Académique Documents
Professionnel Documents
Culture Documents
N° 08
08 OCTOBER
OCTOBER 2015
2015
The
TheNew
NewInnovation
Innovation Paradigm for the
Paradigm for theDigital
DigitalAge:
Age:
Faster,
Faster, Cheaper and
and Open
Open
DIGITAL #DTR8
TRANSFORMATION
INSTITUTE #DTR7
N° 08 OCTOBER 2015
The New Innovation Paradigm for the Digital Age:
Faster, Cheaper and Open
Capgemini Consulting’s Editorial Board
DIGITAL
TRANSFORMATION
INSTITUTE
dti.in@capgemini.com
The Digital Transformation
Institute
@capgeminiconsul www.capgemini-consulting.com
www.linkedin.com/company/capgemini-consulting #DTR8
#excitinginnovation
Contents
New Innovation Models for the Digital Age: Editorial 06
O
ne word characterizes our This fertile environment is In response, companies are
digital era: innovation. fuelled by technology innovation investing more in research. R&D
Creating a startup has never that continues to evolve at an spend is reaching historical highs:
been easier and cheaper. In our exponential pace (see Figure 1). in 2014, $1.6 trillion was spent on
interview with Jon Nordmark, CEO Take supercomputers – in 20 R&D globally. However, simply
of startup curator Iterate Studio, he years, the speed of the fastest throwing money at the issue is not
argues that “the cost of developing supercomputer has increased by always the right answer, and it is
a digital startup has fallen from an astonishing factor of 419,100i. certainly not sustainable. Despite
approximately $5 million in 2000 Personal computers are now 99.9% these significant investments,
to $5,000 as of 2013.” And this has cheaper than in 1980ii. Technology’s results are often falling short. In
led to an explosion in the number inexorable march will continue certain sectors, more than 85%
of startups – a Cambrian age of to be a highly significant business of new products failiv and 90% of
digital – with Jon Nordmark’s disruptor for many years to comeiii. companies consider that they are
team having identified more too slow to market and often over
than 130,000 active tech startups budgetv.
across the world. And this figure is
growing every day.
Figure 1: The Many Dimensions of Moore’s Law
1,000,000,000,000,000
Supercomputer Speed
(FLOPS)
1,000,000,000,000
1,000,000,000
Logarithmic Scale
1
Hard Drive Cost Efficiency
(gigabytes/dollar)
0.001
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
Year
Source: “The second machine age” – Andrew McAfee and Erik Brynjolfsson, 2014
6 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
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In this edition of the Digital The Digital Innovation company that makes two of the
Transformation Review, we Radar Screen most popular industrial robots –
examine how organizations can Baxter and Sawyer. We spoke to
create a sustainable and successful Adding intelligence to Machines. Jim Lawton, Chief Product and
innovation strategy, drawing on our We open the Review with Michael Marketing Officer of Rethink
global panel of industry executives Osborne, an associate professor Robotics to understand Rethink’s
and academics (see Figure 2). We at the University of Oxford, and views of the future evolution of
focus on four key themes: an established expert on machine collaborative robots.
■ Which digital innovations should learning. Professor Osborne explains
why this digital innovation wave is Digital Innovations – Our Top Picks.
be on organizations’ radar screens?
very different from previous ones, Did you know that there is a shoe
■ How should companies promote that grows to adapt to the increasing
with technologies now increasingly
innovation and embed it into shoe-size of an adolescent? Or that
substituting for human brain labor
their culture? there is a company that promises
or human cognitive work.
■ What lessons can we draw from to reduce your power bill through
organizations that are stand-out When Bots Strike. Among the very smart sensors and software, which
innovators? first companies to have made robotics does not charge you for doing so?
■ What is the role and impact of a household name is Rethink Robotics, Large companies, startups and
innovation centers, including the the makers of Roomba, the robotic individuals are increasingly pushing
Capgemini Consulting-Altimeter vacuum cleaner. While household the limits of digital innovation. We
Group report, “The Innovation robots may be a while away, capture a select set of innovations
Game: Why and How Businesses collaborative robots are becoming across products, services and
are Investing in Innovation increasingly common on the industrial business models to inspire you
Centers”. shopfloor. And Rethink is the to drive your own organization’s
innovation efforts.
Jim Lawton,
Boston, USA
Michael Osborne,
Jon Nordmark, Oxford, UK
Denver, USA Gavin Starks,
London, UK
Navi Radjou,
San Francisco, USA James Patterson,
Washington, USA
Claus von Riegen,
Mannheim, Germany
Pablo Rodriguez,
Barcelona, Spain
D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 7
New Innovation Models for the Digital Age – Editorial
Promoting and Embedding Innovating Through Data: How that often kicks in and opposes
Innovation Open Data Can Help Drive innovations. This is because the
Innovation. Open data is data organization is currently set up to
Frugal Living: How ‘Jugaad’ that anyone can access, use and protect and optimize the current
Innovation Can Help You. share. And leveraging open data business model. He outlines how
Innovation need not always be for innovation is precisely what SAP does things very differently.
expensive or long-drawn out, says a variety of startups and large
Navi Radjou, a Fellow at Judge organizations alike are doing. At the Innovating from Inside: The
Business School, University of forefront of enabling this innovation Telefónica Way. For many
Cambridge and an innovation is the Open Data Institute (ODI). The large organizations, the answers to
advisor based in Silicon Valley. organization works to catalyze innovation challenges are already
Navi Radjou, co-author of the open data to create economic, present inside the company. However,
books Frugal Innovation and environmental, and social value. identifying and supporting those
Jugaad Innovation, argues that The institute convenes experts to employees that hold the key to
the mainstream innovation model collaborate, incubate, nurture and innovation is a bridge too far for many
adopted by most large organizations mentor new ideas, and promote organizations. We spoke with Pablo
is broken. The answer, Navi believes, innovation. We spoke with Gavin Rodriguez, Director of Innovation
is frugal innovation, or Jugaad. Starks, CEO of the ODI. at Telefónica to understand how
Telefónica solves this challenge.
Starting Up: Working with The Innovation Oscars:
Startup Curators to Accelerate Networked Innovation: How
Innovation. It is a daunting task Lessons from the Pioneers Capital One Innovates using a
to create, in large organizations, the Network of Innovation Centers.
We look at three companies from Startups usually thrive in recognized
innovation culture that characterizes
three different sectors, and analyze tech clusters across the world, such
startups. To address this issue, we
their approaches to innovation – as Silicon Valley, London, Israel and
spoke to Jon Nordmark, co-founder
SAP, Telefónica and BBVA. Boston. For large organizations,
of Iterate Studio. This is a company
that discovers and curates startups’ getting innovation right is often a
Innovating the Business Model: question of being in the right spot,
disruptive technologies for large
SAP’s Self-Disruption Approach. and getting the right talent in place.
companies. Iterate Studio works with
One of the biggest challenges for One approach to doing so is setting
thousands of startups and helps large
large organizations is overcoming up a network of innovation centers,
enterprises conduct rapid proof-of-
reticence to change. Claus von which is just what Capital One, the
concept experiments to quantify the
Riegen, Vice President and Head financial services company did. We
impact on their business.
of Business Model Innovation at spoke to James Patterson, Head of
SAP, outlines how organizations Capital One Labs.
have a “corporate immune system”
8 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
DIGITAL TRANSFORMATION REVIEW
The Innovation Game: how they are doing so. Analyzing As we noted at the beginning of our
Why and How Businesses over 300 innovation centers across introduction, massive investment in
200 large organizations globally, we innovation does not necessarily lead
are Investing in Innovation found that innovation is no longer to massive value. In fact, innovation
Centers confined to the top few tech hubs. often remains a frustrating and
In fact, a number of cities across the dispiriting pursuit in many large
We close this eighth edition of the globe are emerging as innovation companies. We hope this edition
Digital Transformation Review destinations. We also draw on the of the Digital Transformation
with a joint-research study from views of innovation heads at a range Review is a helpful guide to making
Capgemini Consulting and Altimeter of large organizations to understand innovation a satisfying endeavor at
Group on why businesses are what it takes to get an innovation your organization. Please do contact
investing in innovation centers and center right. us if you would like to discuss any of
these issues further.
