1. Mile Markers on the Service Innovation Journey: A Four-Year Study of the Discipline of Service Innovation Presented at: AHRQ Annual Conference September 27, 2007 Peer Insight

2. Copyright 2007 Peer Insight LLC All rights reserved page 2 Peer Insight September 27, 2007 INNOVATION There is a natural progression of knowledge acquisition mystery heuristic (rules of thumb) algorithm binary code QUALITY Much of what we know is wrong Leaders must be prepared to fail Adapted from Roger Martin, Rotman School of Business, University of Toronto

3. Copyright 2007 Peer Insight LLC All rights reserved page 3 Peer Insight September 27, 2007 We are fortunate to have some great companies as our research partners

4. Copyright 2007 Peer Insight LLC All rights reserved page 4 Peer Insight September 27, 2007 Those companies are adopting innovation at different rates leading edgeearly adoptersearly majoritylaggardslate majority What does it mean to our customers? To our employees? To the world? cultural transformation (cultures) “Why” M&A + Six Sigma No Man’s LandInnovation 1.0Innovation 2.0Innovation 3.0 “Stay the course” “If” Is innovation the way to grow profitably in the post-Six Sigma era? search for organic growth (experiments) “How” How do we find big ideas and get them off the ground? methods and protocols (projects) “How it scales” How do we make innovation easier, more systematic, so it doesn’t rely on heroic acts? innovation operating model (programs) burning question focus (unit of measure) Distribution of innovation sophistication, all companies Source: Peer Insight analysis of 115 recent service innovation projects

5. Copyright 2007 Peer Insight LLC All rights reserved page 5 Peer Insight September 27, 2007 M&A + Six Sigma No Man’s LandInnovation 1.0Innovation 2.0Innovation 3.0 “If” “How” “How it scales” “Why” leading edgeearly adoptersearly majoritylaggardslate majority There are 5 key lessons firms learn along the innovation journey What does it mean to our customers? To our employees? To the world? cultural transformation (cultures) Is innovation the way to grow profitably in the post-Six Sigma era? search for organic growth (experiments) How do we find big ideas and get them off the ground? methods and protocols (projects) How do we make innovation easier, more systematic, so it doesn’t rely on heroic acts? innovation operating model (programs) Innovation as a new discipline 1 Customer-centricity 2 Senior leadership 3 Operating model 4 Change management 5 Source: Peer Insight analysis of 115 recent service innovation projects