Roy Vayalathu

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The future of Swiss Business Competitiveness: Industrial to Knowledge Age, A call for Strategic Change

As Novartis continue with the long battle to protect its patent rights in India, Roche lost the battle to the Indian Cipla’s generic in 2012. Both Novartis and Roche are still struggling for a strategy that would enable them to spread their wings in the $12Bn drugs market that is still 90% capitulated by generics (Routers, 2012) (Economic Times, 2012). As the Swiss global conglomerates venture out further into the international markets from known protected environments, reliance on homegrown business competences may prove to be ineffective and at times generate inertia. Uncertainties and risks from external forces as described above are a norm for the global business that has become increasingly complex and the rate of change is accelerating. The agility to anticipate, adapt, innovate and identify emerging growth opportunities could make or break Swiss businesses in the future.

As the effects of globalization continue to take influence on Swiss business attractiveness, a Swiss Federal Agency Commission study (Outlook 2025, 2011) has highlighted global power shift and development of EU as the major macro economic forces that will play an important role towards shaping the future of the country’s economy. It could result in the trade-off of centuries old economic policies and business practices.  Switzerland, long known for innovation delivery and service quality is finding itself at the crossroads of fundamental changes, as it tries to uphold the long-standing business norms. The “Made in Switzerland” brand and the concept of Swiss quality have been challenged by strong competition from abroad and changes in customer service and product utilization patterns (Meyer & Pfannes, 2012). The world has witnessed over the last decade power shift from west to east, shifting directions of EU, increasing impact of emerging economies and a financial crisis on which Switzerland had hardly any influence. The study developed scenarios, as per which, the continued Swiss business competitiveness and maintaining the current healthy balance of export and import (over 11% excess export) as the most decisive factors in shaping the future of Switzerland economy.

Switzerland is renowned for its ability to stay ahead of competition by virtue of Innovation and technological advancement through research and efficient workforce. The question remains, can Switzerland continue to be competitive and push the envelope by increasing efficiencies to stay ahead in an integrated or fragmented global / EU market place? To deliver to today’s networked society, Swiss businesses would require shortened product life-cycles and adaptation to technological advancements. In this context, it is to be noted that every second Franc earned by Swiss corporates come from their export activities.

Big Data is gaining momentum across the world. So much so that Harvard business review has dedicated the October 2012 spotlight on this business idea. Customers, suppliers, employees and business partners are increasingly using mobile and connected devices constantly to gain upper hand and latest information. While traditional approaches to customer relations are increasingly challenged, big data offers enormous opportunity for innovation, crowd sourcing / development, tailored solutions, building online communities that are loyal and for product mavens. However, studies have stated that the optimal use of big data in organizations have faced with organizational inertia. Sizing the opportunity, identifying resources and gaps, alignment of strategic choices and addressing organizational implications remain a challenge for big data utilization (Bughin, Livingston, & Marwaha, 2011). 2013 Global pharmaceutical CEO Survey (PWC, 2013) revealed that 94% of the CEO’s claimed that clients & partners influence their business strategy and 81% are looking for new ways to increase customer engagement. Novartis oncology open partnership was founded to realize the power of collaboration that leads to discovery and development of innovative medicines (Novartis, 2013). Big Data is all about fragmented data, which businesses could relate and mine for their advantage, but not yet part of the corporate strategies of many, as they consider it as too big to tackle.

The changing face of international business context, driving innovation through networked millennial, adapting to the emerging market needs and delivering services to the 21st century customers require transformational leadership capabilities and a new approach to management. Tomorrow’s managers must be capable of leading with minimal authoritative power as employee / employer relations are more and more taking the form of business association. As the globalized world-market evolves, management functions and leadership roles are challenged and transforming as a result. The life cycle of established management principles and leadership models are becoming shorter and shorter analogically to those of today’s products and services. The process of making managers and leaders fit for tomorrow’s business challenges, need to be updated continuously and the business leaders “Made in Switzerland” need to be “Made for the world”.

I believe it is now the time to reflect on past years business trends and ask at industry level questions :

– Can the organization continue to focus on delivering innovation and quality service still be maintained in the midst of competition from emerging markets and consumer trends? –      

– What are the main pillars that make my industry any my current positioning, one of the most competitive in the world?