D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 9
The Digital Innovation
Radar Screen
The New Innovation Wave: Machine Learning and AI
Michael A Osborne
Associate professor at the
University of Oxford
M
ichael A Osborne is an associate professor at the University of
Oxford. He co-leads the Machine Learning Research Group, a
sub-group of the Robotics Research Group in the Department of
Engineering Science. Professor Osborne designs intelligent algorithms
capable of making sense of complex data through the usage of techniques
such as Machine Learning and Computational Statistics. His work in data
analytics has been successfully applied in fields as diverse as astrostatistics,
labor economics, and sensor networks. Professor Osborne is also the co-
author of the widely publicized research “The Future of Employment: How
susceptible are jobs to computerisation?” with fellow Oxford academic
Carl Benedikt Frey. They concluded in the paper that about 47% of total US
employment was at risk of being automatable. Capgemini Consulting spoke
with Professor Osborne to understand Machine Learning and its impact on the
business world.
12 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
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Your latest research with actually affected unemployment Can you give us your definition
Professor Carl Benedikt much; the unemployment rate of machine learning and
Frey and Citi on innovation was about 5% at the beginning of artificial intelligence?
shows that throughout history the 20th century and was still 5%
Machine learning is a subset of
powerful interests have at the end of the 20th century.
artificial intelligence (AI) and
hindered innovation. Is history
can be defined as the study of
repeating itself?
algorithms that can learn and act.
History might be repeating itself.
Technological progress has always
Roman Emperor It’s about the reproduction of some
of the most quintessential human
created significant disruptions Tiberius, had [an characteristics. The boundaries
that powerful interests tried to inventor] sentenced between all these different fields
combat to maintain the status
quo. In Ancient Rome, the great
to death, fearing are not very clear. However, you
might associate computer vision,
author, Pliny the Elder, records the loss of jobs and language processing and speech
the story of an inventor who creative destruction. recognition as other subsets of
discovered a way to manufacture artificial intelligence.
glass that was unbreakable.
Is the current digital innovation
Hoping to receive a reward, the
wave different from the
inventor presented his invention
previous innovation waves?
to Roman Emperor Tiberius.
Unfortunately for the inventor, Yes, in the past technology In the past
Tiberius had him sentenced to has largely just substituted the technology
death, fearing the loss of jobs and human muscle, whereas now has largely just
creative destruction due to the technologies can increasingly
new technology. substitute human brain labor substituted the
or human cognitive work. If human muscle,
The various innovation waves machines can substitute for whereas now
in history have led to dramatic cognitive labor, as they have done
upheavals in society but we in the past for physical labor, it’s technologies
have never seen large-scale not very clear to what extent there can increasingly
technological unemployment. For might be any demand remaining substitute human
example, at the beginning of the for human labor. Another thing
20th century in the U.S., about that is different this time is the cognitive work.
40% of our employment was accelerating rate of technological
engaged in agriculture, whereas change. It is undeniable that we
at the end of the 20th century, it really are making quite dramatic
was less than 2%. There was quite leaps forwards in designing
a seismic change in the makeup of intelligent algorithms that might
employment due to technology. be able to substitute for human
However, none of these changes workers.
D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 13
Making Machines Learn
What is machine learning? How big is machine learning? How hot is machine learning?
$300
1
Machine Intelligence Research Institute, “How Big is the Field of Artificial Intelligence?”
2
Bloomberg QuickTake, “Artificial Intelligence”, July 2015
DIGITAL TRANSFORMATION REVIEW
Could you give us some speech recognition and has us one step closer to artificial
examples of current applications successfully replaced traditional intelligence. Deep learning is a
of artificial intelligence and algorithms for speech recognition set of techniques, inspired by
machine learning in business or at an increasingly large scale. biological neural networks, for
non-business environments? Historically, people were trying teaching machines to find patterns
to induce speech recognition and classify massive amounts
A great example of this is the retail
by recognizing speech features of data. It tackles crisp and
business, where ‘recommendation
like words and phrases. But well-defined problems, such as
engines’ are being used
recently, algorithm designers classifying images as to whether
extensively. Take Amazon as
have turned to massive data they contain a car or a book, for
example. It recommends products
that has become available for example. It’s worth noting that
to millions of customers on the
characterizing human speech. deep learning is still not well-
basis of historic data. Algorithms
If this trend continues, we are understood, or provably robust,
can process data, characterize
likely to continue to move from and that it is likely unsuitable for
the spending patterns of millions
the 95% accuracy rate that we’re safety-critical applications.
of customers, identify latent
able to achieve on our mobile
trends and patterns, and identify
devices today to nearly 99%. What are the most promising
clusters and communities for
This would probably make these opportunities for both AI and
recommendation.
speech recognition techniques machine learning?
Self-driving cars are another completely widespread. In our recent paper, “The Future
application where machine of Employment”, Frey and I
learning is really playing quite have identified occupations
a pivotal role. Cars today have
sensors, onboard computing and
Machine learning is that we thought were the most
susceptible to automation. These
safety systems, and use intelligent a subset of artificial are the kind of jobs that would
algorithms to render themselves intelligence (AI) and be most easily automated within
autonomous. These algorithms
observe how you drive using
can be defined as the the near future using machine
learning techniques. The model
the onboard sensors and quietly study of algorithms predicts that most workers in
learn to travel from the current to that can learn and transportation and logistics
desired positions on the basis of
this data.
act. occupations, together with the
bulk of office and administrative
support workers, and labor in
Speech recognition is one key You mentioned ‘deep learning’. production occupations, are at
application of machine learning. Can you shed some light on this risk. I think that in all these kinds
Voice recognition software, such concept? of areas, there will be an ever-
as Apple’s Siri, has been driven “Deep learning” is the new big increasing degree of automation
by advances in machine learning. trend in machine learning. It using machine learning
Deep learning is becoming a promises general, powerful, and algorithms.
mainstream technology for fast machine learning, moving
D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 15
The New Innovation Wave: Machine Learning and AI
Are there sectors where you see Can individual companies invest
a lot of potential for machine in artificial intelligence?
More or less learning?
The wonderful thing is that
anything that does The retail sector, for example, you don’t necessarily need to
not require one of offers tremendous opportunities. be developing novel artificial
We have seen restaurants intelligence techniques and
the three bottlenecks deploying tablets on tables. machine learning algorithms to
– i.e. creativity, These tablets can be used to take benefit from the state-of-the-
social intelligence orders from customers. They art. It’s relatively low cost, an
can also recommend customers individual corporation can just
and the requirement a set of dessert options tailored hire a data scientist or a machine
to manipulate to what customers might want learning PhD. There is this wealth
complex objects based on what they have ordered of open-source state-of-the-
previously. A customer might art algorithms already out that
in an unstructured even have a profile that’s built could be immediately deployed to
environment – up over multiple desserts in the applications. So, the bottleneck is
will be potentially same restaurant or even a family really not investment, it’s talent.
of restaurants using the same The challenge is just attracting
automatable. software. So, you might get to people with the right skills.
the point at which this tablet can
instantly know, as soon as you
More or less anything that does walk through a door, what your
not require one of the three
bottlenecks — i.e. creativity, social
usual order is, and expedite the There is this wealth
ordering of it.
intelligence and the requirement of open-source
to manipulate complex objects Even in the traditional mall, the state-of-the-art
in an unstructured environment
— will be potentially automatable
customer movement around the
store can be closely monitored,
algorithms already
in the near future. When self- indicating customer interest in out that could
driving cars become a reality, products. The change here is that be immediately
there is going to be an enormous
economic impact for taxi and
these intelligent algorithms can
become more personalized and
deployed to
truck drivers. In the near term, gather a lot more data about us as applications.
self-driving technologies are individuals. Therefore, they can
going to have an impact in the make recommendations to us that
automation of professions, such are more directly targeted at what
as forklift drivers, agricultural we want and what the store might
vehicle drivers, or mining vehicle actually want to promote.
drivers.
