LATEST EDITION / JUNE 2016

APPLIED INNOVATION EXCHANGE

This edition of BTB talks about fostering innovation and learning the art of applying it across your organization. We offer pragmatic tools and insights that help resolve business problems, thus enabling organizations to achieve the competitive edge amid digital disruption.

Leveraging our deep-set culture of applied innovation, we help organizations identify new opportunities to cater to emerging markets. This edition encourages the dynamic, authentic, humane, and sustainable culture of innovation exchange.
Lanny Cohen, Chief Technology Officer, Capgemini

THE ANTIDOTE TO DIGITAL DARWINISM: Applied Innovation

Lanny Cohen, Chief Technology Officer, Capgemini
The pace and potency of innovation means big companies are under threat from digital disruptors. Can you master innovation and thrive in the digital age?
Digital has accelerated the pace and potency of innovation. Uber, Airbnb, Tesla, Amazon, Alibaba and Netflix are the headline-grabbing disruptors, but for every success, there are countless victims. How can you save your company from extinction? How can you ensure that you thrive in the digital age?

The source of innovation is just as important as the speed

It’s not just the pace of innovation that is changing the landscape for businesses. Sources of innovation are expanding rapidly too. Entrepreneurial hubs to rival Silicon Valley are sprouting in Berlin, London, Tel Aviv, Sao Paulo, Bangalore, and beyond. Start-ups, emboldened by a record-setting $128 billion of VC investment in 2015 are profiting from access to low-cost, cloud-based infrastructure. These younger firms are just as likely to invent a category's “next big thing” as the R&D arm of a major conglomerate.

The threat of extinction looms large

52 percent of the companies on the Fortune 500 list in 2000 have since been bankrupted, bought or closed.

This shift poses an urgent problem for incumbents. A report from Capgemini Consulting and Altimeter revealed that businesses continue to struggle with innovation and that the current R&D model is broken. Not only are businesses failing to understand the pace of change, the majority lack the requisite structure, knowledge, skills, culture, risk tolerance, and confidence to rise to the challenge.

For large organizations, innovation is a three-step process.

First, discovery: With so many potential sources, how do businesses position themselves to spot the next breakthrough idea? Do they forge closer ties with a handful of high growth start-ups or develop partnerships with the local university? Second, application: Is the concept ready to be incorporated into the business, or is further development required? Third, scale: How do we adjust our structure, people and processes to accommodate this innovation? How do we manage change?

The importance and challenge of Applied Innovation

Any business playing catch up must learn to master all three steps. It's a virtuous cycle that we call “Applied Innovation". Incumbents in all industries are finding applied innovation difficult. Telcos are urgently looking to apply and scale business model innovation in order to fight off the $380 billion threat from over-the-top (OTT) providers such as Skype and WhatsApp. Automakers are scrambling to discover and apply the product innovation required to combat disruptors such as Tesla.

The journey to take innovations and apply them is complex. It requires access to sources of innovation such as start-ups and academic institutions. It needs freedom to apply emerging technologies experimentally. It needs support from subject-matter experts with an understanding of sectors and technologies. It must be underpinned by tried and tested tools and methodologies for implementation. And it must also be conducted at speed, at scale and on a continuous loop. Only a handful of organizations have all these capabilities under their own roof.

Stay ahead of the curve with Applied Innovation “Exchanges”

This is reflected in the proliferation of what we refer to as "Exchanges" —high performance experience and delivery facilities and platforms dedicated to the application of innovation. These are safe places for learning, experimentation and concept development. Capgemini just opened its ninth—in the heart of Silicon Valley—earlier this year. Embraced as part of a broader push towards applied innovation, these facilities can have a substantial digital transformational impact.

It was Brian Solis, principal analyst at Altimeter, who coined the phrase “Digital Darwinism” to describe society and technology outpacing an organization’s ability to adapt. By learning and adopting the process of applied innovation, organizations can stay ahead of the curve, sustain their business in the short term and reap the rewards of market disruption in the long.

