The New Age of Innovation: Driving Cocreated Value Through Global Networks [Hardcover]

C.K. Prahalad (Author), M.S. Krishnan (Author)

Book Description

Publication Date: April 8, 2008 | ISBN-10: 0071598286 | ISBN-13: 978-0071598286 | Edition: 1

Named one of the "Best Books on Innovation, 2008" by BusinessWeek magazine

From the greatest minds in business today comes a groundbreaking new blueprint for executing the next stage of customer-created value. C.K. Prahalad, the world's premier business thinker, and IT scholar M.S. Krishnan unveil the critical missing link in connecting strategy to execution--building organizational capabilities that allow companies to achieve and sustain continuous change and innovation.

The New Age of Innovation reveals that the key to creating value and the future growth of every business depends on accessing a global network of resources to co-create unique experiences with customers, one at a time. To achieve this, CEOs, executives, and managers at every level must transform their business processes, technical systems, and supply chain management, implementing key social and technological infrastructure requirements to create an ongoing innovation advantage.

In this landmark work, Prahalad and Krishnan explain how to accomplish this shift--one where IT and the management architecture form the corporation's fundamental foundation. This book provides strategies for

• Redesigning systems to co-create value with customers and connect all parts of a firm to this process
• Measuring individual behavior through smart analytics
• Ceaselessly improving the flexibility and efficiency in all customer-facing and back-end processes
• Treating all involved individuals--customers, employees, investors, suppliers--as unique
• Working across cultures and time-zones in a seamless global network
• Building teams that are capable of providing high-quality, low-cost solutions rapidly

To successfully compete on the battlefields of 21st-century business, companies must reinvent their processes and culture in order to sustain innovative solutions. The New Age of Innovation is a complete program for achieving this transformation to meet the needs of the end consumer of the future.

Editorial Reviews

From the Back Cover

The new global standard for innovation and corporate growth

“Prahalad and Krishnan show us how innovation will be driven by the seamless integration of strategy, business processes, technology, and people. While this may seem an insurmountable task, the authors delight the reader by creating an architectural framework for business transformation. I have yet to come across a book that offers such a clear roadmap.”-S. Ramadorai CEO Tata Consultancy Services

“A great analysis of the challenges facing business today. Personalization of an individual consumer’s experience, globalization, global logistics, evolving business processes and information technology creates great complexity. C.K. Prahalad and M.S. Krishnan provide a framework to structure this complexity. Once understood, standardized and simplified these drivers provide an enviable foundation for innovation.” —Ralph Szygenda, Chief Information Officer, General Motors

“Prahalad and Krishnan argue that to create value in a flattening world, companies must develop highly flexible innovation strategies that 'fold the future in.' To do this, they must partner with truly global networks of partners and customers—and rethink everything from their core capabilities to their corporate culture. Prahalad’s and Krishnan’s book is a compelling roadmap for this next phase of globalization.” —Craig Mundie, Chief Research and Strategy Officer, Microsoft

About the Author

C.K. Prahalad is the international bestselling author of The Future of Competition, Competing for the Future and The Fortune at the Bottom of the Pyramid. He is the Paul and Ruth McCracken Distinguished University Professor of Strategy, Ross School of Business, University of Michigan. Prahalad was named “The World's Most Influential Management Thinker” in 2007 by the Times of London and “the most influential thinker on business strategy today” by BusinessWeek.

M.S. Krishnan is a Hallman Fellow & Professor of Business Information and Technology, Ross School of Business, University of Michigan.

Product Details

• Hardcover: 304 pages
• Publisher: McGraw-Hill; 1 edition (April 8, 2008)
• Language: English
• ISBN-10: 0071598286
• ISBN-13: 978-0071598286
• Product Dimensions: 6 x 0.9 x 9.1 inches
• Shipping Weight: 1.2 pounds (View shipping rates and policies)
• Average Customer Review: 3.6 out of 5 stars  See all reviews (17 customer reviews)
• Amazon Best Sellers Rank: #288,964 in Books (See Top 100 in Books)

Most Helpful Customer Reviews

56 of 56 people found the following review helpful

3.0 out of 5 stars Comprehensive, not about innovation and falls short in several areas June 17, 2008

By Mark P. McDonald TOP 1000 REVIEWERVINE™ VOICE

Format:Hardcover|Amazon Verified Purchase

The New Age of Innovation is good but miss-titled. This is not a book about how to be innovative. Rather the book advances an idea that all companies must face a world where they deal with customers individually and get their resources globally. The authors drive this home in a mantra of N=1 (there is one customer) and R=G (your resources are global). The N=1 R=G idea is cute and it is used throughout the book,but as you read the book N=1 R=G becomes the rational for everything and therefore nothing.