16 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
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Source: Nesta, “Creativity vs. Robots: The Creative Economy and the Future of Employment”, April 2015; Carl Benedikt Frey and Michael A. Osborne, “The Future of Employment: How Susceptible are Jobs to Computerisation?”, September 2013
The New Innovation Wave: Machine Learning and AI
18 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
CREATING A CULTURE OF INNOVATION
Jim Lawton
Chief Product and Marketing
Officer, Rethink Robotics
20 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
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What are the drivers behind the What has really been at the heart screen acting as a face. Sawyer is
rise of collaborative robots? of the creation of this new kind smaller, designed to fit a compact
of collaborative robot is to think environment. It weighs 42 pounds
Agility and flexibility are the two
differently about what could be from the waist up, has slightly longer
key factors that have been driving
done with robots. The opportunity arms, and a heavier payload.
the emergence of collaborative
is massive – we believe that 90%
robots. Manufacturers increasingly
of the tasks in factories today are
need to maintain the flexibility
not automated.
and the agility that they get with
manual labor, and robots haven’t
The opportunity is
been up to that task so far. Today, I
Can you tell us more about massive – we believe
your collaborative robots –
may be standing in front of a sheet
Baxter and Sawyer – and their
that 90% of the tasks
metal press brake, and, tomorrow,
I will be putting circuit boards
unique features? in factories today are
into an in-circuit tester. This is Baxter, our first robot, weighs 165 not automated.
the kind of agility and flexibility pounds from the waist up and is
that manufacturers need and that typically mounted on a pedestal
has been missing. Most industrial or a table. He is humanoid in form
robots at automotive factories, for with a torso, two arms and a display
example, perform welding and are
Baxter and Sawyer
typically placed in cages. These
robots take a couple of hundred
hours or more to program and are
then dismantled at the end of the
product line. Units like that are
difficult to deploy for a particular
task and lack flexibility.
Agility and
flexibility are
the two key
factors that
have been
driving the
emergence of
collaborative robots.
Source: Rethink Robotics
D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 21
Rise of the Machine: Forging Ahead with Robots
22 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
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D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 23
Rethink Robotics
D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 25
Rise of the Machine: Forging Ahead with Robots
How intelligent could a robot Inside the home, how do you The key thing for robots in the
become and by when? see the evolution of robots? home will be to be able to process
input of both vocal and gesture
Traditional robots had a big I see robots evolving within the
to a better job at deciphering. For
heyday 30 years ago. Then, the home into two broad categories.
example, the Echo device designed
innovations really flattened out
by Amazon is capable of providing
over the last 30 years and it has The first category is using robots
information, answering questions,
been much more incremental. I for things that I don’t want to do
playing music and reading the
think with the combination of or can’t do anymore. For example,
news instantly. We are going to
physical and cognitive automation from an elder care perspective,
start to see Amazon voice services
and a lot of artificial intelligence, if I no longer have the physical
that get embedded into all of these
we are going to see another big ability to perform certain tasks,
systems.
burst over the next 10 or 20 years. the robot can take over from me. I
think we are going to start to see
It’s just another place where we are
I think initially we are going to collaborative robots in not only
going to see that the technology is
see robots apply greater levels of every manufacturer, but every
coming out to reach the human as
logic. The complexity of the kinds home and in a lot of service-type
opposed to the human having to
of problems they are going to solve opportunities as well.
change the way they do things.
is definitely increasing, but we are
currently overstating how quickly a Another broad category is
major transformation is possible. I companion robots. These are
don’t see robots with consciousness robots that will be your buddy and
any time in the next many tens interact with you in a way that’s
of years, but I do think that in the more like a human. I want a robot
next five years, you are going to that I can interact with and can
see robots that are deployed with provide me with this sociological-
learning systems that are artificial type support and provide with
intelligence derived. some level of companionship.
26 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
THE INNOVATION CHALLENGE
C
reative ideas and innovations can transform the lives of thousands of people, solve critical social
problems, and transform companies and markets. Here, we have selected a range of product and
business model innovations that offer creative solutions to a range of contemporary issues, from
social to consumer applications. This list is offered merely as a conversation starter – share your personal
innovation favorites using the hashtags #excitinginnovation and #DTR8.
Innovation in Products
28 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
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Source: www.liftware.com
D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 29
Digital Innovations – Our Top Picks
30 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
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D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 31
Promoting and Embedding
Innovation
‘Frugal Innovation’: Innovating More with Less
Frugal Innovation:
Innovating More
with Less
Navi Radjou
Innovation and leadership
advisor; Fellow at Judge
Business School, University of
Cambridge
N
avi Radjou is a Fellow at Judge Business School, University of
Cambridge and an innovation advisor based in Silicon Valley. He has
served as a member of the World Economic Forum’s Global Agenda
Council on Design Innovation and is a regular columnist for Harvard Business
Review. In 2013, Navi Radjou received the prestigious “Thinkers50 Innovation
Award”, which is given to a management thinker who is reshaping the way
we think about and practise innovation. Navi Radjou is the co-author of
a new book – Frugal Innovation – and co-author of the bestseller ‘Jugaad
Innovation’. Capgemini Consulting spoke with Navi Radjou to understand
how enterprises can apply principles of frugal innovation to innovate more
with fewer resources and yet deliver greater customer and social value.
34 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
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Mainstream
innovation is rigid
and lacks the agility
to respond to big
changes in the
marketplace.
Firstly, it is extremely expensive.
The world’s leading companies
spend over $650 billion on R&D
every year. In an economic
environment that is not very
growth-oriented, it is very hard
for companies to sustain that
level of investment. There are also
obvious concerns over generating
the right return on this investment.
Studies suggest that more than
85% of new product launches in
the consumer products industry
fail in the market. It is leading to
D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 35
The third kind of shortfall in the Many of them struggle with poor is made entirely of clay. It does
existing innovation practices is that infrastructure, access to capital not require any electricity, and it
they are relatively closed and not and natural resources. And yet is 100% biodegradable. It uses the
open enough to collaborate with we noticed that there are many principal of evaporation to cool
external partners. Organizations entrepreneurs – especially in India the inside of this so-called fridge,
believe that they possess, in-house, and Africa – who are able to use and costs approximately €20–25.
all the resources they need to deal their limited means to innovate It can keep fruits and vegetable
with demand. However, companies and create economic and social fresh for several days. It is a
cannot handle all innovation on value for the communities. They great solution for people living
their own. They need to look for are frugal innovators. We covered in remote areas who do not get
partners outside to augment their this subject in detail in our first reliable electricity supply.
capabilities. book – Jugaad Innovation –
which came out in 2012. Jugaad
Refrigeration without
Frugal Innovation to Drive the is a Hindi word that means
Electricity
Next Wave of Growth ‘makeshift’ or ‘make-do’, which is
basically the ability to improvise
Can you introduce us to the an effective solution in a difficult
concept of frugal innovation? situation.
36 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
to democratize access to solar Is the idea of frugal innovation
lighting and he has been doing only relevant for emerging
it for 20 years. SELCO employs markets or does it apply to A recent study
young locals in the villages to developed nations as well? showed that 55% of
charge the solar lanterns in the
morning. They then distribute the
I believe there is a universal global consumers
appeal to the concept. Our
lanterns in the village houses and
first book offered Western
want to pay even
shops in the evening, so they can
multinationals best practices they more for products
use it at night for reading and—if
you are a shopper, you can use it
can learn from emerging market that are socially and
entrepreneurs, and companies
to sell your goods at night. In the
who were able to innovate
environmentally
morning, they collect the lamps
more with fewer resources. We responsible.
back along with micropayment
then spent the last three years
for the amount of light they used
studying frugal innovation in
the evening before. With this
the Western context. From our Today, consumers would rather
inclusive approach, SELCO was
findings, we published a new opt for a relatively frugal solution
able to scale out its frugal solution
book called Frugal Innovation. that addresses their basic needs
to over 200,000 households in
This book argues that, since 2008, and represents more value(s) as
rural areas, in some of the most
there is a big shift in the Western well. Frugality is a lifestyle that
remote villages in India, while
world – consumers have become connects the need for saving
creating many jobs in local
increasingly value conscious, money while doing the right thing
communities.
looking for products and services for the society and environment.
that deliver more value for less. This need is growing especially
Secondly, consumers in the West among young people in the
I believe there is a prefer to buy products and services Western world. These trends have
from companies that are socially been forcing Western companies to
universal appeal to and environmentally responsible. rethink their innovation approach
the concept of frugal A recent study showed that 55% to serve frugal customers in their
innovation. of global consumers want to pay home markets.
even more for products that are
socially and environmentally
responsible. And this number has
been growing. More interestingly,
nearly 70% of future employees
want to work for companies
that have this kind of social and
environmental credentials.
D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 37
‘Frugal Innovation’: Innovating More with Less
Principles of Frugal Innovation today if a company needs truck good enough solution, and then
– Working within Constraints capacity, it can approach the iterate i.e. incrementally improve
marketplace called FLOOW2. This the solution as the customers’
to Create More Value for is a B2B marketplace that enables needs evolve. This practice is very
Customers and Society companies to share idle physical frugal in terms of resources as
assets, trucks, factory equipment, well as time.
What are the key principles medical devices etc. In most cases,
underpinning Jugaad or frugal the system has more resources The third key principle is
innovation? than you think when you look regarding s u s t a i n a b i l i t y.