– What makes Switzerland the fertile ground for innovative business for me?

– What forces are at work that are shaking my competitive advantages and which of the new trends should I seriously consider? How can I separate noise from value adding trends?

– What are the different micro- and macroeconomic forces that threaten my business prospects in the future?

– Am I ready to adapt and embrace these changes? How could the Swiss business competitiveness be sustained in the future?

References :

Outlook 2025, S. C. (2011). Outlook 2025 : Analysis of the situation, context and challenges facing federal policy. Zurich: Confederation Suisse.

Meyer, T. D., & Pfannes, P. (2012). The Swiss Top500 — New opportunities for growth in volatile times. Zurich: Accenture Management Consulting.

SwissInfo. (2011, February 3). Service sector. Retrieved February 21, 2013, from Swiss Info:

EconomyWatch. (2010, March 18). Economy Watch. Retrieved February 21, 2013, from

Routers. (2012, November 3). Retrieved February 23, 2013, from

Economics Times. (2012, September 12). Retrieved February 23, 2013, from Economics Times: (2012, November 12). Retrieved February 23, 2013, from Roche:

Routers. (2012, November 3). Retrieved February 23, 2013, from Routers:

Economic Times. (2012, September 10). Retrieved February 23, 2013, from Economic Times:

Roche. (2012, November 12). Retrieved February 23, 2013, from Roche:

Novartis. (2013, June 1). Novartis Oncology . Retrieved March 26, 2013, from Novartis Oncology Vision:

Tapscott, D., & Williams, A. D. (2007, March 2). Business Week. Retrieved March 26, 2013, from The New Science of Sharing:

Bughin, J., Livingston, J., & Marwaha, S. (2011, October 1). Seizing the potential of ‘big data’. McKinsey Quarterly , 1.

PWC. (2013, January 1). 16th Global CEO Survey Pharmaceuticals & life sciences. Retrieved March 1, 2013, from PWC:

Switzerland, S. I. (2012). The Swiss Chemical and Pharmaceutical Industry. Zurich.

PWC. (2012). From vision to decision Pharma 2020 . USA: PWC.

Switzerland, S. I. (2012). The Swiss Chemical and Pharmaceutical Industry . Zurich: Science Industries Switzerland.


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Switzerland’s Insurance Industry: It’s time for customer focused innovation

dsc0051.jpg  As we all look forward to 2015 with a fresh breath of hope and growth outlook, I took a reflective view at the Switzerland’s Insurance industry that I have been working closely for the past 9 years. Over the years I had the opportunity to work closely with industry decision makers to deliver multiple business solutions and to get firsthand view from some of the market movers. I have also been reviewing industry reports and studies from prominent agencies and universities.

My objective is to provide an overview of Swiss insurance industry and how the industry players are positioning themselves to industry changes in the post financial crisis era.  I then take a detailed look at the customer demographic changes, changing engagement patterns, increased individualization demands, omini-channel access needs and how the latest IT technology trends be used to better serve and to gain market advantage.  The question is how to reach the right customer at the right time with the right product at the right price through the right channel? I suggest a larger commitment to lean start-up approach in insurance industry for a closer collaboration between various parties including customers and partners alike to build, test and learn.

I start the article by giving an overview of the current market structure and the relevance of this industry within the Swiss economy. All articles and reports referenced and some of the insights that I learned from are listed at the bottom of the article.


To better understand the importance of insurance industry in Switzerland we have to compare it to the overall size of the industry within the Swiss economy context. Switzerland is one among the 20 largest insurance markets in the world. With gross value added of about CHF 20bn, it is equivalent of around 4 percent of the economy as a whole. The insurance industry is a key player of the Swiss economy that relies heavily on the financial services industry and its competitive edge to stay on top as the world’s most competitive economy. With the 23 life insurance, 123 non-life insurance and 26 re-insurance companies active in the country, the insurance industry employed about 48,600 people at the end of year 2012. In 2011 the premium volume in Switzerland amounted for 30.6bn in life and 25.3bn for non-life insurances. It is also estimated that re-insurance amounted for an additional 1.8bn. Worldwide 10 of the top Swiss companies earned an estimated 61.8bn in premium volume for life, non-life and reinsurance combined.  Capital investments of Swiss life insurance, non-life insurance and reinsurance companies totaled an asset of 507bn.

