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IpOp DISCOVERING EUROPES INNOVATIVE ALTERNATIVE TO THE CORPORATE BUSINESS PLAN AND HOW IT BOOSTS CORPORATE ENTREPRENEURSHIP

Raphael Cohen, University of Geneva 16 ch de la Voie Creuse, 5e tage, 1202 Geneva, Switzerland Tel + 41 22 3469900, Raphael.cohen@unige.ch Heribert Watzke, Nestl Jerome Katz, Saint Louis University

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ACADEMIC ABSTRACT This workshop introduced a novel European approach to the business case, which fosters internal open innovation. Used by organizations such as Nestl, Oracle, Sanofi-aventis, banks and hospitals. A Nestl executive presented how the IpOp Model provides, within his organization, a disciplined but qualitative method for bulletproofing the project and empowering intrapreneurs to become change agents, while ensuring that the key issues and interrelationships have been covered. The workshop provided attendees a basic working knowledge of the IpOp toolbox for business case development. For future reading and reference, attendees were granted free access to the book explaining the IpOp Model.

EXECUTIVE SUMMARY The workshop was the first presentation in the USA of the IpOp Modeli, a novel approach to corporate entrepreneurship which has been extremely successful in Europe. By acting as a proven guide to ensure a systematic and holistic strategic analysis, it helps innovators and entrepreneurs assess, in an explicit and stimulating manner, the feasibility of their initiative. It also provides management with a framework to decide which ideas should be pursued. The IpOp Model encourages the use of an Opportunity Case which addresses all the key issues that interest decision-makers. Since few decision-makers are actually interested in the implementation before being convinced of the merits of the Project, they appreciate first receiving the Opportunity Case and seeing the merits of the Project. IpOps fit to decisionmakers needs improves the self-confidence of employees, making them proactive change agents. Because of this, IpOp has been adopted by several multinational corporations, such as Nestl, Oracle, Sanofi-aventis, banks and hospitals. The so what for attendees was a basic understanding of a novel pre-project toolbox with a proven track record that they can immediately adapt to their teaching, corporate entrepreneurship or consulting activities. Attendees were granted free access to the book explaining the IpOp Model as well as examples of Opportunity Cases that they can use in their own teaching. The workshop was in three parts. Raphael Cohen, explained the IpOp Model and the Opportunity Case, while Heribert J. Watzke, explained how the IpOp Model has been instrumental to boost innovation and promote internal open innovation. Jerome Katz set the context for considering the IpOp approach as well as comparing it with current practices and issues (e.g. traditional or shortform business plans) in the US.

INTRODUCTION This workshop presented the IpOp Modelii (Cohen, 2011), a novel approach to corporate entrepreneurship, which guides the analysis process of innovators in a motivating manner and which has been extremely successful in Europe. Its implementation in many companies and public sector organizations has boosted innovation with measurable results that have turned executive education into real profit centers, rather than being only cost centers.

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Why the Pre-Project Phase Is So Important There are plenty of ideas around, yet why are there so many projects that fail or promising ones that remain at the stage of the "never materialized brilliant idea"? How can we explain that more than 95% of business plans submitted to investors end up in a garbage bag or on a shelf? Or that nearly 40% of startups close within three years after their creation (Headd, 2003)? Or even that the ability to implement innovations, including non-tech ones, within existing companies is so low? There is no single answer to these questions, yet there is nevertheless a common denominator: the transition from the ideation stage to a robust and validated implementation or commercialization plan turns out to be more difficult than anticipated. This is the missing link. In fact, in most organizations, many employees have innovative ideas; however, very few of those ideas are actually materialized. The reason for this low implementation rate has little to do with the quality of the ideas, but instead depends mostly on the ability of the innovator(s)iii to convince decision-makers. In order to do so, the innovator needs to build a compelling case. The issue is that very few employees know how to fully analyze a Project and sell it to their management. Because they are also aware of their limitations, it prevents them from taking their idea further. Moreover, traditional strategic analysis tools used in corporate strategy are not suitable for innovation projects. Mirroring the model of punctuated equilibrium seen in group start-ups (Gersick, 1988), most innovators who have an idea that shows good potential eagerly jump into "execution mode," without going through a strategic analysis process enabling them to properly identify their Projects key success factors. The execution mode means that they focus on the practical aspects of the implementation (the "Tactical Moves"). This drive to action affects startup leaders as well as large organization employees wishing to launch innovative Projects. The irresistible desire "to act" prevents the innovator from taking a step back to make a strategic analysis. The problem is that most people who have identified an opportunity intuitively start by writing a business plan, which is very often only a plan of action. By skipping the strategic analysis provided by the IpOp Model, they approach their project in a non-systematic and nonholistic manner. This could lead them to forget to take one parameter into account and one bullet is sometimes enough to kill a project. The Benefits of a Validation Process In 2001, this observation led the Raphael Cohen to create his first seminar for Oracle Software employees, Toolbox From the Idea To the Action Plan, in order to see if providing such a toolbox would improve their behavior or intrapreneurial mindset. Three months later, a survey showed that 56% of those who had been trained had, during those three months, launched a new initiative that they would not have launched had they not attended the training. The survey also showed that 87% used some or all of the tools that had been taught during the seminar. This

