Fragility, Anti-Fragility and Innovation

Fragility, Anti-Fragility

and Innovation

Bill Wadewade-partners.com

We’ve Been Discovered !

Complete Surprise: The Black Swan

What is the opposite of “Fragile”?

What is the opposite of “Fragile”?

an·ti·frag·ile: something that benefits from stress, harm, chaos, events, disorder,

unforeseen consequences, uncertainty, time

Astronaut Atrophy

Tourist Trophy Hunt

Air Travel

Mithridates VI

Human systems are antifragile.

Humans are antifragile.

Removing stress doesn’t make us stronger.

Removing skin from the game.

Making everything bigger.

Stifling freedom of everything.

Risk Forecasting

Trains Will Haul Bulk Power Plant Fuel

Trains Will Haul Bulk Power Plant Fuel

OOOPS !

• OEM Component Integration

• OEM Vocational Standardization

• Design for Recycle- ability

• Supplier System Partnership

• Death of Diagnose and Repair… Severe Technician Shortage

Major Structural Trends (Threats?) In the Ag Equipment, Parts and

Service Markets

Anti-Fragile Strategies… John Deere to Titan to Ralph’s Farm Supply

• Size alone is not a strategy… nor is a footprint

• Fee follows function… discounts become discriminate

• Information is the ultimate pop code ‘A’• VIN tyranny splinters• War declared by European (and Domestic) OEMs• Tuángòu explodes• Net conquers gross… and CASH conquers all!

Innovation…All that distinguishes leaders from followers… S. Jobs

Offense or Defense…

What does this really mean to you?

Is Your ‘Model’ Sustainable… Machines, Markets, Distribution

• Facing the ‘Great Moderation’

• Define the ‘New Normal’

• Indefinite Warranty

• Permanent World Maps ?

• Guessing the Future…Economic Cycles– Market has called 9 of the last 5 downturns

Innovation

The only net creator of new wealth.

Innovation is all that foiled Malthus.

Global warming next ?

Innovation

The only net creator of new wealth.•Something newly tried.

•New combinations.

•Creating a portfolio of options to achieve substantial, profitable and sustainable growth.

•Other activity is caretaking, improvement at the margin or rearranging the deck chairs.

Fortification vs Exploration

• Tension between defending existing dominance and creating new growth paths

• Chance favors the prepared mind… or company

Innovation… How to?

• Be absolutely clear about the mission to everyone.

• Create just enough structure.

• Match people and horizons.

Innovation… How to?

• Think businesses… beyond product or technology.

• Innovate on behalf of your customers … not your existing position.

• Diverge early… converge late.

Things I’ve Noticed• Iterate and communicate

• Don’t try to predict… buy options

• Runway…. electric cars vs. newspapers

Business Innovation Radar• Creation of radical

new value for customers

• In the beginning, all you have is data and intuition

• Almost never just product

Create Insight, Avoid Reflection

• Industry mirrors ?

• Best Practices Kill!

• Which industry orthodoxy can be challenged?

• We only see things for which we are looking.

• Mission Focus: Target Definition

• Mission Clarity: Organization Understanding

Periphery Is Your Preferred Frontier

• It is where to look first, but not exclusively

• Avoid the Success Trap

• Chaos vs. Structure

• The better we are at ‘this’, the tougher it is to try ‘that’

• Define ‘Factors of Merit’… Speak multiple languages in multiple worlds.

Perspective is everything10 Ways to Slice It….

Offering-Creating new product or SERVICES

Significant Augmentation– Toyota Hybrids

– Apple Ipod

– Sony 4 generations and 150 variations of Walkman

– Merrill Lynch Cash Management Account

Platform- Exploiting commonality

Common components as building blocks– Airbus common cockpits

– GM OnStar

– Disney animation

– Microsoft Suites

Solution- Solve complete problems

Customized combinations– UPS complete 3PL

– DuPont selling painted bodies to Ford

– IBM bundling of hardware, service and financing

Customer- Serving unmet needs

Identify unarticulated latent needs and resegment markets

– Chrysler minivan

– Home Depot ‘almost pro’

– FedEx segmenting by time instead of volume

Customer – Redesign interface

Broaden touch points and life cycle interface– Saturn no haggle pricing

– Cabela’s store as entertainment

– Amazon returns handling

– Everything about ‘American Girl’