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The New Driver’s Seat: Consumers At The Heart Of Innovation

Today, the consumer is at the center and is a powerful entity in the whole supply chain through the advance of digital technology and data analytics.
Consumers now have more power in how businesses operate than ever before. Through the advance of digital technology and data analytics, the customer's seat at the strategic table is here to stay.

The consumer is the center. They control everything now.

Kees Jacobs, Global Consumer Products and Retail, Capgemini's Insights and Data practice.

How should businesses respond to this changing landscape?

How do businesses use this to their advantage? What issues will be important to consider as enterprises continue to put their customers at the heart of their innovation journeys?

Capgemini's Applied Innovation Exchange (AIE) enables organizations to take advantage of a global network of innovation spaces to rapidly and securely gain a competitive advantage in today's fast-paced innovation market landscape.

"It's really important not to lose track of the consumer in all this," said Didier Bonnet, Senior Vice President and Global Practice Leader, Digital Transformation. "That should be the starting point in everything we look at. Everything we do in the AIE will have a heavy dose of customer insights. They have more power because they have access to more data. In the old days, you had to brainstorm, and then went through materials, etc. The linear days are over now."

In no place is this dynamic more important than the supply chains that deliver products to their customers. Also, in no place is this more clearly illustrated than through Capgemini's Future Value Network report.

Linear value chains being replaced dynamic networks built around the consumer

The big message is that linear value chains will be dismantled and reorganized, becoming less sequential. It will be a dynamic network. This value network is now organizing around them.

Kees Jacobs, Global Consumer Products and Retail, Capgemini's Insights and Data practice.

With a massive and mutating network effect at play, the ability to understand and gain insights will be crucial, and companies must develop the ability to pull signal from the noise.

Traditionally in the supply chain, we've been focused on the products: How do I move, plan, design, and develop?

Chris McDivitt, NA Supply Chain Technologies Leader at Capgemini.

Beyond unstructured data available to companies, engagement with comprehensive Omni-Channel portals with multiple collaborative companies and seamless customer experience are now essential.

"Traditional supply chains are not wired to react with the amount of speed that consumers are demanding," said Chris McDivitt, NA Supply Chain Technologies Leader at Capgemini. "Consumers have the complete expectation that any product they want, they can go online and buy--then have the ability to ship from the store, pickup from the store, or maybe even return to the store."

Another way to keep the consumer at the center of innovation strategy is to consider the continuum of discovery and implementation as the technology naturally moves from the lab into the business environment.

"It's something that's done in a lab, but also on-premise with a customer," said Fernando Alvarez, Global Chief Digital Officer for Capgemini Consulting. "When I look at it from that perspective, it's difficult to de-couple everything."

Then, the rapid discovery and iteration of the AIE have a direct impact on a successful application to a client's business.

A key mandate – if we’re going to fail, let’s do it quickly. In order to satisfy the consumer demand to embrace digital technologies – how do we use innovation to experiment and fail quickly in order to understand what you don’t need to do.

Fernando Alvarez, Head of Group Strategic Initiatives and Partnerships for Capgemini

Understanding the consumers is one thing, knowing how to act is something else

The only way the lab is going to keep its relevancy is by staying close to the customers. Once the pain points are known, we determine the appropriate approach and technology.

While understanding the consumer's powerful new role is an imperative, so is the capacity to do something about it in a considered and methodical way, within a controlled environment.

"There's no cookbook for this," said Jacobs. "The reason why this is important is it positions this movement as a seismic change. It's not about an incremental step or a new technology. It's about a whole shift in the value network. And it won't be done in the corner of some building. It is now a fundamental activity."

Whether through the insights gained from new unstructured data, or the competitive advantage of an Omni-Channel strategy, this fundamental imperative will now place the consumer at the heart of all innovation.

The Applied Innovation Exchange will empower companies to find the right innovations for their consumers.

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THE ART OF THE POSSIBLE: Changing Business Models

Capgemini has developed the Applied Innovation Exchange to enable organizations to rapidly and securely gain a competitive advantage in today’s market.
From the identification of technologies and their application, to questions of enterprise innovation acceleration, a close reading of root causes of why a company needs to innovate in the first place is essential.