Moving from those facts to the recent trends, life insurance companies have seen a 2.2% premium growth from 2011 to 2012. This growth was mainly driven by increase in-group contracts of occupational pensions. Also interesting to notice is the fact that six of the top life insurance players shared about 86.6% of the market and the number remained constant compared to the year before. Non-Life Premium growth in 2012 amounted to 2.4% primarily driven by minor premium adjustments, robust construction activities, stable economic environment and population growth in Switzerland. Here as well nine of the players shared 83% of the market that has hardly changed over the last years. Switzerland spent the highest per person on insuring domestic risks. Market structures are generally considered to be slow to change.

Over the past years insurance industry have been making an increasing contribution to the added value of the Swiss financial center. As the contribution of the banks has stagnated due to the recent financial crisis, the insurance industry delivered excellent performance in 2012 despite record-low interest rates and sluggish economic growth.

The insurance industry has completed over the years positive structural transformation and efficiency gains. The Switzerland’s regulatory environment, economic and political stability, quality reputation, reliability, Zurich location accessibility, Switzerland’s infrastructure and educational system offers greater business advantages and are hard to replicate. Over the past year the main drivers of growth for industry was the positive trend in population growth and the rising incomes of private individuals. The reinsurance companies gained market share from the rapid growth in emerging markets.

The current situation in insurance regulation revisions provoked uncertainty, and the differences between Swiss insurance regulations and those abroad can hinder the competitiveness of local companies.

Changes that are shaping the industry

In the wake of increased globalization, the global uncertainty in the macroeconomic environment continues and the local industry lag on organic growth as mentioned above. Large insurers are increasingly looking to emerging markets for strategic growth. Most major Swiss life / non-life insurers have made substantial investments in the Middle East and Asian markets. I have personally lead delivery of a strategic business application for one of the major insurer in the Middle East. For reinsurance companies the growth in emerging markets and the consequent expansion in demand is opening up substantial opportunities but it also demands a need for new risk evaluation model that cannot be adapted from home markets.

The competition between the life insurance companies and banking sectors for consumer savings and investments products will continue to increase. The central challenge for non-life insurers is the fierce competition from a saturated local market.

The financial crisis also poses challenges regarding the investment activities of the insurers. Life insurance companies need to overcome the challenges of the current low interest rates environment and demographic change that is putting pressure on spending.

I expect the recent IT technology trends such as omini-channel presence, social media, big data analytics and mobile data to offer substantial advantage to those who harness it and will be able to change the landscape of current Swiss insurance industry. As Clay Christensen reminds us, the insurance industry has still not shaken by disruption, may be these technological trends will shake the current market balance. The new technical possibilities equip customers with new information and tools that present them with extended research and symmetric information for making decisions. These informed customers are more demanding than their predecessors. Harmonizing technological breakthroughs such as social media developments, cloud computing, location based analytics, hosted industrialized solutions; Internet of things will open up new possibilities to connect with customers, bring in product innovations, cost reduction and operational restructuring. Mobile distribution channels are gaining momentum as a channel for information gathering and after sale support.

Know your customer well has long been the success formula in insurance sales. Customer loyalty programs and brand name of the insurance company have seen eroding impacts when it comes to customer retention. But in the wake of these technological changes the insurers now need to ask from a different perspective what does future customers expect? What are the risks that they are willing to off load? What does innovation mean to real customers? Can current processes still be effective in serving future customers?

Industry reaction

Swiss Insurance companies are great at modeling and managing insurance risks and central disciplines. This expertise has helped them through the turbulence of the financial and economic crisis and is still focused on attention to the risk management. Though no new market entrants are foreseen in the coming year, the established players have not been successful in capitalizing on business opportunities from the crisis as they where not able to acquired new accounts. As the cost pressure mounded over the last year most companies continued to look for optimization in processes, digitization of products and services and value chain corrections. Product innovation, mass customisation and specific focus to niche markets are far from site in the industry.