The first principle is that you at it from a single person or a It’s not about Corporate Social
use what is abundant to create company perspective. Responsibility (CSR) but how to
what is scarce. For instance, make your entire company more
you use clay, a widely available sustainable. We have examples of
and cheap material, to create Instead of operating companies like Unilever (its CEO,
Paul Polman, wrote the foreword
something like a fridge that does
not use electricity. You employ
with the sense for our book), which is planning
local people and turn them into of scarcity and to double its revenues by 2020
your distributors instead of hiring thinking only about while simultaneously halving the
environmental impact. This is not
employees. So, the question is
‘how do you create more impact
resources under just for one product or service.
using fewer resou rces’, the their sole ownership, They are reinventing their core
answer: you don’t create new [companies] must business model and entire value
chain to produce more, and better,
things, you just piggy back and
leverage what you already have.
look at what’s with less.
Reusing is indeed a sustainable available in the
alternative to “reinventing the whole ecosystem
wheel”.
that they can access. I believe that
What does it mean for
companies and what is Which other principles gradually we will see
abundance for companies? reinforce frugal innovation? companies sharing
Abundance lies in the ecosystem. Using what is abundant to create their fleet, their
Companies must take a systemic what is scarce is our first principle. factories as well as
The second principle is to engage
approach – instead of operating
with the sense of scarcity and and iterate. Instead of wasting
their clients. This
thinking only about resources time and money trying to create is the B2B version
under their sole ownership, they a perfect solution in an insular of the sharing
R&D lab, companies must directly
must look at what’s available
in the whole ecosystem that engage customers, identify their
economy, and it is
they can access. For example, basic needs, quickly produce a just taking off.
38 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
Innovating More with Less
High-quality solutions that are simple, effective, Connects the need for saving money while being
affordable and created with limited resources thoughtful for the society and environment
In the process, companies reuse, themselves: “if I am not using 50% fewer parts than a typical
recycle but also up-cycle – my assets all the time, they are Renault with a minimalist design
creating more social value as well. sitting idle, I am basically wasting that met high-quality and safety
money. So, why don’t I share them standards. To capitalize on the
That brings us to the fourth with other people?” I believe that demand, Renault developed an
interesting principle, which is gradually we will see companies entirely new entry-level product
about collaborating extensively sharing their fleet, their factories line under the Dacia brand. These
with other companies – including as well as their clients. This is entry-level vehicles now represent
your rivals – the notion of open the B2B version of the sharing circa 40% of Renault’s total sales.
innovation and “coopetition”. economy, and it is just taking off.
The second chapter, being written
Can you elaborate on the in 2015, is the launch of Kwid –
concept of open innovation? an entry-level car produced for
Take, for example, the French
Renault is a very the Indian market. The concept of
Railway Company, SNCF. Their good example of a the car was developed to a large
extent by Indian designers in
focus was on offering the best company that has Renault-Nissan’s design centers
possible train services, but
customer demands have evolved.
been at the forefront in India and very much relies
People want an end-to-end of frugal innovation. on open innovation and local
supplier network. Ninety-seven
mobility solution that takes them
Frugal Innovation can percent of the components in Kwid
from point A to B, irrespective of
Make Corporations More come through local suppliers.
the modes of transport they may
They involved the suppliers very
have to use – cabs, trains and Competitive early on – right from the design
car-sharing etc. SNCF realized
phase. So, the whole ecosystem
this and has just launched a Can you explain how
was involved from the beginning
service aimed at this customer large organizations have
until the end, and that is what
need. They’re combining their implemented the concept of
allowed Renault to pull it off.
services with partners – such as frugal innovation?
Overall, Kwid is a very cost-
Zipcar and others – to provide a
Renault is a very good example effective solution as it cost them
“door-to-door” mobility service.
of a company that has been at the only half as much to take the
They are willing to share their
forefront of frugal innovation. car from design to dealers. Most
client with other brands and
In 1999, Louis Schweitzer, the Western carmakers cannot copy
companies. They understand that,
previous CEO of Renault, set an what Renault is doing because
by pooling resources together,
audacious goal of building a they try to take the existing cars
they can serve the customer
€6,000 car and gave his engineers that are being sold in Europe or
better and more comprehensively.
the freedom to handle the how US and ‘de-feature’ them for local
Another example is Mars, the
part. That was the first chapter in markets in India and China. That
chocolate maker. Mars is sharing
the Renault story that led them to approach does not work. They
its fleet of trucks in Germany
launch in 2005 the Logan – a no- must learn to build a frugal car
with other companies. They asked
frills yet spacious car that used from scratch.
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Do you have a view on an say nearly 90% of the companies approach that produces only low-
approximate percentage are already using frugal cost output and not necessarily
of companies using frugal innovation in some way. The US, a good quality product. The
innovation? however, is lagging way behind challenge is to convince people
Europe and Asia in adopting that something simpler with
If you look at the Fortune 500
frugal innovation. fewer features can be innovative.
companies, I would say roughly 5%
Actually, it is innovative because
have adopted frugal innovation
Overcoming Obstacles to it brings more value to customers.
in a very aggressive way as
Frugal Innovation So, the difficulty is to shift the
they have realized its strategic
R&D mindset from pushing
importance. Approximately 20%
What are the main obstacles to more technology to really
are experimenting with it and
frugal innovation? understanding customer needs
the remaining 75%, I think, have
and focus on delivering value to
very little awareness. If we look There are a few obstacles of customers by creating a simpler
at Europe only, I would say there course. The first one is mindset. solution.
is an equal split across the three Frugal innovation is viewed as an
categories. While in Asia, I would
D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 41
The second challenge is around patiently execute the strategy
marketing. How do you market a over 10 years, you can become a
The challenge is to frugal solution as aspirational? leader in the space. I believe more
convince people that I believe Renault is doing an companies have to realize that
amazing job in India in terms frugal innovation is not just about
something simpler of marketing Kwid. They are low cost. It is about combining
with fewer features not talking about affordability. four attributes – affordability,
can be innovative. They are positioning the car quality, sustainability, and
as something aspirational, like simplicity. It is about improving
Actually, it is the car gives you more freedom people’s quality of life while
innovative because and comfort. It is well designed preserving our precious planet.
it brings more value and makes you feel good. Most
companies know how to market
to customers. an expensive product and create a
need for it but they do not know
how to create a need for frugal I believe more
solutions. companies have
How important is it to change
to realize that
the culture of a company for frugal innovation
ensuring success with frugal is not just about
innovation?
low cost. It is
I think changing the culture about combining
of the company is absolutely
critical. In Renault today, nobody four attributes –
is challenging frugal innovation affordability, quality,
because it has proven to be sustainability, and
successful in Europe and now
in India. So, companies need to simplicity.
evolve from “doing frugal” to
“thinking frugal” and then finally
to “being frugal”. Our research
shows that it takes approximately
8–10 years for a company to make
the complete transition, which is
a long journey. But, if you look
at companies like Renault, I think
they have proven that if you can
42 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
Kick-starting Innovation Through Startups
Kick-starting Innovation
Through Startups
Jon Nordmark
Co-founder of Iterate Studio
How did you come up with the work. Unlike accelerators, we focus
idea of Iterate Studio? on proof-of-concept tests. We find
A few years ago, I was working
the startups with the most potential We create ‘digital
in Eastern Europe with Brian
through a discovery process – often recipes’ [by combining
they will have 10 customers already,
Sathianathan – one of Iterate
maybe even 100. Once we’ve found point solutions from
Studio’s other co-founders – at
a startup accelerator. We would
a startup with intriguing claims or different startups.]
success stories, we try to get them
review about 300 business ideas
tested rapidly in an environment we Sometimes startup solutions
every six months and accept
trust – often in a small enterprise can be too niche compared to
approximately 10 countries into
where we can be sure experiments the scale of large enterprises.
the program.
are properly operated. Our hands-on How do you work around this
oversight helps us determine if the
After seeing all these really challenge?
business claims made by the startup
interesting companies, we thought
are valid or not. We are unbiased and Often, startups produce what we
there needed to be a service that
agnostic as far as how we endorse call “point solutions,” because
helps large companies discover and
technologies, whereas an accelerator each strong startup tends to be
validate new digital technologies
– like a VC – is always going to be really good at one little thing.
from all over the world. At the
biased to the companies that come However, if you can combine a
same time, intriguing startups
through their program. We don’t care few of these, you can create a
coming out of accelerators would
where a startup is from, how much simple, powerful enterprise-level
get a quick validation within
money it has raised, who funded it, solution that is very difficult to do
large-scale environments. After
who its founder is; we only care if as a single startup or enterprise.
proof-of-concept tests have been
the technology provides a positive We create “digital recipes”.
run by a third party, individual
business impact.
startups are valued a lot more than
when they were just an interesting Can you explain the testing
idea or theory. process in more detail?