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confirms that suitable tools do empower innovators. This toolbox has since substantially been improved and has become the IpOp Model, which was presented during this workshop. Supporting this approach, four out of the ten finalists for the managerial innovation prize at the Geneva University Hospital (10,000 employees) had been taught the IpOp Model at one point in time during the last 6 years. It shows that the IpOp Model does act as an enabler with lasting effects. But the most interesting demonstration is that corporations such as Nestl, Microsoft, Sanofiaventis, banks or public sector entities are using the model in executive education programs that generate more measurable profit than the cost of the training program. This income-generating component, turning executive education into a profit center, represents a major change of paradigm. At Nestl, for instance, the return of investment has been above 2,000% for each of the last two training programs. A senior VP in charge of training in the R&D department at Nestl headquarters has explained during the conference how this has been achieved. He has also explained how it fostered internal open innovation, where ideas are generated by employees but outside their normal area of expertise. This could also be described as a silo-breaking approach, encouraging employees to cross divisional barriers. It expands the concept of open innovation to the companys employees. Overall, the IpOp Model is a process that labels, in a clear and structured manner, all the different parameters of a project. As a roadmap, it adds rigor to the process while mimicking the thought process that experienced and successful entrepreneurs use naturally. It was not only inspired by the observation of successful innovators but also by the mistakes of those who failed. The time and energy required to write a business plan should not be spent without first reflecting on the strategic aspects of the Project; unfortunately, most people do not know how to successfully do this. In addition, writing a business plan is a painful and time-consuming exercise. Although the IpOp Model is necessary to produce the Opportunity Case a document that addresses all the key issues that interest decision-makers without providing an implementation plan it can also be used to produce a traditional business plan. However, as opposed to when people write a business plan, using it as a guide for their analysis and thinking-process, the IpOp Model analysis is done according to the model and not according the structure of the document (i.e. the business plan). This represents an important change. Writing a business plan after having analyzed a Project with the IpOp Model becomes a much easier task. As a result, the IpOp Model analysis can be the step that precedes writing the Opportunity Case or the business plan. After having gone through the different steps of the IpOp Model, innovators will either realize that their Project is not worth pursuing, therefore saving themselves the unnecessary pain of failure, or will have the effective ammunition to convince their management or investors. The IpOp Model also provides management with a framework to decide which ideas/projects should be pursued. Deploying this framework in an organization allows everyone to know what

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the selection criteria are. This organizational transparency reduces the arbitrary or black box factor often associated with the selection process of new ideas. Knowing on what basis their Project will be evaluated leads innovators to focus on what counts for their management (or their investors). This also means that they will only show their management/investors validated action plans that are relevant to them in an easy-to-read standardized format. The main benefits that have led several multinational corporations to adopt this model are that it channels innovation towards achieving corporate objectives and that it stimulates nontechnological innovation as well as innovative marketing. Although the emphasis of this workshop was on corporate entrepreneurship, it does not mean that the approach is restricted to large organizations. The IpOp Model has also been very successfully adopted by startups and SBEs. It is also taught in different business schools and MBA programs in Europe. The Opportunity Case What distinguishes internal open innovation (Chesbrough, 2003) from a traditional idea box is that innovators are not expected to come up with an idea, but a complete Opportunity Case addressing all the key issues that interest decision-makers. Producing such a comprehensive analysis is demanding and requires a much more substantial commitment from the innovator compared to the suggestion-box concept. The typical template of the Opportunity Case includes the following questions, in addition to a few others that have been presented during the workshop: What is the Opportunity and/or the Needs? What are the challenges / issues / difficulties? What is the proposed Solution? Does it fit our strategy and mission? What benefits are brought by the Solution to each key Stakeholder? What are the Competitive Advantages? What are the measurable Objectives defining success? What is the Business model providing the necessary resources? What are the critical success Factors? What are the Risks and Unknowns? What are the Collateral Effects? What Resources are required for implementation? Who initiated the Project and who will implement it?