It is hard to give a book that covers such a breadth of important topics a mediocre review, but I have thought about this and come to the conclusion that this book is O.K. I am glad I read it as there are some good things here, just not to the level that I could heartily recommend it. If you are interested in these ideas and study the subject of enterprise strategy and management, then please buy this book as it will round out your experience. If you are looking for innovative ideas, then I am sorry this is not the book for you - in my opinion.

Besides the book not being about innovation, or really about how you drive co-created value, it is pretty good with some very good ideas. Prahalad and Krishnan start with an interesting premise - that all markets are not individual and that no company will have all the resources at its disposal to serve those individual markets. Put that way it provides a fresh way of thinking about global business. However that fresh thinking quickly devolves into a way of explaining a large range of business decisions from Wal-Mart to UPS, to GM to ICICI and others.... I am always suspicious when a framework can cover such a diverse set of companies - not that the framework is poor, but rather that it is capturing something that we already know and have already dealt with. That is more the case in this book and the reason why it gets only 3 stars.

This book had the potential to redefine some basic tenants of corporate thinking - in other words extend beyond Treacy and Wiersema value disciplines. The N=1 R=G is a simple framework that requires blending multiple disciplines to delivery. However, the book does not do that - rather it advances the idea of intergration across all fronts without a target destination. This makes the book comprehensive, but it also makes it disjointed in some areas and therefore difficult to see how it would really apply to my company or my situation.

Strengths:

The presentation of these two ideas (customer centrality and global sourcing) is strength in that these issues are rarely discussed in an integrated fashion.

Incorporation of a comprehensive view of the enterprise including its business processes, analytics/information, information technology and social/managerial technologies. Few books have ever looked at the enterprise from such a multi-faceted view.

Chapter 6 on efficiency and flexibility, it should have been the second chapter of the book as it puts the N=1 R=G into a set of clear management decisions.

The book highlights the need for the interconnectedness of the issues involved. It continually points to the need for process connectedness, visibility and transparency. It also points out the need to address decisions that are often thought of as contradictory (chapter 6) and the tools in figure 4.3 (p. 129)

Weaknesses:

The discussion of Information and Communications Technology (ICT) is bold in its vision but very weak in its implementation. (See Chapter 4 review) The book talks about ICT in a major way in three chapters and not the same way in any of them.

Using multiple titles and tags for roughly the same thing which makes it unnecessarily complicated. This is seen in the way the book tries to redefine issues like business process transformation, capabilities, components, change management etc. It would have been better to use standard terms and then talked about the new insight based on the ideas of the book.

It is true that India is a hot bed of innovation and growth but to imply that Indian companies are primarily the ones that get these ideas is a bit uneven. There are many innovative and market capturing companies in India (ICICI is one that we all need to study and understand). However, the authors keep returning to these companies as the prime examples of what success will look like. This refocusing, particularly on the Indian software industry, weakens the book as it gives the reader with the miss-impression that all I need is an educated, cheap and plentiful labor source and my problems are solved - that is too simplistic and undercuts what these leaders have done.

References as there is neither a single footnote nor source in the book, when several sections are clearly based on work that I have read before. I am not saying that they are copying these materials; rather some references would have been nice and more professional. The discussion of Li & Fung is an example as much of that material was covered in a Wall Street Journal article a few years ago.

The book appears to contradict itself in several areas. The discussion of IT throughout is one also the case examples can be viewed as contradictory, particularly the use of North American and European Companies whose actions can be just as easily explained using other frameworks (Wal-Mart, UPS, ING, etc)

CHAPTER REVIEW

On a chapter by chapter level there are some good ideas - the reason it is not a one star recommendation. So if you pick up the book here is where to concentrate and here is where to be on the lookout.