We thought there When a large organization subscribes
What is your unique needed to be a to Iterate’s services, the first thing
proposition compared with
startup accelerators and
service that helps we do is put an innovative legal
agreement in place. That legal
incubators? large companies agreement provides the large
Iterate is not a startup accelerator. We discover and organization with the right to test
are not interested in helping anyone validate new digital any startup that Iterate Studio has
decided to endorse. On the startup
draft a business plan or giving advice technologies from side, if we decide to endorse a
regarding how a company should
all over the world.
D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 45
Kick-starting Innovation Through Startups
startup for our large company weeks, we usually know whether technology. The methodology is a
subscribers, we sign an agreement the business impact is positive, bit different for tests in physical
with the startup that gives Iterate an neutral, or negative. If the test environments, but the philosophy
umbrella experimentation license. worked, we’ve found a great match is the same.
We can pass that “experimentation for the enterprise. It also gives us
license” on to any large enterprise great confidence in recommending What is the percentage of
that we are formally working with. the startup technology to other innovations that make it from
The beauty of these agreements is clients. If we see the test works for proof-of-concept?
that the large company removes one website, we know that there is
Our success rate is above 80%
that time-consuming process of a high likelihood that it will work
for testing online technologies.
writing and signing an individual in sites that are similar. We really
We also have a high success rate
contract with every single startup believe that the best
on finding technologies that
they work with. On the other side, thing to do is to test and
will satisfy challenges presented
for startups, it helps them scale their try things rather than
by enterprises – from stopping
solution faster than the old way. talk too much about
suicides to removing standard
So, we are trying to remove all the
POS systems from retail checkouts
paperwork and make it seamless to
to creating mashups of video
get a quick pilot test in place.
technologies. We have a broad
reach across the emerging technology
Once the administrative stuff is out of
ecosystem, plus spend a lot of time
the way, we get ready to test run the
trying to find the right startup
startup’s solution. If it is a digital
technology that could
test for the Web or mobile,
solve a company’s
we turn on an A/B
problem – hence the
split test platform.
high success rate.
Within a day to two
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D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 47
Kick-starting Innovation through Startups
Digital Startups are Blossoming Companies need startup curators, to help them…
The cost of developing
a digital startup has fallen from • Discover new digital technologies from
approximately $5 million in 2000 to all over the world
approximately $5,000 as of 2013.
There are somewhere between 100,000 and • Validate business claims made by the startups
400,000 digital startups around the world. in an unbiased and technology-agnostic way.
How Companies can Compete with Tech Giants – by Leveraging the Combined Potential of Startups
A startup identified by
Iterate helped companies
Iterate works closely speed up their website Iterate’s new
performance by up to website — Iterate.ai
with 45 startups,
semi-closely with 100 35%. — has indexed
and is aware of more than
hundreds more. 130,000 startups.
DIGITAL TRANSFORMATION REVIEW
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Kick-starting Innovation Through Startups
One of our Boston-based startups, Another bootstrapped Indian aware of hundreds more. Our new
which has raised nearly $50 million, startup that we endorse created website – Iterate.ai – has indexed
increases the speed of websites and a malware-removing software. more than 130,000 startups, and
mobile sites by 35% on average. The startup blocks e-poaching, we can dive into that database
This translates to about a 16% where malware secretly takes in search of digital solutions. We
revenue per visit increase. In May over a shopper’s browser, trying are also beginning to use Iterate.
2015, our tests helped the startup to move shoppers to competitive ai to automatically pair enterprise
replace its primary competitor – a websites. We are finding that challenges with startup solutions.
$10 billion incumbent – in three 6% to 11% of shoppers seem to For any executive trying to work
large enterprises. Now, many more have malware infections, causing on the cutting edge or even remain
tests are lined up based on those almost 4% to 8% of their total relevant in today’s fast moving
results. websites revenues to be lost. digital ecosystem, it is critical to
Last month, we determined this be aware of the startup landscape,
malware blocker would deliver a to be able to connect dots on the
One of our Boston- $6 million revenue lift for one of fly, and to do it in a scalable way.
our enterprise clients. This startup Those are services we are trying to
based startups, had a solution to that problem provide for all the companies we
which has raised and a technology that could be work with.
nearly $50 million, plugged-in in minutes, and many
of our clients want to test this new
increases the speed brand-protection technology.
of websites and Iterate Studio
mobile sites by How many entrepreneurs and
works closely with
startups do you work with?
35% on average. approximately 45
Over the years, we have been
exposed to thousands of startups, startups, semi-closely
but Iterate Studio now works
closely with approximately 45
with another 100,
startups. We work semi-closely and we are aware of
with another 100, and we are hundreds more.
50
SUCCESSFUL INNOVATION APPROACHES
Innovating Through
Open Data
Gavin Starks
CEO of the Open Data
Institute (ODI)
G
avin Starks is the CEO of the Open Data Institute (ODI). Founded by
inventor of the Web Sir Tim Berners-Lee and Sir Nigel Shadbolt, the
ODI is an independent non-profit, non-partisan organization partly
funded by the UK Government working to unlock the value in open data.
The Institute supports and promotes open data in business, governments and
society, and convenes experts to collaborate and nurture innovation through
open data. Capgemini Consulting spoke with Gavin to understand the role of
open data and how it can drive innovation. Gavin is also a musician and a
Fellow of the Royal Society of Arts.
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DIGITAL TRANSFORMATION REVIEW
D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 53
Innovating Through Open Data
Another interesting startup is Open to valuable real-time and historical farmers, enabling them to increase
Utility. They have created a platform open data generated amongst productivity sustainably. This
for energy trading – an “ebay” for thousands of projects and their initiative is part of Syngenta’s Good
electricity. The peer-to-peer trading connected devices. This enables Growth Plan commitment to help
service lets renewable generators other individuals and businesses improve the fertility of 10 million
set the price for their electricity and to use the data to experiment, hectares of farmland.
make it available to local commercial innovate, and incorporate it into
energy consumers to buy. This their own products and services.
marketplace was made possible
thanks to the availability of energy What is the role of private Today, having an open
data as open data. Their business organizations in open data? innovation strategy
model is based on a transaction fee.
Large organizations should think without open data
Finally, OpenSensors.io offers
about releasing their data and
rely on third parties to innovate
makes no sense.
real-time data access, data
on their behalf rather than trying
security and storage, analytics Arup – an engineering organization
to innovate internally. Large
and machine learning via its with 11,000 employees – is also a
organizations have a pivotal
IoT platform. OpenSensors.io’s strong advocate of open data. They
role to play in the innovation
real-time messaging engine can conduct large scale infrastructure
ecosystem by publishing their data
process millions of messages projects around the world. In the
as open data. Today, having an
a second from any internet- course of such projects, they obtain
open innovation strategy without
connected device, such as a sensor huge amounts of information
open data makes no sense.
or camera. Businesses can use about the environment, from soil
the platform for many purposes quality, designs and plans of cities
Can you give us some examples
– from automating networks of to underground infrastructure
of private organizations
car parks through license plate such as water cables. The company
opening up their data?
recognition cameras and motion releases most of this data as open
sensors to optimizing office spaces Syngenta is a good example. They data and they are collaborating
by configuring devices such as have released data collected on with startups to build great insights
thermostats, lights and locks to 3,600 farms in 41 countries across and innovative solutions.
respond to the preferences of the Europe, Africa, Latin America and
people working in them. Anyone Asia Pacific, representing about 200 Syngenta and Arup are not
using the Opensensors.io platform crop-climate combinations. It is isolated examples. Pharmaceutical
to publish data can use it for free, the first time information at a crop companies, for instance, are
providing their device publishes level, including resource efficiency, starting to share information
their work as open data. Paid plans has been made public in this way as open data and are working
are offered for private users. As a by a commercial organization. together to solve big questions,
result, the platform provides access The data will be very valuable to such as the next antibiotic.
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D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 55
Innovating through Open Data
Exciting Innovation Spawned by Open Data is Augmenting Social and Customer Value
OpenSensors.io
TransportAPI – – offers real-time
seeks to create a single, Open Utility – a data access, data
comprehensive source platform for energy security and storage,
of UK transport trading between analytics and
information. people. machine learning via
its IoT platform.