Experience has shown that IpOp Model users with an interesting idea become increasingly engaged while preparing this Opportunity Case. This leads to a very impressive level of motivation for when they are eventually ready to present it to the key Stakeholders. Organizations that use Stage-gate approaches (Cooper, 2001) indicated that such an Opportunity Case would, in many instances, act as a very beneficial early stage filter that can clarify the roadmap through Stage-gate. This filter makes Stage-gate more cost-effective since it reduces the

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waste of resources that would be consumed until the gate down-the-road that would point out the issue that should have blocked the Project earlier if it had been identified at the pre-project stage. Since very few investors or decision-makers are interested in the implementation before being convinced of the merits of the Project, a two-step approach is much more effective. Step one, the Opportunity Case explains what the Project is about, why it should be completed, what the outcome will be and who will implement it. This short document, of only 5 to 10 pages, allows the decision-makers to decide if the Project is interesting enough to justify evaluating its practical feasibility. Step two, the Implementation Plan, will show how the project will be implemented and which resources will be necessary. Because this Plan should take into account the characteristics of the potential investors, including their network, their existing facilities and resources, as well as the feedback and comments based on the Opportunity Case, etc., the Plan can be customized during the short period that follows the approval of the Opportunity Case. Each resulting Implementation Plan tailored for one target decision-maker will be considerably more relevant than what would have been described in a business plan, which is written without knowing which partners will eventually support the Project and how, besides money, they can contribute. Another important benefit of this approach is that producing an Opportunity Case is considerably easier and faster than writing a complete business plan. This allows the innovators to submit the Opportunity Case to interested parties much sooner. In addition, if nobody is interested, then there is no need to waste more time with this Project; however, if a decision-maker expresses interest, it will boost the energy and confidence of the team to quickly produce the Implementation Plan that the decision-maker will request to assess the practical feasibility. The IpOp Model As Used in Analysis In order to produce such a comprehensive Opportunity Case and Implementation Plan(s), the innovators must thoroughly analyze the many dimensions that can influence the fate of their idea. The purpose of the IpOp Model is to guide them during this exploration phase to assess, in a systematic and explicit manner, the feasibility of the Solution at the core of their initiative. The use of a specific terminology, which is employed below, is exploited by the IpOp Model in Figure 1 and is further explained in the workshop and the book. One of the major benefits of going through this process is that the innovators will automatically identify Tactical Moves that should be included in their Implementation Plan to successfully execute the Project:

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FIGURE 1 The IpOp Model

a) Clearly profiling the Customer(s) and his(their) Pain(s), Need(s) or Desire(s) (PNDs) that the Project will address. Too often this step is implied instead of being thoroughly analyzed and made explicit. b) Verifying to what extent handling these PNDs fits the companys mission and current strategy. Without strategic fit, the Project has little chance of being supported by management. c) The team must identify the Customer Decision Criteria (CDCs) that the target Customers will use to select one Solution amongst the Alternatives available on the market or internally. Without a high level of Familiarity with the Customers, this is done superficially with the risk of missing a critical CDC.

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d) The Solution must then be benchmarked for each CDC against current and potential Alternatives. The benchmarking table will explicitly show if the Competitive Advantages are compelling enough to pursue the Project. e) Identifying the actual Competitive Advantages of the Solution is a prerequisite for the next step, which is to define the Customer Unique Experience (CUE) that the Solution will provide. f) The Value Chain, to deliver this Customer Unique Experience, must be analyzed in order to recognize the critical components that the Project should focus on and which ones can be outsourced. g) The Business Model that will provide the necessary resources required to satisfy the key Stakeholders of the Value Chain should be made explicit. h) Listing the Stakeholders Aspirations (or expectations) to know what has to be delivered to key Stakeholders will help identify the necessary Tactical Moves to satisfy them. i) Similarly, identifying Stakeholders Resistances will also help handle their potential objections with suitable Tactical Moves. j) Because a Constraint is an unavoidable condition that has to be respected, all those imposed by Stakeholders must be listed and addressed by the appropriate Tactical Moves. k) For the Stakeholders to find the Project attractive, it must deliver measurable results for each Key Indicators of Success (KISs) which is relevant for them. Those KISs must be known by the team. l) For each KISs and each Milestone, Objectives should be assessed to express what will be delivered to the Stakeholders as a counterpart for the Resources and/or authorizations that will be granted. This Definition of Success represents an essential component of the contract between the key Stakeholders and the innovators. m) In addition to Stakeholders Aspirations and Resistances, other Factors which can boost or hinder the delivery of the Definition of Success also have to be accounted for. Listing them will prompt innovators to identify suitable Tactical Moves to take advantage of the Boosters or minimize the negative impact of Hurdles. n) Cataloguing the Unknowns (missing information that automatically generate uncertainty) that will surface during the IpOp Model analysis will help spot relevant Tactical Moves that will reduce their level of uncertainty (test, pilots, surveys, etc.). o) Identifying the Risks affecting the fate of the Project which are generated by potential Hurdles, by Unknowns and by Stakeholders Resistances and by their combinations. p) A selection amongst the significant number of Tactical Moves, which will have been triggered by the above analysis, must be made to keep those that will be the most resource-effective to deliver the Definition of Success. They will then be integrated into the Implementation Plan. q) This Implementation Plan should deliver the Definition of Success, but it can also produce Collateral Effects, which will upset Stakeholders. The innovators must identify them to avoid triggering the Stakeholders immune system as this would lead to the Projects death. Managing these Collateral Effects will also require appropriate Tactical Moves. r) Resources necessary to execute the Implementation Plan must finally be evaluated to know what is required to make the Project happen.