Customers on the other hand continue to expect greater product innovation / customization driven by technological advancements, personalized custom services and prevention approach in insurers range of products and services.

Change Drivers

I believe 2015 will see an increase in the speed and intensity of major change cycles in the business environment of insurance. This will mainly be driven by the customer demographic changes, customer relationship patterns, increased individualization demands, decline in solidarity, new technologies and channels, altered communication behavior such as social media engagements, pressure from consumers and advent of international markets.

An Accenture study has shown that private, capital-financed retirement schemes are gaining ground over pay-as-you-go systems. Insurers and customers see advisory services as dynamic and attractive. Insurance companies have not fully seized these opportunities from the growing retirement planning market and the banks are gaining momentum in this sector.

The Game changer

Based on the study stated above, today’s customers look for good advice across channel, transparency, comparability, service and competitive pricing as criteria for selecting their insurance. They need product flexibility; a range of reasonably priced and standardized products, and a high level of service. Recent financial crisis, availability to computing power and cheap / easy availability of technologies/ tools are the basis for this shift. How much trust is established with the customer will be the decisive criteria in sales. This forces insurance companies to rethink access options and distribution management
. Digital technology based channels are considered increasingly significant in the nonlife segment compared to life insurance where in customers continue to still prefer personal advisory based sales.

Customers are now looking for new products that are easier and flexible and that can be adjusted to their individual requirements. Gone are the days of complex products that required in-depth understanding of the industry terms and difficult to compare. Today’s customer expects greater relationship, transparency and engagement with the companies.

Gearing products and services to specific customers rather than standard customer segmentation requires flexible customer analytics. Improved risk selection is crucial to success but challenging to implement. They involve consumer-oriented “pay-as-you-<do>”. Prevention is a promising approach for insurers’ customer relationships and the associated business model.

As we have seen in lean startup companies and other industries we need to build up a culture of working together with the customers, partners and the analysts to build-test-learn approach to bring real customer value driven products that can be individualized.

Focusing on the customer lifetime value

Insurers continue to believe that customers are most interested in price discounts or special contract conditions in exchange for appropriate prevention behavior.

But to better understand the customer behavior we need to look deep into changes in customer knowledge, interests and behavioral patterns that are at most importance to the insurance companies. The Accenture study indicated that about 26% of the Swiss customers are relationship-oriented individuals who want personalized advice and demands choice of products to meet their specific needs. Only 22% of the customers are technology savvy customers and are constantly on a lookout for bargains. They are willing to completely switch to electronic media for purchase and after sale services. They are mainly driven by price and standard risk coverage.

The 78% of customers that includes relationship-oriented individuals, passive customers that are actively value good advice and indifference customers demand non-standard products that are adapted for their needs to some degree. They are willing to share additional personal data and communicate over the Internet in exchange for individually adapting a product and price as well as a big selection of products and additional services. This opens up new opportunities for product innovation.  Relationship, individualism and advice are key to these customers. They need flexible adjustment of products to changes in their life circumstances, high level of information and knowledge on various covers and risks and independence in the purchase process. They also require comprehensive total solutions / combination products, support on prevention and advice. They are more critical but also interested in dialog. Most insurance companies do not have proper tools in place for an active listening and conversation with these customers either over social media or other channels.

Some of the major barriers for insurers to serving them to their expectation are lack of customer profile data for cross touch point aggregation, legacy application integrations, rigid technical infrastructure or fragmented web platforms / applications. An across the industry benchmarking such as with retail industry that has well harnessed these technological trends would help to understand the technical possibilities and open up new strategic initiatives.

An organization’s ability to reach selected customer segments with inexpensive, simple and adaptable products will be the key to business success in the future. This brings me to the need for investments in building applications that provide different means of access for the customers (omini-channeling), enable target-specific marketing / customer segmentation, topic-centered advice / life-cycle approaches, innovative product solutions and need based partner management. This advancement will enable businesses to ask the question what is the actual value delivered to the customer? What is the perceived value? They will also have to address the customers’ desire for high-quality contacts in trust based personalized advisory services and distribution.