To unpack the underlying motivations and business requirements of change and reinvention, we can look no further than the blurring (and bleeding) lines of certain sectors and business models.

Applied Innovation Exchange – the key to securing a competitive advantage.

This significant perspective shift has led Capgemini to develop its Applied Innovation Exchange (AIE), an integral system enabling organizations to rapidly and securely gain a competitive advantage in today's innovation market landscape.

You can't paint every company in the sector with the same brush"

Lanny Cohen, Global Chief Technology Officer

"For us, it's going to need to open our client's eyes to the art of the possible, and what technologies are available," said Jack Dugan, VP Capgemini Financial Services.

Capgemini's experience in this level of asymmetrical change is of a core strength.

"You don't want to paralyze the legacy company," Dugan said. "Way back when in 2004, we worked with a company called Guidewire. They provided on-premise type solutions with the latest technology to enable insurance with services around the clock. It represented tens of years with custom type developments."

What's the next Guidewire out there? How can Capgemini be the facilitator of the offering based on a subscription basis? In Financial Services, we want to take a paralyzing fixed cost and "veriabalize" it, changing the business model, making it much more predictable for our clients.

Jack Dugan, VP Capgemini Financial Services

Beyond services such as Finance, traditional manufacturing industries such as automotive are in deep flux.

Carmakers are now technology companies

Kai Grambow, Corporate Vice President Automotive, knows that the best carmakers on the planet now think of themselves as technology companies, as other players such as Google and Apple enter their world. "Business needs technology," he said. "We're addressing this through AIE. These are not just business issues, but tech issues as well."

While the media may want to discuss self-driving cars, Grambow sees the opportunity of the technology within the vehicle itself as truly innovative. "We are quite far down the road with our initiative, Automotive Connect, and we are bringing out people from AIE Munich and AIE San Francisco together to exchange on how to apply these features and keep them going. It can't be a one-time effort. This has to be a living thing."

Energy and Utilities being driven to transformation by technology, consumers and changing regulations

In no other sector is this dynamic of change more alive than in Energy and Utilities. Legacy companies are faced with a shifting regulatory landscape—a more connected and educated consumer —and competition from digital players.

If I'm a Nest customer, Google knows more about my consumption, usage, and patterns than my utility service provider.

Perry Stoneman, Global Head of Sectors at Capgemini.

"There are companies like Solar City that are changing the very energy delivery mechanism," said Stoneman. "For every sale, they end up getting five more customers through their social network. And now that we're reaching grid parity, at some point the cost of these panels will be so low, it'll be cheaper to go solar than be connected to the grid."

The way to combat these disruptions is through the education of the exchange.

First, we want to expose them to the obvious —show them some forward thinking utilities that maybe are a little ahead of them. Then we expose them to the technology that will help them create new discrete offerings. We can look at solar panels, of course, but what about energy data, drones, and maintenance services?

The answer to these questions and more is the focus and drive of AIE and Capgemini.

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Enterprise Grade and Industrial Strength: The Role Of Technology In Applied Innovation

Capgemini's AIE is the most accelerated and safest way to step into the future. The application of new ideas is at the heart of what Capgemini does.
It’s become commonplace to hear about the sheer velocity of technological change. Everywhere we turn, the speed of innovation, and the head-snapping changes shaping the modern world, are stark reminders that a new paradigm of perpetual change is here to stay.

What can enterprises do in this climate of rapid innovation and change?

Capgemini's Applied Innovation Exchange (AIE) enables organizations to take advantage of a global network of innovation spaces to rapidly and securely gain a competitive advantage in today's fast-paced innovation market landscape.

This will determine their survival. Time is of the essence. There is no catching up from one day to the next.

Michiel Boreel, Group CTO of Sogeti

With such a sense of urgency, what's driving the technology and its rapid acceleration must be considered and mastered. AIE seeks to not only understand the changing methods, but determine their best use for specific clients.

