1. Page 1 Strategic Innovation

2. Google vs. Apple Apple Launch iPhone Improvement Launch iPad Google Android operating system Improvement Launch Nexus One Pull back Nexus One Page 2

3. Page 3 Innovation and Organic Growth Emphasis on: – Top-line revenue – Customer-centric, customer value – Internal and external social interactions – Cross-functional and cross-experiential teams – Empathetic, high EI people – Experimentation, learning – Entrepreneurial culture, boldness, audacity Value-creating strategy vs. Value-enhancing strategy

4. Page 4 Product 1 New Product Introduction Profit Plateau Competition Erodes Profits Product 2 Profit Product 3 Product 4 time Value-creating vs. Value-enhancing Strategy

5. Page 5 Apple iPod

6. Page 6 Product 1 New Product Introduction Profit Plateau Competition Erodes Profits Product 2 Profit Introduce iPod Mini iPod Photo BMW iPod Adaptor iPod Wireless Remote WiFi iPod Video iPod + Timex Watch iPod + Nike Shoe Value-enhancing Innovation Product 1 Product 2 Product 3 Product 4 time Windows compatible Value-creating vs. Value-enhancing Strategy Price Cut Value-creating Innovation

7. Page 7 Apple’s iPod Innovation Network 10 parts create 85% of the iPod’s cost GM Ford Apple Unknown Battery Pack Renesas (Japan) Display Driver Inventec (Taiwan)- Assembly, Testing Toshiba (China) – Hard Drive Broadcom (Singapore)- Multimedia Processor Toshiba-Matsushita (Japan)- Display Module iPod PortalPlayer (US) Portal Player CPU Unknown Back Enclosure Unknown Mainboard PCB DisneyTimex Digital Music Group Delta Airlines Nike Samsung (Korea) – Mobile SDRAM memory 400 additional inputs with values from $2 to fractions of a penny, with an average value of $.05 Source: Portelligent, Inc. and Linden, Kraemer & Dedrick, 2007. Alliance Network and Innovation

8. Page 8 Apple – alliance network in 1995Apple – alliance network from 1995-1997 Apple Computuer High Level of VC + VE Alliance Network and Innovation

9. Page 9 Unique Perspective

10. Page 10 How do you define the coffee industry? Leisure, Enjoyment, Social Interaction Food & Beverage Item Coffee Packaged Convenience coffee Café/restaurant drinking Fashion Caffeine Source

11. Page 11 How does Starbuck’s define coffee industry?

12. Page 12 Red vs. Blue Oceans Red Ocean StrategyBlue Ocean Strategy Compete in existing market spaceCreate uncontested market space Beat the competitionMake the competition irrelevant Exploit existing demandCreate and capture new demand Align organization towards strategic choice between low cost or differentiation Align organization towards pursuit of low cost and differentiation

13. Coffee’s Next Blue Ocean? Strategic Dimension 1 ? Strategic Dimension 2

14. Page 14 Early U.S. Auto Industry

15. Page 15 Blue Oceans and The Auto Industry Company / ProductNew/IncumbentIndustry Char. Ford Model-TNew EntrantUnattractive Toyota CorollaIncumbentUnattractive Chrysler MinivanIncumbentUnattractive Toyota Prius HybridIncumbentUnattractive

16. Strategic Map: PC Industry (Pre-MacIntosh) Fast/ High Capacity Low PriceHigh Price Apple II Wang IBM Slow/ Low Capacity

17. Strategic Map: PC Industry (Post-McIntosh; Pre-Dell) User Friendliness GUI Drop & Drag Mouse WYSIWYG Low MarginHigh Margin Wang IBM DOS-based Operating System >copy *.doc A:\ Apple MacIntosh

18. Strategic Map: PC Industry (After Dell Enters) High Quality & Dependability “Regular” Supply Chain Management Lenovo Adequate Quality Apple “Efficient” Supply Chain Management High Price Dell Low Price H-P

19. Page 19 IBM Mainframe Apple II IBM PC Apple MacIntosh Compaq Portable Tablet PC Compaq Laptop Apple iPad IBM Wearable PC

20. Personal Computers …what’s the next big thing? Strategic Dimension 1 ? Strategic Dimension 2

21. What ’ s the next big thing? Strategic Dimension 1 ? Strategic Dimension 2

22. Umbrellas …innovation? Strategic Dimension 1 ? Strategic Dimension 2

23. Page 23 LG Internet Refrigerator

24. Page 24 Airbus A380

25. Page 25 Segway Personal Transporter

26. Page 26 Tooth Tunes

27. Page 27 Converging Industry Advantage Palmtop Computing Entertainment Music, Movies, News, Sports Wireless Telephony GPS Books