Customers will also start to look for insurance benefits not only in monetary form but also as benefits in kind (road side assistance, privileges in special life style events etc.). The gap between customers perception of insurance innovation and insurance product designer perceived innovation has widened over the past years. Industry insiders continue to search for innovation involving additional components and risk aversion which add greater complexity while customers reward product innovation that is simple, flexible and combinable.

Socio-demographic, economic features and wealth or income are three frequent segmentation criteria’s in the insurance industry. Total value of the customer and his life stage are the other two that are used sparingly. For example in Switzerland most Motor insurance products consider drivers nationality and number of years since receiving the driving license as two of the major criteria’s for calculating the premium. Neither of these criteria’s add value in attracting the right customers as stated above (not the most efficient pricing approach or relation oriented). There is simply not enough data to benchmark all drivers by nationality. Also just because someone received a license 10 years ago and never driven does not make him a safer driver. Instead the question should be how efficiently the specific driver is able to drive his vehicle and how the premium can be adapted on an ongoing basis based on the specific customers driving patterns. Today’s location based technology offer the possibilities to answer these questions with proper data collections.  Most companies collect an increasing amount of data but few are able to evaluate it methodically and continuously. Today’s customers are more generous in providing data so insurers have better opportunities for utilizing data. This type of customer analytics requires insurers to have value chain processes featuring fast and flexible product development, group orientation or individualized distribution. Existing infrastructure systems are often not flexible enough to depict the different product versions

Today we are in a position to develop products based on the consumer-oriented “pay-as-you-<do>” model. But this requires that companies must be able to collect appropriate data and analyze it in a way that allows segmentation.

I believe 2015 will also see the possibility opening up for shifting insurance company focus towards protection. AXA Winterthur has successfully introduced the crash recorder. Another example is Basler Versicherungen mobile application for efficient use of a weather warning for rain, hail and snow. The object is to affect their driving behavior positively and improve it continuously. But I think there is greater value to be derived from these innovations. For example, my life insurance company offers me the possibility to get a discount on a health club annual fee. But from a personal motivation point of view this one time incentive is not a psychological driver for maintaining good health, which is the intended prevention from the insurer. I believe a better question to be asked here is how effectively I maintain my fitness regime and how frequently I actively participate to a fitness activity? This would enable my insurance companies to incentivize me on an ongoing basis with attractive offers that are more personalized for my personal situation.


As it is the case with any matured industry, focus on process optimization, strict cost management & performance management will continue to exist and it might also invoke strategic considerations to adopt new approaches to sourcing.

But as stated above customer relationship management, Advisory services, efficient distribution management, modern IT infrastructure & innovative market segmentation, product innovation through technological assistance, time to market will drive the growth in insurance market over the next years.

Next wave of customers might make the initial contact through diverse channels and expect online, personal and mobile channels for purchase, claim recording, updates or for submitting feedback/ complaints and engage with the provider.

The challenge will be to have integrated data set covering across above mentioned distribution channels. The system must make available comprehensive, consistent and up-to- date data across the channels and use the benefits of these insights to improve customer segmentation based on multi-dimensional dynamic view of the customer and risk profiles. Only then an insurance company will be in a position to make an informed segmentation that will assist to reach the right customer at the right time with the right product at the right price through the right channel. That will lead to new insights into customers and pave the way for an industry disruption to identify underserved customers and niche products. To achieve this insurance companies need to start thinking like a lean start-up and collaborate closely with customers, partners and analytics alike to build-test-learn and improve.


