SAP’s Co-Innovation Lab
“The Co-Innovation Lab, located on SAP’s Palo Alto campus, is a hands-on working environment for SAP, its customers and integration partners to execute joint projects, and work on proof of concepts, enabling them to discover and promote new business applications and technology solutions. Customers also benefit from reduced integration costs and faster innovation cycles while gaining a new generation of highly agile and adaptable solutions.”
https://www.sdn.sap.com/irj/sdn/coil
“The collaboration workspace from SAP aims to provide Web 2.0 infrastructure such as blogs, wikis and online forums – with built-in governance for all companies to participate and collaborate in real time within a secure business network community.”
“SAP Co-Innovation Lab Offers Multiple Projects” on SDA.
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HP, Intel, Cisco and NetApp have donated products and systems to SAP’s COIL, which is celebrating its first anniversary. SAP’s Walldorf facility in Germany, where the company is headquartered, seems to be the reference model for this newer one in the Silicon Valley. The lab provides services such as: project portfolio management, onsite and remote access to live demos and a training theater.
COIL projects involve ISV, independent software vendors and developers, system integrators as well as equipment vendors. The focus is collaboration around SOA, service oriented architecture, SaaS, software as a service and, potentially, service semantics which happens to be the cornerstone of Web 3.0 concepts.
The following video showcases SAP’s developer challenge, which was held just this past week. Forty-five developers from SAP and customer and partner companies worked together in Palo Alto for five days on topics such as: “Green IT,” “Social Computing for the Enterprise” and “Mobilizing the Enterprise.”
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| Naperville, IL. 20 June 08 |  |
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Philips’ InnoHub
“The InnoHub aims to create an environment in which breakthrough innovations can occur in an open innovation setting. At the InnoHub, end-users, product developers, and various business partners come together to actively develop new ideas for products and services in an inspiring, real-life setting.”
“The concept is combining three aspects: a physical environment designed to inspire breakthrough ideas, innovation methodology and the knowledge of the stakeholders involved in the process.”
http://www.vtt.fi/liitetiedostot/uutiset/FactSheetPhilipsInnoHub15062008.pdf
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Later this year Philips and VTT will launch a new InnoHub in Finland which is aimed to deliver a physical environment facilitating research on new product concepts, usability testing and technology demonstrations.
This lab will also work with partners and universities on projects ranging from ideation to product design by involving experts in cross-functional teams. This kind of consulting and research services can be subcontracted by external companies.
InnoHub allows for recreating different environments such as a full-sized apartment, a fashion store and a hospital ward as seen in the below pictures. These rooms deliver a test-bed enabling researchers to study users’ experiences in advance to conducting more costly field trials.
Usability testing often involves specific use cases (tasks) and a cross-section of target users to determine whether a product meets its purpose in the context it was designed for. Innovation springs from trial & error coupled with a continuous improvement mindset. This means iterating designs (i.e. from mockups to final products) drawing from test results, the observation and understanding of specific behaviors as well as users’ feedback. Designers also get a first hand experience by undertaking these tests themselves. But it should be noted that their intimate knowledge of the product makes them expert power users whose experiences could be very different from those of end users.
If interested in how Philips addresses innovation I would suggest reading “Foresight by Design“. Other company’s practices can be found on this blog’s innovation recipes page.
Picture credits: Philips.
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| Naperville, IL. 18 June 08 | |
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About cloud computing, hosting web apps and streaming the software
“Streaming Office will clobber Google Apps, eventually driving the search giant out of the hosted applications business altogether.”
Read Randall C. Kennedy’s article, “Streaming Office: Death knell for Google Apps?”, on InfoWorld.
“A streamed version of Office would be stored on a server at a hosting provider or enterprise but delivered bit by bit to users on demand through a local network or the Internet, just as streamed music and video are. The software code will be stored on the local PC and persist even after a user logs off. That means that while opening Office for the first time may take four minutes or more, subsequent start-ups should take only 10 to 20 seconds (…) Is £4.99 a month cheap enough to pull customers away from Google Apps, which costs a little more than $4 (£2) a month?”
Read Eric Lai’s article, “Microsoft to trial web streamed Office suite“, on PC Advisor.