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IpOp vs. Other Models for Feasibility Analysis and Business Planning The IpOp Model fits the current zeitgeist which is emphasizing the selection of ideas to accommodate the worldwide reduction in resources for growth and entrepreneurship. This is reflected in the plethora of books on early-stage decision-making in entrepreneurial roles such as The New Business Road Test (Mullins, 2004) or Will It Fly? (McKnight, 2003). At the same time, the traditional business planning approach is under reconsideration in part because of the resources and time required to prepare or evaluate one (cf. Karlsson and Honig, 2009, Gruber, 2007), and because traditional business plans have become increasingly disconnected from what the new larger and more diverse set of funders want to know (Gumpert, 2002). IpOp enters this situation with the advantage of a history rooted in the concerns of the decisionmakers, and proposes an adaptable approach which can meet the needs of a wide variety of industries and decision-makers. While demanding in terms of the scope and depth of its total model, IpOp can benefit any user by providing a toolkit of procedures which can enrich traditional approaches, as well as be the foundation for an ultimately faster, more focused and more fitting analysis of the issues important to decision-makers when considering which idea to promote. As the examples from Nestl and other firms will show, IpOp has been applied in a variety of situations, with strongly positive results. With its more open approach to combining qualitative and quantitative elements, IpOp provides a useful alternative to conventional feasibility analyses and business plans. ENDNOTES
i

Specific vocabulary of the IpOp Model is capitalized throughout this article. Winning Opportunities, a proven tool box for converting your projects into success without a business plan (Cohen, 2011) presents the IpOp Model in detail. The book can be downloaded free of charge at www.winning-opportunities.org after the USASBE conference. iii Innovator or innovators below will indifferently be used for simplicity. The masculine terminology will also collectively include both feminine and masculine genders.
ii

REFERENCES Chesbrough, H. (2003) Open Innovation: The New Imperative for Creating and Profiting from Technology. Boston: Harvard Business School Press. Cohen, R. (2011). Winning Opportunities, a proven tool box for converting your projects into success without a business plan. Geneva: Getratex. Cooper, R. G. (2001). Winning at New Products: Accelerating the Process from Idea to Launch, Third Edition (3rd ed.). New York: Basic Books. Gersick, C. J. G. (1988). Time and Transition in Work Teams: Toward a New Model of Group Development. The Academy of Management Journal, 31(1), 9-41. Gruber, M. (2007). Uncovering the value of planning in new venture creation: A process and contingency perspective. Journal of Business Venturing, 22(6), 782-807. Gumpert, D. E. (2002). Burn Your Business Plan!: What Investors Really Want from Entrepreneurs. Needham, MA: Lauson Publishing.

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Headd, B. (2003). Redefining Business Success: Distinguishing Between Closure and Failure. Small Business Economics, 21, 51-61. Karlsson, T., & Honig, B. (2009). Judging a business by its cover: An institutional perspective on new ventures and the business plan. Journal of Business Venturing, 24(1), 27-45. McKnight, T. K. (2003). Will It Fly? How to Know if Your New Business Idea Has Wings...Before You Take the Leap. London: FT Press. Mullins, J. (2004). The New Business Road Test: What entrepreneurs and executives should do before writing a business plan. London: FT Press.