Chapter 1: The Transformation of Business is a good chapter that lays out the basic premise that the focus of value is on the `centrality of the individual'. At the same time the focus of the firm is on realizing that it must "focus on access to resources not ownership of them." This is not new news, but putting the two ideas together does spark some new thinking.

Chapter 2: Business Processes should have been a killer chapter and provided a basis for repositioning process in the internet era. It did not, first it defines processes as the expression of strategy - leaving out the customer which is interesting given that N=1. Instead of focusing on process, the chapter talks about IT and the layers of IT. The chapter has a good review of ICICI - an Indian financial services company.

Chapter 3: Analytics highlights the central role that information plays in serving customers as individuals using a global network. But rather than telling you how to use information, run the business based on information, it dwells on the analytics/visibility/transparency. The chapter misses a chance to redefine management by discussing the qualities of information rather than its application and impact.

Chapter 4 IT Matters is a call for component based systems and technologies. This chapter is the most disappointing as it is filled with generalized statements regarding what IT should do and be rather than how to deliver it. If you have read books about object oriented and component based development before then you have read much of this chapter. Sorry but this chapter reads like someone who has read a lot about IT and talks about IT but does not practice it - too theoretical and aspirational

Chapter 5: Organizational Legacies starts out like a gem by highlighting the need to understand the dominant language that forms the context and the basis for managerial points of view and change management. The first part of this chapter is good; the back half looks to redefine what the book says about IT from Chapter 4 and seeks to redefine change management practices which were not needed.

Chapter 6: Efficiency and Flexibility highlights the central challenge of implementing the ideas behind N=1 and R=G how to gain the efficiency needed to serve customers at a profit and be able to meet their changing needs and changing capabilities in the supply chain. This chapter dwells too much on it being a trade off, and again returns to IT as a disconnect.

Chapter 7: Dynamic Reconfiguration of Talent discusses the people issues which are critical to making this work. If this chapter did not exist, then the book would have been another diatribe for strategy and technology.

Chapter 8: An Agenda for Managers brings all these ideas together and highlights a 12 point agenda for managers to look at. The authors believe that N=1 and R=G will be here by 2015 - sorry to say that in many industries it is here now.

If you have read this far, then thanks for considering this review. It is a good book, one that I am smarter for having read, but it is not a great book and not one I can recommend you clear the decks to read. Read more ›

16 of 17 people found the following review helpful

4.0 out of 5 stars Brilliant in Isolation, Annoying for Self-Referential Insularity August 24, 2008

By Robert David STEELE Vivas HALL OF FAMETOP 500 REVIEWER

Format:Hardcover|Amazon Verified Purchase

This book is certainly worth reading, and especially by those executives that do not read much (the ones with the big egos and short attention spans). I admire the authors, but I am also increasingly annoyed by the annoying self-referential insularity that charactizes "star" authors who seem to not have read much by anyone else. Publishers need to begin demanding a proper literature search and more due diligence in "connecting" the reader to dots created by others.

Let's be crystal clear: Stewart Brand, the original editor of the Co-Evolution Quarterly and the Whole Earth Review, and the founder of the Silicon Valley Hackers Conference, did more inthe 1970's and 1980's for the concept of co-creating value that this pair will ever achieve.

More recently, in the 1990's and the past ten years, Collective Intelligence, the Power of Us (a Business Week cover story 20 June 2005 that the author's do not deign to notice), Wisdom of the Crowds, Smart Mobs, and so on, have all focused on the core concept of co-creation of value.

This book loses one star for its pretentions as an immaculate conception of a core concept that has been understood by the rest of us for the past forty years.

Now, having vented in defense of other scholars and practitioners that the authors should have respected, here are my flyleaf notes that easily warrant a solid four.

+ Roadmap for business leaders that does a superb job of showing how strategy and business processes both need to receive more respect as well as deliberate management....

+ Every individual must be treated as a singular client, and no firm has the resources to do it all--being able to connect the single client with a need and the single third party able to meet the need may be the ultimate business process.

+ Most interesting to me, as a deep admirer of The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits, the book that showed me my final calling as intelligence officer to the public, for which I and 23 others created a non-profit, the authors drop the one billion extreme poor from their client list, and focus only on the 4 billion above that line.