Value Capture- Changing how you get paid

Changing yield management or position in the value chain

– Google paid search

– GE time in air

– Progressive utility pricing

Organization and Process

Design for internal improvement and process streamlining

– Boeing 787

– 3M Slack Day

– Google 20% program

– Cisco partner centered network

Supply Chain Flow

Primarily increased communication within channels

– Walmart VMI

– Dell user-direct one-off manufacturing design

– Home Depot/GE appliance floor plan

Presence- How customers access you

Augmenting channel mix, including self service

– Enterprise in repair shops

– Netflix

– McDonald's and BOA

– Diebold remote teller

Networks-Exploit network intelligence

Leverage network connectivity– Otis elevator

– Electrolux auto replenished refrig

– Peapod edible billboards

– Microsoft Xbox Live channel

Brand Leverage

Co-Branding into new product classes– Virgin Mobile, Air, etc

– Cat Boots

– Intel Inside

– Yahoo as a lifestyle brand

– (not Champion filters!)

Drivers of Service / Dealer Affinity

• Accelerating Regulation (i.e.. OSHA)

• Extended Trade Cycles (new normal)– Vehicle Economy

– Refurb Economics

– Warranty Control

• Proprietary Information

• Labor Shortage

Fuels… It is all about the juice!Ethanol (17) Westport Engine

Biodiesel (19) Electrics / Hybrids

Hydrogen (21) ‘Green’ Issues…

CNG (23)

LNG (23)

Synthetic Diesel (26)

Methanol (27)

DME (29)

Innovation Boosters: Adaption and Aliens

2014…Labor Shortage and the Agent EconomyOutsourcing… and Aliens

Ferguson/Wolseley, Grainger, HD Supply, MRC Global Corp. (formerly McJunkin-RedMan), Airgas, Motion Industries, Fastenal Company, McMaster Carr, Applied Industrial Technologies, MSC

Industrial Direct, Wurth (North America), Kaman Industrial Technologies, BDI, Barnes Distribution Industrial Distribution Group,

SunSource, Lawson Products, BlackHawk Industrial Distribution

B-to-B from the B-to-C• Lowe’s has launched their

Lowe’s ProServices

• Ace Hardware has The Supply Place

• Staples has a strong B-to-B component that now includes medical supplies.

• Home Depot ‘On Set’

Distribution Trend - Service Overtakes

‘Box Pushers’

Services • Emergency Services • Energy Services • Grainger TripleGuard Repair• Inventory Management • Online Purchasing Solutions • Product Services • Products Beyond the Catalog • Safety Services

Technician Training

• Who do you expect to provide this and who should bear the cost?

• Delivery… Let’s discuss the different possibilities.

• Technician shortage… How concerned are you?

• What is your strategy for recruiting?

Newest Service: 3D Parts PrintingType Technologies Materials

Extrusion Fused deposition modeling (FDM)

Thermoplastics (e.g. ABS), HDPE, edible materials, Rubber RTV silicone, Porcelain, Metal clay (including Precious Metal)

WireElectron Beam Freeform Fabrication (EBF3)

Almost any metal alloy

Granular

Direct metal laser sintering (DMLS) Almost any metal alloy

Electron-beam melting (EBM) Titanium alloys

Selective laser melting (SLM)Titanium alloys, Cobalt Chrome alloys, Stainless Steel, Aluminum

Selective heat sintering (SHS) [18] Thermoplastic powder

Selective laser sintering (SLS) metal powders, ceramic powders

Powder bed and inkjet head Plaster-based 3D printing (PP) Plaster

LaminatedLaminated object manufacturing (LOM)

Paper, metal foil, plastic film

Light polymerizedStereolithography (SLA) photopolymer

Digital Light Processing (DLP) photopolymer

New Service Market Opportunities

• Telematics• Aerodynamics• Ergonomics• Exhaust / Fuel • Hybrid Systems• Marking / Optics• Accessory Adoption• Tools / Shop Equipment

Training…Training… Training

Innovation

Never Leave Serendipity to Chance !

Questions ? Comments !

Special thanks to Professor Robert WolcottNorthwestern University

Bill Wadewade-partners.com

bill.wade@wade-partners.com847-760-0067