D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 57
The Innovation Oscars:
Lessons from the Pioneers
Innovating at SAP – the Delicate Balance between Incremental and Radical Innovation
C
laus von Riegen is Vice President and Head of Business Model Innovation
(BMI) at SAP. He chairs the BMI Service Center that designs and implements
new business models across the organization. Previously, Claus von Riegen
held various management positions in product development where he most
recently was responsible for SAP’s industry standards and open source strategy.
Capgemini Consulting spoke with him to understand how a large organization
such as SAP manages innovation.
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Innovating at SAP – the Delicate Balance between Incremental and Radical Innovation
62 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
SAP
SAP is a leading cloud
SAP’s customers include vendor with 82 million
74% of the world’s 98% of the 100 most subscribers and a market
transaction revenue leader for mobile business
valued brands and 87%
touches an SAP system apps with over 130 million
of Forbes Global 2000
mobile users
Innovating at SAP
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DIGITAL TRANSFORMATION REVIEW
How can your team work around However, with the arrival of What are the other channels of
the ‘immune system’ that tries to our team – the business model innovation within SAP?
thwart innovation? innovation service center – we
Innovation is not solely steered
can make a case, and try to find
Let me give you an example. A centrally – anyone can voice new
a middle ground. We might
number of teams have proposed ideas. But it creates the obvious
see whether we could start in
that SAP leverage the value challenge of prioritization
markets where we can comply
of the data that flows through as we are a large group of over
with data protection and privacy
our applications and networks. 75,000 employees. We have an
regulations. We can then launch
The idea is that SAP should environment that we created last
some pilots and, if customers
move into the data business and year called the intrapreneurship
accept and trust the security
eventually anonymize, aggregate program. The idea is to leverage
and usefulness of our solution,
and analyze data. And through all the great ideas about new
we can consider rolling it out in
such an aggregation, we can then products and value propositions
other markets. The business model
provide services to our customers directly from our employees. We
innovation center effectively
that weren’t possible before. For have a set of coaches who help
provides an environment that
example, as a chief procurement employees formulate their ideas
lets in-house entrepreneurs
officer you would then be able and jury members who assess and
experiment with new types of
to manage your spend based on evaluate these ideas to eventually
business models until their market
benchmarks you get across your pick those which we as a company
readiness is proven.
industry. Now, if you raise this want to invest into.
idea, the first thing that many
people will ask – which is part of
the corporate immune system –
is: ‘how can we comply with all By creating strong
the data protection and privacy
regulations?’ Others would say,
connections with the
‘good luck, but we will never business early on,
support you, and the SAP board we have realized that
has no interest to move into
the data business’. And the idea
we can create more
would soon be shelved. value faster.
D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 65
Unlocking Innovation through Intrapreneurship
Unlocking Innovation
through Intrapreneurship
Pablo Rodriguez
Director of Innovation at
Telefónica and Head of
Telefónica’s Barcelona R&D lab
P
ablo Rodriguez is Director of Innovation at Telefónica and Head of
Telefónica’s Barcelona R&D lab. He also serves as adjunct Professor
at the Department of Computer Science at Columbia University (New
York) where he teaches Social Networks and Distributed Systems. Capgemini
Consulting spoke with Pablo Rodriguez to understand how companies can look
to ‘intrapreneurship’ as a tool to foster innovation. In 2014, Telefónica invested
nearly €7 billion in research, development and innovation programs and it is the
world’s second largest operator in terms of investments in R&D.
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Innovation in the Digital Age They must empower people to with partners, and being agile
propose and defend innovative enough to include everybody’s
Do you feel the need for ideas, and give them autonomy to contribution represents a big shift
a different approach to execute these ideas. in innovation in this digital age.
innovation compared to, say, a
decade ago? The ‘Intrapreneurial’
Perhaps the most important To thrive in Approach to Innovation
element that needs a rethink is
the diversity of talent. Diverse
the digital age, How is Telefónica fostering
teams are better able to spawn organizations need innovation throughout the
innovative ideas. Realizing this, to evolve from organization?
we are adopting an entirely
different way of setting up our
hierarchical and Our innovation team – Telefónica
I+D – coordinates the global
innovation teams. For instance, process-centered strategy for digital innovation
our innovation lab in Barcelona structures to being across the group. We set it up in
has nearly 300 people from varied
backgrounds, such as technology,
talent-driven. 1988 with a mission to make the
group more competitive through
psychology, design, political technological innovation. We
science and big data. have about 650 employees as part
Beyond talent, how have you
of this group, with a majority of
evolved your approach to
them being university graduates,
innovation?
representing 18 nationalities.
Our innovation We have become much more
open. We derive our insights
From its inception, the group has
been instrumental in churning out
lab in Barcelona and inspirations to innovate innovative products. For instance,
has nearly 300 from many external forums, it contributed to our public phone
people from varied such as startup ecosystems,
universities and collaboration
booths in 1990, internet access
services in 1996, connected cars
backgrounds, such with other industries. Telefónica in 2000 and interactive digital TV
as technology, is the founding partner of the in 2004.
psychology, design, European Commission’s Startup
Europe Partnership initiative, We have been a pioneer in adopting
political science and which aims to connect Europe’s the Lean Startup approach for
big data. best startups to corporates. We’re our internal entrepreneurship,
also part of the European Digital or ‘intrapreneurship’ initiatives,
Forum, a think-tank dedicated to where we promote our
To thrive in the digital age, empowering tech entrepreneurs own employees to become
organizations need to evolve from and growing Europe’s digital entrepreneurs. It allows us to
hierarchical and process-centered economy. I believe that opening create opportunities that are
structures to being talent-driven. up innovation, working more not necessarily ‘low-hanging
D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 67
Unlocking Innovation through Intrapreneurship
fruit’ and grow them to become How does your How much time can they
sustainable businesses. Our ‘intrapreneurship’ initiative dedicate to “intrapreneurship”
intrapreneurs have helped work? How does it nurture activities at the different stages
us launch initiatives in some innovation projects from from ideation to design and
revolutionary areas, such as inception to reality? implementation?
software-defined networking,
We seek to promote employees We run the intrapreneurship
machine learning, cyber security
who have a start-up ‘mentality’ program several times per year
and privacy.
and a determination to create depending on our need to fuel
new things. Any employee can new projects into the innovation
participate in the program by funnel. Each time we start the
proposing ideas at any time of program, we select ideas from
I believe that the year. We pick up the ideas intrapreneurs and we let them
that demonstrate the potential work in their project full time
opening up to create future business for for three months. During this
innovation, working Telefónica over the next one to time, we implement a safety
more with partners, five years. We also encourage net mechanism that encourages
multi-disciplinary teams to come people to participate in the
and being agile together and form a ‘start-up’ that program: once the three months’
enough to include can take their idea from concept period is finished we allow them
everybody’s to reality. The teams then need to return to their original position
to mature their ideas into sound if their idea doesn’t succeed. But
contribution project proposals before they can if they succeed they will continue
represents a big shift secure resources. working full time in the project
in innovation in this during its whole life.
digital age. How do intrapreneurs secure
Our intrapreneurs resources for their projects and
what happens to successful
This approach is in stark contrast have helped us ideas?
to the more conventional
approach. That demanded
launch initiatives in Once an innovator’s idea has
elaborate business plans and some revolutionary been refined to a certain level,
years of investment, yet often areas, such as a venture-capital setup decides
the end result was a product or
service that didn’t meet customer
software-defined whether to invest in it. If funded,
the project is executed by first
expectations. networking, machine testing its attractiveness among
learning, cyber a set of customers. For this,
security and privacy. innovators run two to six ‘test-
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D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 69
Unlocking Innovation through Intrapreneurship
70 D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08
Unlocking Innovation through Intrapreneurship
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Intrapreneurship helps 8OObb²8½b innovation cycles Set up in 1988, ¥coordinates
by up to Á¢¹½bµcompared to usual projects, group’s global digital innovation strategy
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• I+D launched the “TU Go” app – allows users to make calls from any device and over WiFi
• Thinking Things – allows enterprises create their own Internet of Things (IoT) solutions using simple blocks of
sensors and connecting devices
Unlocking Innovation through Intrapreneurship
What are the key innovation products launched to the market. TU Go users communicate more,
themes that you are currently As I’ve mentioned before, we have have longer calls and are more
working on? reduced our financial needs by loyal to Telefónica. After its initial
half which, in the long term, will success in the UK, we launched it
We have been largely focusing on
mean to double our success rate. in Argentina last year.
