Four sources of trapped value – and seven ways to exploit it

Rapid advances in Technology are creating huge potential for organisationsto unlock value from these changes organisations need to Innovate. While a majority of organisations are increasing their innovation spending the return on this investment has declined by 27% over the past five years. This is primarily because these organisation are not able to keep pace with the improvements in technology and are focussed on incremental innovation thereby missing the opportunity to create deep changes in the organisation. This lag creates  “trapped value” in the following four areas: 

  1. Enterprise trapped valuewhere the opportunity is visible but the cannot be accessed due to the organisation’s limiting business models and capabilities.  
  2. Consumer trapped value, where there is an unreasonable cost burden  or latent consumer surplues (think Airbnb exploiting less expensive under-utilised consumer-held real estate). 
  3. Industry trapped value, where only few companies are reaping rewards; or companies are failing to pursue partnerships that accelerate innovation.  
  4. Societal trapped value, where commercial activities fail to create benefits for the general public. Think about reduced carbon emissions, job creation, or water and food safety. 

At the same time a small group of companies (~14% of the executives in who participated in our research) are able to successfully generate value from their innovation spend. What are these companies doing differently? As per their executives, these organisations are: 

  1. Change-oriented: they do not limit innovation to their product or services alone but employ innovation intesively to make deep and fundamental organisation change  
  2. Outcome-led: they broad base the innovation efforts across the organisation and link these to financial outcomes 
  3. Disruption mindedextend the boundaries and scope of innovation to disrupt the industry and create entirely new markets 

Lets look at the  seven characteristics of companies that are focussing on innovation to unlock  trapped value.  

  1. Hyper-relevant: They respond to customers’ changing needs. Tommy Hilfiger, for example, allows customers to watch a live stream of its new fashion collection, and place orders on the spot. In the past, it took six months from catwalk to catalog. 
  2. Network-powered: harness the power of eco-systems, for example Adidas partnered with a company specialising in 3D printing to make personalised running shoes (there’s hyper-relevance again). The kicker? This partnership allows Adidas to produce shoes in a few days, where their industry produces the same output in months. Using this partnership, it is increasing production a whopping 20 times. 
  3. Technology-propelledembrace leading edge technologies to innovate. Exmaples of these innovations can be found across industries.  
  4. Talentrich: The best companies invest in leadership skills to drive their innovation efforts. They also invest in training employees to be ready for the future. AT&T is on track to spend a billion dollars in seven years from 2013 to 2020 in re-training for 140,000 employees. That’s a huge number. But it’s necessary to spend money re-training for new roles 
  5. Datadriven: Data has increasingly become the most valuable asset in organisationData driven organisations harness the value in date to improve performce and be more customer centric. Chevrona large oil producer uses data to cut the time to drill a shale well almost in half – from 27 days to 15 days. 
  6. Inclusive: Innovative companies develop new services that better address customers’ higher needs in an attempt to be inclusive and address a broad range of stakeholders.  Like anybody else, older people – 70 and over – prize autonomy.  Accenture has partnered with Age UK and Amazon Web Services to develop an AI platform help older people keep their minds and bodies active. Carers and family members have access to the portal to keep an eye on whether their older clients or relatives are adhering to their medication schedules, or perhaps demonstrating unusual behaviour. The older person is in charge of their own privacy settings. There is the network effect again, driving an inclusive innovation. 
  7. Asset-smart: Efficient asset and operations management is another practice that frees up capacity for innovation.  The Australian Securities Exchange is leveraging a block chain solution to record shareholding and manage the clearing and settlement of equities  They partnered with blockchain startup Digital Asset to acheive this 

 That’s the four sources of trapped value, and seven ways you can unlock it. For more information, please contact me. Or you can read more about innovation in our report, How to unlock the Value of your Innovation Investments.