Tech in the past was about replacing muscle power. We're now seeing a raft that is cognitively based. It used to take 10 years or more for a tech to move out of the lab. Now we're seeing months, or maybe a year. The application time lag is getting extremely short, and there are endless new opportunities.

Didier Bonnet, Senior Vice President & Global Practice Leader Digital Transformation

Opportunities abound, and new technologies will change the way we do business.

"This is the first act," said Bonnet. "We will see help for a hedge-fund manager in the form of a complete replacement of a decision-based algorithm. On the manufacturing side, things such as robotics and 3D printing will change the way we produce products."

The true power of collaboration within the exchange comes from the application of multiple technologies in harmony with the business' needs.

The AIE is the way to get clients exposed to the actual application. Rarely will a single technology change anything. It's when they mesh—demonstrating an old way and radically new way —and how we weave all that together.

Didier Bonnet, Senior Vice President & Global Practice Leader Digital Transformation

What about the quotidian needs of a business’ path to innovation?

Not all clients within the exchange need earth-shaking leaps of science-fiction.

"The contextualizing is very important," said Lanny Cohen, Global Chief Technology Officer. "We have to look at the maturity or stage of transformation that a company is in. If the company is all about incremental innovation, that's one thing. But others may be more sensitive to the urgency of innovation, and want to be more aggressive. We're seeing about a 70/30 split."

Finally, the sources of new technology are themselves changing. By opening the newest innovation studio in the heart of San Francisco, Capgemini is exposing enterprises to a wealth of new start-ups and innovative companies.

"Not a week goes by when you're not taken by a wonderful idea," said Cohen. "And there are so many ideas out there. And what we're seeing, through our relationships with investors, clients, and venture capital funds, is that a number of these start-ups are being led by experienced tech and business executives."

Once these companies are identified, the application of their potential is the heart of what Capgemini does.

The Applied Innovation Exchange is the most accelerated and safest way to step into the future.

Our value is how we've industrialized this discover phase. We can narrow these options in short order. You can always be taken by a novel new technology. The bigger concern is, can the tech really scale at a global level? Is it durable? The technology has to be enterprise grade and industrial strength.

Lanny Cohen, Global Chief Technology Officer

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TECHNOVISION THEATRE: BUILDING BOXES FOR APPLIED INNOVATION

Ron Tolido, Senior Vice President, Capgemini Group CTO Office
Capgemini’s TechnoVision is an annual collection of insightful industry trends and forward-thinking views on technology, its impact, and potential for disruption.
If you want to think outside the box, you need one. More specifically, one you can hold, carry and stack on other boxes. If there is one thing we have learned from years of digital innovation and strategy workshops, it’s that –despite all the disruptive breakthrough technologies—people prefer to work with simple, tangible artifacts.

The beauty of boxes as digital ‘totem poles’

As we are approaching the tenth anniversary of Capgemini's TechnoVision yearly trend update series—a frequent guest in innovation sessions—we have been spending a considerable amount of our time of getting rid of complexity in the approach. We skipped our infamous "business-driver-to-technology-trend" matrix years ago. We redesigned our central framework picture to include icons and visual metaphors. We introduced the notion of storytelling and went to great length to refresh the terminology used ('My Data Is Bigger Than Yours', 'What Would Amazon Do', 'Hack My Business Model', anyone?).

But hands down, the most impact was delivered by our TechnoVision Theater: our 37 trends turned into colorful, real-life cardboard boxes. They can be picked up, carried away for study outside in the sun, discussed with others and stacked as digital "totem poles". Together, they can tell about a technology-enabled customer story, a day in the life of an employee, a breakthrough in a process, or a new, disruptive product.

Our digital building boxes turn out to be an easy, attractive language that can be spoken by both IT and business people. We have put them in our Applied Innovation Exchange labs, our agile development zones, and our office lobbies (rumor has it that a certain TechnoVision author even glued a full mini set to his wall at home; talk about dedication).

Digital innovation all too often revolves around virtual technologies, abstract concepts and tons of PowerPoint slides.

Who would have thought that a set of cardboard boxes (and just wait for the origami version, for that matter) is so helpful in making innovation actually applied?

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