predicting human behavior, IoT
and privacy of identity. Predicting
Through our Open Future_
human behavior is opening up
program, we have invested in
new opportunities by analyzing
massive amounts of data, such We have reduced more than 550 companies and
created new digital employment
as helping launch big societal our financial needs for more than 5,000 people.
initiatives. We funded one of our
innovation projects in the area
by half which, in We have also been a part of
of ‘Smart Tourism’. The project the long term, will successful funding rounds for
Sigfox, which raised $115 million,
analyzes mobile network data mean to double our and Cyanogen, which raised $80
to better distribute economic
benefits of tourism among
success rate. million.
residents while helping tourists
enjoy a high-quality experience. One example is the “over the top”
In the realm of privacy of identity, television solution of Telefónica
we have partnered with MIT, that has been developed internally
and the Open Data Institute run within the innovation program. It We have partnered
by Tim Berners-Lee and Mozilla
Foundation, to launch the Data
started with the work of only three
engineers and ended up with a
with MIT, and the
Transparency Lab. It seeks to solution that, at the end of 2014, has Open Data Institute
advance transparency of online been deployed in 4 countries and run by Tim Berners-
personal data. has more than 400 million users. Lee and Mozilla
What level of success have Recently, we became the first Foundation, to
you seen with your innovation telco in the world to launch a launch the Data
browser-based calling product
initiatives? using WebRTC technology. This
Transparency Lab.
product – TU Go – is the result of
We have had a good track record
our in-house innovation program.
of innovation successes during
TU Go is an app that allows people
these years. The main difference
to always stay connected and use
from the past is how efficient
voice calling and texting features
we have been in using our
through any mobile device, such as
innovations funds that has led
tablets and laptops, not just their
to a high number of successful
mobile phone. We have found that
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D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 73
Bringing Ideas to Life – the Core Principles of Innovation Centers
James Patterson
Managing Vice President and
Head of Capital One Labs
J ames Patterson is Managing Vice President and Head of Capital One Labs, the
experimental product and technology arm of Capital One. Capital One Labs is a
network of innovation centers located in San Francisco, New York and Washington
D.C. Over the past four years, the network has involved over 100 entrepreneurs in
reimagining the way 65 million people interact with their money. Established as a credit
card company, Capital One is now a Fortune 500 company and one of the top 10 banks in
the US. James Patterson is also involved in driving digital transformation efforts across the
organization, with Capital One a recognized digital leader. 75% of its customer interactions
are digital and it conducts over 80,000 Big Data experiments a year.
Capgemini Consulting spoke with James Patterson to understand more about the core
building blocks of innovation centers in large enterprises.
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What was the rationale behind How do you work with the
the creation of Capital One’s business?
innovation centers – Capital We concentrate on Business teams reach out to us
One Labs? less predictable – whenever they have an insight or
Capital One Labs was set up nearly yet potentially far- an idea that they feel we can help
four years ago. We’re a group of just them grow. And vice versa, if we
over a hundred product managers,
reaching – returns. are working on something that can
designers, design thinkers, engineers Capital One Labs is a be a potential breakthrough for the
and data scientists across three offices. natural extension of business, we involve them at the
We serve as the experimental product right time. The key is to bring the
and technology arm of the company
who we already are right people along for the journey
and our priority is to accelerate Capital as a company. at the right time – not too soon,
One’s product and business agenda. not too late – and having the right
Many innovation centers fail to
We conduct experiments and test new integrated teams that include the
make an impact because they are
products and concepts that we know business working on ideas together.
disconnected from the rest of the
will be important for our business, but
business. How are you tackling How is Capital One Labs placed
don’t yet deliver revenues or returns
this issue at Capital One? within the broader Capital One
on investment. We focus on areas that
are disruptive or radically different Capital One Labs is a natural organization?
from our current offerings. We take a extension of who we already are as We are in the technology and digital
24-month horizon and spot potential a company. There is no disconnect division that falls under the Chief
disruptors that will have an impact on between our team and the rest of Enterprise Services Officer, who
the areas where the business wants to the business because we share the runs all of enterprise technology and
grow in that timeframe. The business same culture of entrepreneurship. operations. Being in a centralized
focuses on near-term improvements Capital One is the largest founder- division versus being within any
with relatively predictable, short- led bank in the country and is one line of business (LOB) gives us
term results, while we concentrate on operating at this scale – over 65 a unique advantage. It allows us to
less predictable – yet potentially far- million customers. At Capital One, take an enterprise view and focus
reaching – returns. innovation is not just for one team, on holistic consumer experiences
but for the whole company. We that may not fall neatly into any
have a strong culture of long-term single LOB.
We’re a group of investments in innovation and as a
startup in the 1990s we transformed
just over a hundred the industry by becoming the first
product managers, bank to create mass customization The key is to bring
designers, design of credit cards with a personalized the right people along
APR. So our businesses and the
thinkers, engineers Labs share the same understanding
for the journey at the
and data scientists of what innovation truly means. right time – not too
across three offices. soon, not too late.
D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 75
Bringing Ideas to Life – the Core Principles of Innovation Centers
What are the key challenges Are Capital One Labs helping
you are facing in running create an innovation culture
Creating excellence Capital One Labs? within the company?
at small scale I think the biggest challenge is As you bring new ideas into the
is relatively to scale something that’s really company, you have to model what
compelling. Taking something it means by doing as opposed to
straightforward. from a prototype or market pilot talking. The highest calling we
Doing so at scale is to scale is extraordinarily hard to have is to demonstrate the power
extremely hard. And do. That’s primarily because you of an idea or an insight through
are involving a totally different actually bringing that into reality
that’s where most and expanded cast of characters rather than just talking about
innovation centers to get to scale compared to just it. I think our ‘learn by doing’
struggle. getting to pilot. It’s not good approach versus what you might
enough to just have an idea and call a ‘learn by PowerPoint’
What is your level of to get it in the hands of a few philosophy is getting a lot of
investment in Capital One hundred people. I keep myself traction across our business.
Labs? accountable to making sure that Building a true ‘maker’ culture has
the ideas that go to pilot actually been our most important impact
I think the key here is more get to production. And that on the organization.
about independence than the involves an enormous amount of
absolute investment. We have the coordination and collaboration
complete, independent budget to across the company.
pay for all of the resources and The highest calling we
people required to run alpha and
beta tests and experiment with
Creating excellence at small scale have is to demonstrate
is relatively straightforward.
technology. Even if the business is Doing so at scale is extremely
the power of an idea
integrated into an alpha test, we hard. And that’s where most or an insight through
can self-fund it, so we do not have
to ask the business for anything
innovation centers struggle. actually bringing that
that we start. Another key challenge is
into reality rather than
obviously talent. We are very just talking about it.
careful and selective about who
We are very careful we bring in. We have incredibly
talented people in our Labs but it
and selective about takes a very long time to recruit
who we bring in. the right people.
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Capital One Labs - Manifesting the Core Principles
of Innovation Centers
Capital One is a Digital Leader, conducting more than 80,000 big data experiments
a year and processing 75% of customer transactions digitally
Is a network of innovation centers A team of just over 100 product The experimental product and
across 3 locations: San Francisco, managers, designers, design thinkers, technology arm of Capital One
New York and Washington D. C. engineers and data scientists
Focuses on a 24-month horizon and Has the complete and independent Fosters connections with the tech
spot potential disruptors with less budget to pay for all resources and community by selectively working
predictable yet far-reaching returns people required to experiment with with startups to accelerate their
technology product agenda
Capital One Wallet, a payment app that Second Look, a service that helps customers
seamlessly works with Apple Pay spot anomalies in their spends
DIGITAL TRANSFORMATION REVIEW
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The Innovation Game: Why and How Businesses are Investing in Innovation Centers
Why Should Companies Launch Innovation Has Never Been Enter the Innovation Center
Innovation Centers? More Important...Or So Difficult
The weaknesses of traditional
In today’s highly competitive innovation approaches have led a
We live in an era of digital
economy, innovation is more number of ambitious organizations
Darwinism. As technology and
critical than ever. A recent survey of to seek new inspiration. These
society evolves, it becomes
large corporations found that 65% organizations have launched
imperative that organizations
of senior executives face increased innovation initiatives or full-
also evolve their business models.
pressure to innovate2. However, the blown innovation centers in major
Companies that don’t invest in
challenges of innovation continue technology hubs with the explicit
counter-disruptive measures
to defeat many. In 2014, around mandate to accelerate digital
will learn that evolution doesn’t
$1.6 trillion was spent on R&D innovations. Innovation centers
wait. 52% of the Fortune 500
globally3. Despite this significant achieve this by rethinking customer
have merged, been acquired
investment, the results are falling experience, improving operational
or have gone bankrupt since
short. In consumer goods, for efficiency and testing new business
20001. Over the last ten years,
example, research shows that more models through the use of digital
there are myriad examples of
than 85% of new products fail4. technologies such as Big Data, the
established corporates that have
Internet of Things, Social, Mobile,
fallen on difficult times. How can
To excel in these times requires Robotics, Augmented Reality and 3D
companies avoid this fate? The
innovation, to protect against Printing.
answer is innovation.
external threats and create new
competitive advantage. But many These innovation centers, comprising
R&D teams at large and traditional teams of people and often physical
52% of the Fortune corporations seem ill-equipped to sites, are established in a global
respond. They can be constrained tech hub. The goal is to leverage
500 have merged, by legacy organizational models, the ecosystem of startups, venture
been acquired or risk-averse cultures, and a rigidity capitalists, accelerators, vendors, and
have gone bankrupt of approach. A recent study academic institutions that these hubs
revealed that only 5% of R&D staff provide.
since 2000. feel highly motivated to innovate5.