“Rather than configuring, installing and testing software for each individual PC, companies can use SoftGrid to create a central store for applications that are sent over in piece parts, or “streamed,” to end users over company networks. (…) The SoftGrid software stores a local “cache” of each application, which doesn’t affect the desktop machines’ configuration. Eliminating the need to manually set up PCs will save companies money when they install new applications or need to introduce changes to existing software.”
Read Martin LaMonica’s article, “Start-up promises streaming desktop apps“, on CNET. Note that the article was published in 2003 and that Microsoft is now offering SoftGrid as one of their own products.
“So is that model going to finish off web application suites like Zoho? Call me hopelessly biased or hopelessly delusional but I vehemently disagree.”
Read Sridhar’s blog, “Streaming Office vs True Web Apps“, on Zoho.
So, this months’s controversy happens to be framed in terms of the potential impact of what appear to be substitute technologies.
I cannot help wondering whether a more relevant question would be if the market can eventually bear different deployment paradigms and business models, as each one is showcasing a different set of pros/cons followed by subsequent trade-offs.
As far as I can tell, the underlying trends are:
- personal computers keep delivering higher processing horsepower and storage capacity, which is now true even for a wide variety of mobile devices, e.g. iPhone;
- “virtualization” and the “network as platform concept” continue to gaining momentum, e.g. Web 2.0 apps;
- broadband access is becoming ubiquitous and upstream and downstream bandwidth are also expected to keep increasing for fixed and wireless connections.
As intelligence is growing at both edges of the network (e.g. devices and servers) and is becoming pervasive, we now see a range of deployment paradigms and a healthy mix of online/offline plays evolving:
- Microsoft’s move enabling a traditionally thick client offline application such as Office to become both a hosted and streaming service, thus embracing cloud computing. Additionally, the company’s recent launch of Silverlight competing head to head with Adobe’s Flash should also be noted.
- Google’s cloud computing mantra has been coupled with off-line capabilities known as Google Gears. This is further extending the capabilities of web browsers by enabling offline access to traditional online services.
- Adobe’s recent launch of AIR is intended to be enable rich Internet applications, RIA, to be deployed as desktop applications, a browserless experience.
This is one subject I am very interested in. So, I’ll share some more insights in future posts. In the meantime, I will welcome your comments and emails.
Picture credits: Digital image content © 1997-2007 Hemera Technologies Inc., a wholly owned subsidiary of Jupiter Images Corporation. All Rights Reserved.
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| Chicago, 8 May 08 | |
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BusinessWeek’s 2008 List of the Most Innovative Companies
Following up on my last post, here is this year’s BW list of the most innovative companies, which now accounts for three financial metrics such as:
- revenue growth and operating margin growth annualized based on 2004-2007 fiscal year earnings before interest and taxes. I’m showing companies with negative operating margin in orange.
- stock return accounts for price appreciation and dividends from the end of December of 2004 to December 2007. Note that GM, Wal-Mart, Starbucks, eBay and Southwest show negative numbers for this metric.
As usual BW’s list relies on the votes from the executives surveyed by BCG, Business Consulting Group, who completed an online questionnaire. The list of companies includes Tata, Facebook and Virgin Group which are privately held… so BW’s ranking does not show the financial metrics for those.
[1] APPLE [2] GOOGLE [3] TOYOTA MOTOR [4] GENERAL ELECTRIC
[5] MICROSOFT [6] TATA GROUP [7] NINTENDO [8] PROCTER & GAMBLE [9] SONY
[10] NOKIA [11] AMAZON.COM [12] IBM [13] RESEARCH IN MOTION [14] BMW
[15] HEWLETT-PACKARD [16] HONDA MOTOR [17] WALT DISNEY [18] GENERAL MOTORS [19] RELIANCE INDUSTRIES
[20] BOEING [21] GOLDMAN SACHS GROUP [22] 3M [23] WAL-MART STORES [24] TARGET
[25] FACEBOOK [26] SAMSUNG ELECTRONICS [27] AT&T [28] VIRGIN GROUP [29] AUDI
[30] MCDONALD’S [31] DAIMLER [32] STARBUCKS [33] EBAY [34] VERIZON COMMUNICATIONS
[35] CISCO SYSTEMS [36] ING GROEP [37] SINGAPORE AIRLINES [38] SIEMENS [39] COSTCO WHOLESALE
[40] HSBC [41] BANK OF AMERICA [42] EXXON MOBIL [43] NEWS CORP. [44] BP
[45] NIKE [46] DELL [47] VODAFONE GROUP [48] INTEL [49] SOUTHWEST AIRLINES
[50] AMERICAN EXPRESS
Data source: http://www.businessweek.com/magazine/content/08_17/b4081061866744.htm
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| Chicago, 5 May 08 | |
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Innovator’s Dilemmas: real options in R&D? (3)
“Traditional valuation techniques often fail to capture or adequately quantify the value created by technology initiatives (…) Anyone who has tried to measure the value of a technology investment has, at some point, discovered the difficulty of presenting a compelling business case using standard techniques like net present value (NPV) or return on investment (ROI).”