  1. Insurance in 2015 – Determining the Position New Coordinates in the German-speaking Insurance Market (Institute of Insurance Economics University of St. Gallen.)
  2. LOCATION STUDY FOR THE SWISS INSURANCE INDUSTRY – A study commissioned by the Swiss Insurance Association
  3. Future trends in insurance
A global perspective on the life and non-life sectors – Trevor Rorbye.
  4. Global Insurance Market Trends 2012 – OECD
  5. Switzerland as a location for financial services Figures – sif
  6. Facts and Figures 2013 The private insurance industry – SVV
  7. Insurance market report 2012 – finma

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Open Innovation – Great opportunities but still faces integration challenges

DSC_0011Since the inception of the term “Open Innovation” in 2003 by Chesbrough, the concept has evolved into an established research area. The focus to define processes to build ECO system which integrates outsiders from different perspectives such as partners, customers, structural, cultural and institutional adaptations are being extensively researched (Gassmann, Enkel, & Chesbrough, 2010). With R&D as the prime focus, initially Chesbrough defined open innovation as a new paradigm to purposive use on inflow and outflow of knowledge to accelerate internal innovation and expand the markets for external use of innovation (Chesbrough, West, & Vanhaverbeke, 2006). Towards achieving this paradigm shift the organizational knowledge creation process must be looked through the roles of leadership, context & knowledge assets (Krogh, Nonaka, & Rechsteiner, 2012). Firms must analyze the rationale for external collaboration, execution aspects, industry acceptance to openness, effectiveness measures and areas of cultural change (Krishnan & Jain, 2013). The key to success is the realization of “shift in ownership of innovation” towards a shared innovation and it should be internalized.

Open innovation is quite often sited in the context of IT from an open source perspective where it is common today to see firms working with external entities to achieve competitive advantage. Increasing cost of R&D, fears of product commoditization and fast product replication are forcing organizations to switch from a product view to service platform view to sustain profitability. D. Pink points out that as abundance, Asia & automation sweep in across developed western world (Pink, 2006), firms in these regions rely on service innovation for business sustainability.  Chesbrough acknowledges that by transforming to platform business model that incorporate external and internal innovation by integrating customers and suppliers to co-create and offer variety of value added services, that can be developed in to a substantial competitive advantage (Chesbrough H. , 2011).

The very nature of open innovation demands integration of external knowledge to bridge the internal knowledge gap (Purcell & McGrath, 2013). It requires that firms engage with the crowd outside its boundaries and co-create. Organizational knowledge creation theories fall short in addressing knowledge creation at a wider ECO system that span beyond organizational boundaries (Krogh & Geilinger, 2013). The challenge is to attract a broad community to the firms ECO system and sustain their participation. Though Chesbrough extensively critizes the existing strategy frameworks and Porters value chain as tightly internaly focused, when it comes to sustaining the value created, he seems to rely on existing frameworks (Chesbrough & Appleyard, 2007) and leave room for further research.

Integrating innovation ideas originating from emerging markets have been gaining momentum since the recent financial crisis. The idea that proven innovation from emerging markets can be brought back to developed markets for finding space for disruptive innovation (Christensen, 2011) has been researched under the term Reverse innovation (Govindarajan & Trimble, 2012). Though open innovation is commonly accepted, an interesting observation is that recent disruptive innovations emerged from closed innovations and then supported by open service platform. This strengthens the assumption that innovation potential through reverse and disruptive innovation over the ECO system platform is a topic for further research.

The innovation stack (Hamel & Breen, 2007) put forward by Hamel positions management innovation at the pinnacle of innovation stack to highlight the need for management 2.0 in making innovation every one’s job by mobilizing human capabilities by means of building communities. While Chesbrough focused primarily on creating organizational value, there is little attention given towards creating sustainable shared value (Porter & Kramer, 2006). My collegues and myself have done an extensive study on IT firms from India, Europe & US on this aspect from an IT organization perspective and laid the ground for a framework. This require further research and need to be developed in the context of open innovation.

In summary, there is a lack of common framework that defines how to build an ECO system to engage and co-create with customers and suppliers, sustain and measure its innovation effectiveness. Especially in the context to high skilled work force’s changing engagement patterns to achieve management excellence. The open innovation principle offers the basic elements. There is a need to develop a consistent open innovation reference that integrates separate strands of researches and practices from processes, structures, service and management innovation (Gassmann, Enkel, & Chesbrough, 2010) that would enable organizations to co-innovate with outsiders.  Now the research communities and industry practitioners need to gear up towards delivering that.


Chesbrough, H., West, J., & Vanhaverbeke, W. (2006). The future of open innovationOpen Innovation: Researching a New Paradigm. Oxford: Oxford University Press.