+ Properly embraced, these four billion are billed by the authors--accurately and wisely in my view--as a major source of innovation and need that can power the global economy by 2015.

+ Role of Information Technology (IT), which Paul Strassmann has demonstrated is often a negative return on investment, is to bridge the gap between strategic intent and "capacity to act."

+ Analytics in this book are primarily mathematic and data mining of existing digital information, with a token reference to external information. "Intelligence," "decision support," "competitive intelligence," and "commercial intelligence" are not terms to be found in this book. The authors appear to be oblivious to the existence of the Society of Competitive Intelligence Professionals (SCIP) founded in 1986 and just now beginning to reach its potential.

+ The authors place great emphasis on the importance of the individual employee and customer, and again arouse my ire as they fail to refer back to such giants as Wilensky, Carkhuff, or Cleveland (see list of 10 books they either have not read or have chosen to forget).

+ Global standards plus local effectiveness is the key to mobilizing four billion new consumers.

+ They emphasize the importance of understanding the "hidden costs of the inflexible and archaic internal systems that exist in most firms." They might also have thought to cite Ben Gilad on how most information reaching CEOs is late, biased, subjective, incomplete, and often wrong.

+ The three core concepts for the manager in a hurry to retain are: first, treat all others (consumers, employees, suppliers, regulators) as co-equals; second, do continuous analytics; and third, be ready to be turn on a dime. Efficiency is TIRED, flexibility (which means some redundancy) is WIRED.

For myself the real eye-opener in this book was the several case studies of what FedEx and others are doing with the detail that they amass from making their entire system transparent--not only are they tracking every package, but also every link and every inquiry--and then making sense of that to offer new services to specific INDIVIDUALs. I also appreciated the references to IBM's "ecosystem" of individuals and talents, and the emphasis on how many complex tasks can be "de-skilled" and migrated to very low-cost largely uneducated individuals, spreading the wealth while reserving the higher loads for increasingly scarce "full operational capability" programmers and managers.

I liked the authors' reference to A. V. Dhamakrishnan of Ramco India, and his focus on "evidence-based management" (page 165. I am considering publication of a work by many others on Health Intelligence, and the term I have found that rocks the health industry every time is "evidence-based medicine."

The authors conclude that social networks are now moving into business-oriented collaboration platforms, and provide a listing of offerings that is long and interesting but not at all complete. Visit ArnoldIT.com for the real edge of the IT envelope.

This is a very fine book. It may be that publishers need to commission the literature survey, and then identify others to write forewords and afterwords that connect the dots. In no way do I demean the brilliant building block provided by this book--I am simply irritated that it hangs in space as an immaculate conception with no respect demonstrated for the considerable work by others--and to publish a book in 2008 and not even note the Business Week cover story of 20 June 2005 on "The Power of Us," sorry, but that merits a spanking all by itself. Due diligence, anyone?

Other books, both old and new:
The exemplar: The exemplary performer in the age of productivity
The Knowledge Executive
Organizational Intelligence (Knowledge and Policy in Government and Industry)
Out of Control: The New Biology of Machines, Social Systems, & the Economic World
Smart Mobs: The Next Social Revolution
Wikinomics: How Mass Collaboration Changes Everything
The Wealth of Networks: How Social Production Transforms Markets and Freedom
Group Genius: The Creative Power of Collaboration
Collective Intelligence: Mankind's Emerging World in Cyberspace (Helix Books)
Collective Intelligence: Creating a Prosperous World at Peace

The authors might wish to demonstrate in their writing that which they preach so assidiously in this book. Read more ›

7 of 9 people found the following review helpful

2.0 out of 5 stars Vague and superficial August 25, 2008

By Mariano G. Undank

Format:Hardcover

I really respect Prahalad, but this book is probably the worst I have read about innovation (the title is misleading because the book is not about 'Innovation' at all). He iterates around two simple ideas of current 'drivers' for innovation (R=1 N=G), which are crystal clear for most of us who live in this globalized world.

The book is full of anecdotes poorly constructed, that barely address the point he tries to make and that have very little academic rigor. His constant references to ICICI, ING and so on are tiring.