“Projected cash flows seem meager in comparison to the investment required, or the discount rate chosen to compensate for the risk is so high that it renders the NPV unpalatable. Analysts often resort to instinctive appeals of “synergy,” “table stakes” or “strategic importance” to compensate for the valuation shortfall.”
Read Dan Latimore’s paper, “Calculating value during uncertainty: Getting real with real options”, published by IBM Institute of Business Value.
“Option pricing methods are superior to traditional DCF approaches because they explicitly capture the value of flexibility. As a result, we believe that option-pricing techniques will eventually replace traditional DCF methods for investment decision where there is significant future flexibility. It is not clear that option pricing will replace DCF techniques for valuing whole companies except in limited circumstances.”
Read Tom Copeland, Tim Koller and Jack Murrin’s book, “Valuation. Measuring and Managing the Value of Companies“, published by McKinsey and Wiley.
Karen Berman and Joe Knight’s book, “Financial Intelligence”, clearly states that finance is one of those things which happen to be as much art as they are science.
When working on emerging technology projects, business modeling aims to deliver pro forma statements, helping teams discuss variables related to the underlying trends, value based pricing, subsequent cost targets, internal and external dependencies, as well as the product’s specific contribution to the value chain (e.g. percentage of value captured in the ecosystem).
This means developing quantitative views and qualitative insights focusing on how the company’s investment could theoretically perform over a given time frame.
This is key to business case reviews and is often based on limited data and an implicit understanding that any projections rely on assumptions and educated guesses (which should be spelled out anyway) because many innovations deal with uncharted territories.
Most would agree that it is best to work with short term estimates (e.g. 1+ years) supported by early market signals (as they might not have yet become market trends as such) and that any calculations beyond that (2+ years) become an exercise in numerology, a divinatory art in other words.
As an example, at a conference I recently attended in New York, some entrepreneurs leading well known web 2.0 firms mentioned that it is hard for them to figure out what’s going to happen to their business by the end of this year. Some VCs even question if you really need financial modeling to be able to make the kind of investment decisions they thrive in. I would refer you to another post from July of last year on innovator’s dilemmas to explore the rationale behind that statement a bit further.
As shared just yesterday, we are discussing projects characterized by high return / high risk scenarios, which might involve a longer investment commitment than less uncertain projects driven by better known customer demand and proven market trends. When looking at a company’s product portfolio, it is a well known fact that Net Present Value (NPV) and other discounted cash flow (DCF) would factor the project’s risky nature, but they might not capture the potential for value generation derived from the new technology.
As a result, flexibility (enabling the company’s actual options to innovate) is ignored and undervalued. DCF considers uncertainty as a negative factor, leading to a lower project valuation by applying high discount rates. This means: as the hurdle rate increases NPV decreases leading to decisions that can jeopardize long term opportunities, a mind bugging approach when the upside potential can be huge.
“For several years, the oil and gas industry and pharmaceutical companies— businesses characterized by large capital investments with extremely volatile payoffs—have been using real options to help them quantify the risks and potential rewards associated with making investments in risky environments.” Dan Latimore.
Just a quick reminder. I’m basing this discussion on the need for high tech companies to become serial innovators to sustain and grow their business vs. just relying on revenues from a flagship product and incremental innovation. By the way, I’m assuming this stuff is of interest as yesterday’s blog traffic was the highest recorded by consultaglobal so far.
Picture credits: Digital image content © 1997-2007 Hemera Technologies Inc., a wholly owned subsidiary of Jupiter Images Corporation. All Rights Reserved.
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| Chicago, 1 May 08 | |
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