Gassmann, O., Enkel, E., & Chesbrough, H. (2010, January 1). The future of open innovation. R&D Management , p. 1.

Krishnan, S. K., & Jain, R. (2013). Exploring Openness in information technology – Innovation Projects. Ahmedbad: Indian institute of Management.

Purcell, R., & McGrath, F. (2013). The Search for external knowledge. The Electronic Journal of Knowledge Management , 11 (2), 158-167.

Pink, D. (2006). A Whole New Mind. New York: Riverhead Books.

Chesbrough, H. (2011). Open Service Innovation. San Francisco: Jossey-Bass.

Chesbrough, H., & Appleyard, M. (2007, October 1). California Management Review , 57-76.

Govindarajan, V., & Trimble, C. (2012). Reverse Innovation. MA: HBR.

Christensen, C. (2011). The Innovator’s Dilemma: The Revolutionary Book That Will Change the Way You Do Business. New York: Harper Collins Publishers.

Hamel, G., & Breen, B. (2007). The future of management. MA: Harvard Business School Press.

Porter, M., & Kramer, M. (2006). Strategy & Society: The Link between Competitive Advantage and Corporate Social Responsibility. Harvard Business Review .

Krogh, G. V., Nonaka, I., & Rechsteiner, L. (2012). Leadership in Organizational Knowledge Creation: a Review and Framework. Journal of Management Studies , 240-277.

Krogh, G. v., & Geilinger, N. (2013). Knowledge creation in the eco-system: Research imperatives. European Management Journal .

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Your Customer View

I have been reading lately a lot about outside-in view of business where in the business purpose and mission are deified purely based on customers. Some authors even goes to the extend to claim that organization’s sole purpose is to satisfy the needs of its customers. Prof. Peter drucker argues that the purpose of an organization can only be defined from a point of view of its customers and market. As the customers are only interested in their own values, wants and reality, businesses must start stating its mission by addressing such attributes.  Failure to identify relevant customers could take the business spiraling down. Who are they? where are they?  how do they buy? and how are those dimensions changing? these are the question every manager must keep asking constantly. That would enable one to define what business they are in? what will it be? and what it should be?

However, will that makes an organization capable of taking on the challenges head on? I am not sure of that. To be able to take full advantage of environmental change insight, organizations also need to develop an inside-out view. Where in the managers fully understand the competencies and their relationships from inside to be able to align its innovation potential to the market demands/changes. That would require constant zooming in and out switching from outside-in to inside-out view. To be successful in todays business context, managers must be able to understand and vision changes in society, economy and market while constantly making, moulding or abandoning behaviors and practices to adapt to the new reality.

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External View of Result

“The single most important thing to remember about any enterprise is that results exists only on the outside. The result of a business is a satisfied customer. Inside an enterprise, there are only costs.”

– Peter Drucker

Wow. What an interesting statement. I have seen so many metrics highlighting efficiencies and improvements. This statement took me to the roots. Every manager must look at the value of their product as perceived by the customer. At the end if the customer does not like your product, it doesn’t matter how great your product design is.

  • Understand your customers and their needs
  • Establish and live the purpose &  mission of your organization
  • Make work meaningful for your work force
  • Understand and manage your social responsibility

It’s all about people, interactions and communication. That’s all about management.

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I just finished reading the book “The Goal” by Eliyahu Goldratt and Jeff Cox. Even though the book was written from a factory manager’s perspective, what really got me thinking was the moment in which the main character start asking the questions

What is the purpose of my organization?

Why does my organization exist and are we contributing to it?

Are we aligning our measurements to it?

Even though it sound so simple, I am not sure many managers takes a moment away from their busy schedule and try to answer these simple questions.

As part of a CMM Level 5 organization and many other in-house and external IT organizational processes, I have seen incredible number of metrics being collected by various organizations during the IT development proceses. But when I look back and reflect I have to say there are very few measurements that really aligned the true purpose of the project / product and aligned them to measure the true value that is delivered to the bottom line.

No matter whether is it production or IT services, it all comes down to identifying the bottlenecks in your process and adapting the rest to match them. Really a very insightful advice to live by for any managers.