Page 1

Strategic Innovation

Google vs. Apple

Apple• Launch iPhone • Improvement• Improvement

• Improvement

• Launch iPad

Google

• Android operating system • Improvement

• Launch Nexus One

• Pull back Nexus One

Page 2

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

Page 4

Product1

New ProductIntroduction

ProfitPlateau

CompetitionErodesProfits

Product2

Profit

Product3 Product4

time

Value-creating vs. Value-enhancing Strategy

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Apple iPod

Page 6

Product1

New ProductIntroduction

ProfitPlateau

CompetitionErodesProfits

Product2

Profit

Profit

IntroduceiPod

iPodMini

iPodPhoto

BMWiPod

Adaptor

iPodWirelessRemote

WiFiiPod

iPodVideo

iPod +Timex Watch

iPod +Nike Shoe

Value-enhancing Innovation

Product1 Product2

Product3 Product4

time

Windows compatible

Value-creating vs. Value-enhancing Strategy

Price Cut

Value-creating Innovation

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

Disney Timex

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

Page 8

Apple – alliance network in 1995 Apple – alliance network from 1995-1997

Apple ComputuerHigh Level of VC + VE

Alliance Network and Innovation

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Unique Perspective

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

Page 11

How does Starbuck’s define coffee industry?

Page 12

Red vs. Blue Oceans

Red Ocean Strategy Blue Ocean Strategy

Compete in existing market space Create uncontested market space

Beat the competition Make the competition irrelevant

Exploit existing demand Create and capture new demand

Align organization towards strategic choice between low cost or differentiation

Align organization towards pursuit of low cost and differentiation

Coffee’s Next Blue Ocean?

Strategic Dimension 1

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Dim

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Early U.S. Auto Industry

Page 15

Blue Oceans and The Auto Industry

Company / Product New/Incumbent Industry Char.

Ford Model-T New Entrant Unattractive

Toyota Corolla Incumbent Unattractive

Chrysler Minivan Incumbent Unattractive

Toyota Prius Hybrid Incumbent Unattractive

Strategic Map: PC Industry (Pre-MacIntosh)

Fast/High Capacity

Low Price High Price

Apple II

Wang

IBM

Slow/Low Capacity

Strategic Map: PC Industry (Post-McIntosh; Pre-Dell)

User Friendliness• GUI • Drop & Drag • Mouse• WYSIWYG

Low Margin High Margin

Wang IBMDOS-based Operating System >copy *.doc A:\

AppleMacIntosh

Strategic Map: PC Industry (After Dell Enters)

High Quality &Dependability

“Regular” SupplyChain Management

LenovoAdequate

Quality

Apple

“Efficient” SupplyChain Management

High Price

Dell

Low Price

H-P

Page 19

IBM Mainframe

Apple II

IBM PC Apple MacIntosh

Compaq Portable

Tablet PC

Compaq Laptop

Apple iPad

IBM Wearable PC

Personal Computers …what’s the next big thing?

Strategic Dimension 1

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c D

ime n

sio n

2

What’s the next big thing?

Strategic Dimension 1

?

Str

ateg

ic D

imen

sio

n 2

Umbrellas…innovation?

Strategic Dimension 1

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2

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LG Internet Refrigerator

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Airbus A380

Page 25

Segway Personal Transporter

Page 26

Tooth Tunes

Page 27

Converging Industry Advantage

PalmtopComputing

EntertainmentMusic, Movies, News, Sports

WirelessTelephony

GPSBooks