This is a worrying tendency given
the urgency to innovate.
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The Innovation Game: Why and How Businesses are Investing in Innovation Centers
Zappo Labs enabled Zappos to launch its Staples’ innovation lab helped launch a digital wallet
“Ask Zappos” digital personal assistance service in 9 weeks Staples’ fastest deployment ever
—
Walmart's search engine was developed at Walmart AT&T's Foundry innovation centers have significantly cut
Labs in 9 months with just a handful of employees the
—
the time from idea to launch. Collaboration with startups
tool drove a 20% increase in online sales conversions has delivered successful solutions such as a personalized
video bill service and self-optimizing network
Source: FastCompany, “How Zappos uses one-week work sprints to launch big projects fast”, July 2014 ; Adweek, “How an Office Supply Brand Stays On the
Cutting Edge of Retail”, November 2014 ; Walmart, “Welcome Adchemy to @WalmartLabs!”, May 2014 ; Capgemini Consulting and Altimeter interviews
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overlooked a lot.”
– Innovation executive
at a leading retailer
D I G I TA L T R A N S F O R M AT I O N R E V I E W N° 08 83
The Innovation Center Heat Map
North America Europe
London (10)
Munich (5)
53 centers
Berlin (5)
Silicon
Valley Chicago (4)
Paris (9)
N=75
Source: Capgemini Consulting and Altimeter Analysis
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Extend
Innovation
Across the
Deliver on the Core Enterprise
Innovation Promise
Harness Talent
Hire Employees that Engage with
and Partnerships Create a Diverse Partners
Thrive in Both
Cross- Structured and but Use Sound
Functional Team Unstructured Judgment When
Environments Selecting Them
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The Innovation Game: Why and How Businesses are Investing in Innovation Centers
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Harness Talent and Partnerships Engage with Diverse Partners Deliver on the Core
but Use Sound Judgement in Innovation Promise
Create a Cross-Functional Team
Selecting Them
Prove Value by Demonstrating
The composition of the innovation
Engaging with the tech ecosystem Early Wins and Following
center needs to be diverse. James
is integral to the mission of Through on the Promise
Patterson, Managing Vice President
an innovation center, but it is
and Head of Capital One Labs, Innovation centers, by virtue of being
equally important to not waste too
confirms this. Capital One Labs is the standalone units, must constantly
much time. As James Patterson,
experimental product and technology prove the value that they add to
Managing Vice President and
arm of Capital One. He says: “The key the business. Leading innovation
Head of Capital One Labs puts
is to bring the right people along for centers overcome this challenge by
it: “It is important to know the
the journey at the right time – not demonstrating early wins. When
difference between true innovation
too soon, not too late – and having Walmart set up Walmart Labs in
and “innovation theater,” or shiny
the right integrated teams that 2011, it made several key acquisitions
object syndrome. There are a lot of
include the business working on upfront to build momentum. One
interesting startups out there. The
ideas together.” of its early acquisitions, Kosmix,
important thing is to have a sound
proved instrumental in developing
judgment as to which ones to spend
Hire Employees that Thrive in a new search engine to power
time with.”
both Structured and Unstructured its e-commerce website9. They
Environments accomplished the task in just nine
months and the updated website
Shortage of digital skills is an
also increased the conversion of
issue, but attitude is as important
as aptitude. The lead at a telecom We bring all sorts of visitors into buyers by as much as
20%. Today, WalmartLabs continues
innovation center said: “The people best practices and to be a driving force behind digital
element cannot be underestimated.
It takes a certain kind of person
tools and techniques innovation at Walmart.
to work in any innovation center, across the business
where half your time is spent in a to help make people
very open-ended and ambiguous
environment working with startups,
more creative, more
and the other half with the engaged, more
traditional and risk-averse side of innovative.
the business.”
– Head of innovation labs
at financial services major
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The Innovation Game: Why and How Businesses are Investing in Innovation Centers
Sunset Programs and Ideas that Extend Innovation Across The Next Innovation Wave
are Unfeasible… But at the the Enterprise
The digital economy offers a
Right Time
An innovation center can be said solution and an inspiration for the
Innovation centers are all about to have reached its pinnacle when perennial challenge of successful
experimentation, and a trial-and- it is able to extend the innovation innovation. The advent of thriving
error approach is one of its defining practices far beyond its walls and technology hubs, and the appetite of
features. At the same time, it is crucial deeper into business units and new digital entrants to relentlessly
to focus resources and energies on functions. One way of doing this is to disrupt and innovate, has created
the most feasible and viable projects. ensure that learning from innovation an innovation ecosystem that
Hence, projects that are unfeasible centers is constantly routed back to traditional organizations can tap
need to be terminated, and quickly. the business. The head of innovation into. By combining the culture and
The VP at the innovation lab of a labs for a financial major confirms approach of innovation centers
leading fashion retailer said: “You this by saying: “We bring all sorts of with the budget firepower and
need to be honest with yourself best practices, tools and techniques access to customers that they enjoy,
about what is working, regardless across the business to help make traditional organizations have an
of the amount of time, money, or people more creative, more engaged, excellent opportunity to re-energize
personal capital you have spent.” more innovative”. their innovation capability.
At this retailer, ideas are tested in 1
to 2 stores and, based on feedback, a
prototype is created for a pilot in 10
to 15 stores.
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Research Methodology
■ For the purposes of this research, we considered a company to have an innovation center only if at least one of its centers was
located in the following tech hubs:
Silicon Valley, Tel Aviv, Los Angeles, Seattle, New York City, Boston, London, Toronto, Vancouver, Chicago, Paris, Sydney,
Sao Paulo, Moscow, Berlin, Waterloo (Canada), Singapore, Melbourne, Bangalore and Santiago (list based on a study of
global tech ecosystems conducted by Telefónica and the Startup Genome in 2012- Telefónica Innovation Hub, “Startup
Ecosystem Report”, 2012)
■ We adopted a comprehensive research methodology leveraging both Primary and Secondary approaches:
o Focus interviews with executives from leading organizations, overseeing innovation related activities.
Representing diverse industry sectors, all of these are large organizations with most having revenues
greater than $5bn (see below for list of executives who agreed to be named).
o Web-based research of the largest 200 companies by revenue based on the Bloomberg list. We covered
the following sectors – Automotive, Financial Services, Consumer Products & Retail, Manufacturing and
Telecom, and picked the forty largest companies by revenue within each sector.
The research explored innovation centers along multiple dimensions:
■ Mission behind the centers (e.g. increase innovation output, form relationships with eco-system partners)
■ Focus areas for the centers (e.g. mobility, Internet of Things, Big Data)
■ Collaborative relationships forged (e.g. with large companies, startups, universities)
■ Governance models adopted (e.g. centralized, decentralized, autonomous)
■ Challenges faced
■ Results delivered
Acknowledgments
We would like to thank the numerous executives who graciously spared their time for this research. In particular, we would like to thank: Ruth
Yomtoubian, AT&T; Bridget Dolan, Sephora; Mark Brodeur, Nestlé; Kevin McKenzie, Westfield; Georges Nahon, Orange; Bao Nguyen, Walmart;
Debbie Brackeen, Citi; Karen Weining, DuPont; Ed McLaughlin, MasterCard.
You can find an unabridged version of this research on Capgemini Consulting website or on SlideShare:
https://www.capgemini-consulting.com/the-innovation-game
http://www.slideshare.net/capgemini/the-innovation-game-why-how
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About Capgemini