the value of a task. They fear or have experienced unresponsiveness or backlash. Inquiring into how the task creates value is a legitimate way to question. Activities not adding value are modified or stopped. B. How many alternatives are considered in decision-making? How are perspectives integrated into decisions? Limited options are evaluated simultaneously. Projects progress sequentially. Preferred alternative often dominated by politics. Few perspectives are represented. Additional ideas are discounted and rarely listened to. People are expected to explore alternative strategies and plans. Detailed plans are developed only for the selected strategy. Different perspectives are incorporated and diversity of thought is encouraged. The organization has developed a listening culture. C. How open is the organization to opportunities beyond the current business model? The focus is on the improvement of the core business. Non-core businesses are divested. Unusual opportunities are approached with a “How can we…?”, rather than a “This won’t work” attitude. Organization is flexible enough to try, and fail often and honorably. The company encourages revolutionaries. D. How easy is it to get information? People must work hard to get information. They feel out of the loop on critical issues. Information is used as a source of personal power, or, is kept in business “silos”. People obtain information readily. There are few secrets and channels of information flow are abundant. People are encouraged and trusted to seek and use information appropriately. E. How is knowledge managed? There is no formal approach. Informal practices exist leading to errant assumptions or misinformation. There are numerous communities of practice and formal tools to retrieve, sort and convey information.

VI-III Deliverables: Is this an indicator? Is it a leading or lagging? companies can benchmark against: Prior performance All other companies Other companies in their industry Recognized “Innovative” companies Results reported annually ROBUST DECISIONS INCENTIVES IMPLEMENTING IN THE FACE OF RISK AND UNCERTAINTY Instructions: For each Principle, read each question or statement and review the two descriptors provided (for the conventional and value innovation organizations). Rate your company using these descriptors on a seven point scale (-3. –2, -1, 0, +1, +2, +3). If the descriptor for the conventional organization describes your company then insert a –3 in the score column. When you have completed scoring for the 50 questions/statements, transcribe the results into the summary table above. At the outset we will not be able to identity where your company sits relative to a population of companies; however, we expect over time to build a database so that we will be able to in the future. OPEN CULTURE Conventional Organization (-3) Value Innovation Organization (+3) Score A. How empowered are people to question the value of activities? People are discouraged from questioning the value of a task. They fear or have experienced unresponsiveness or backlash. Inquiring into how the task creates value is a legitimate way to question. Activities not adding value are modified or stopped. B. How many alternatives are considered in decision-making? How are perspectives integrated into decisions? Limited options are evaluated simultaneously. Projects progress sequentially. Preferred alternative often dominated by politics. Few perspectives are represented. Additional ideas are discounted and rarely listened to. People are expected to explore alternative strategies and plans. Detailed plans are developed only for the selected strategy. Different perspectives are incorporated and diversity of thought is encouraged. The organization has developed a listening culture. C. How open is the organization to opportunities beyond the current business model? The focus is on the improvement of the core business. Non-core businesses are divested. Unusual opportunities are approached with a “How can we…?”, rather than a “This won’t work” attitude. Organization is flexible enough to try, and fail often and honorably. The company encourages revolutionaries. D. How easy is it to get information? People must work hard to get information. They feel out of the loop on critical issues. Information is used as a source of personal power, or, is kept in business “silos”. People obtain information readily. There are few secrets and channels of information flow are abundant. People are encouraged and trusted to seek and use information appropriately. E. How is knowledge managed? There is no formal approach. Informal practices exist leading to errant assumptions or misinformation. There are numerous communities of practice and formal tools to retrieve, sort and convey information.