For drivers of innovation, go to tradicional literature such as Schumpeter. Utterback and Christiansen are also very good. For something more practical information about innovation embedding, read 'Innovation to the Core' or 'Innovator's Guide to Growth'.

18 of 25 people found the following review helpful

5.0 out of 5 stars How to prosper in the "N = 1 and R = G" world May 2, 2008

By Robert Morris HALL OF FAMETOP 100 REVIEWERVINE™ VOICE

Format:Hardcover

I have read and then reviewed all of C.K. Prahalad's previous books and thus was especially interested in reading this book, co-authored with M.S. Krishnan. As they explain in the Introduction, "We view innovation as shaping consumer expectations as well as responding continually to the changing demands, behaviors, and experiences pf consumers. We must do this by accessing the best talent and resources available anywhere in the world. These two ideas must be connected - the resources of many to satisfy the needs of one.. We suggest that this is possible only if we pay attention to the glue that enables ideas to be transformed into operations. We will focus on the business processes and analytics as the glue."

Prahalad and Krishnan acknowledge that there is a fundamental transformation now underway, worldwide, that will radically alter the very nature of an enterprise and how it creates value. This foundation of this transformation has two basic pillars:

1. "Value is based on unique, personalized experiences of consumers. [begin italics] The focus is on the centrality of the individual. [end italics] We will designate this pillar as N = 1 (one consumer at a time.)"

"2. No firm is big enough in scope and size to satisfy the experiences of one consumer at a time. [begin italics] The focus is on access to resources, not ownership of resources. [end italics] We will designate this [pillar as R = G (resources from multiple vendors and often from around the globe)."

There are several key elements of this transformation.... Prahalad and Krishnan focus on five: Value is shifting from products to solutions to experience; all companies seek access to the talent, components, products, and services they need from the best sources; flexible systems are a prerequisite and must be developed; resources in a company's ecosystem must be continually configured; and finally, specific models must be developed that enable a company to focus on one consumer from among the millions. These are indeed formidable challenges. Prahalad and Krishnan suggest a number of strategies and tactics to consider when responding to them. When proceeding through the rigorously and eloquent narrative of this book, it is imperative to keep in mind that their ultimate objective is to help companies to prosper in this "N = 1 and R = G" world. To that end, they share the most important business lessons learned from a number of exemplary companies that include Amazon.com, Apple Computer, eBay, Google, ICIC Bank, Tata Consultancy Services (TCS), Unilever, and United Parcel Service (UPS).

To me, some of the most valuable material is provided in Chapter 5 (Pages 109-145) as Prahalad and Krishnan discuss the requirements of an information and communication technology (ICT) architecture and the governance mechanisms that can connect business processes and analytics to data and applications. In one of several graphics, Table 4.1 (Pages 124-126), they summarize the specificati9ons of the new ICT architecture in terms of four categories (i.e. "buckets"): Confronting Reality (e.g. capacity to link large systems and multiple databases), Compliance and Change (e.g. regulatory compliance and change), Evolving Capabilities (e.g. Security and privacy of data), and Enabling Foundations (e.g. from transaction-driven to event-driven systems).

Given the fundamental shift in the focus, the sources, and the processes of innovation and value creation, what to suggest for an agenda for managers to consider? They respond to that question in the final chapter. Specifically, they invoke a metaphor --- The New House of innovation - whose design and construction must be viewed as an "integrated package" in terms of its architecture, construction materials, and subsequent maintenance. The organizational transformation process must also be comprehensive and cohesive during a transition period (i.e. a "migration") of management practices to develop new skills, attitudes, and behaviors. It remains for decision-makers in each organization to design and then build its own new house pf innovation. Fortunately, they can use the information and counsel that C.K. Prahalad and M.S. Krishnan provide to guide and inform those initiatives.

Those who share my high regard for this brilliant volume are urged to check out Competing in a Flat World: Building Enterprises for a Borderless World co-authored by Victor Fung, William Fung, and Yoram (Jerry) Wind as well as Competing on Analytics: The New Science of Winning co-authored by Thomas Davenport and Jeanne Harris. Also Enterprise Architecture as Strategy: Creating a Foundation for Business Execution co-authored by Jeanne Ross, Peter Weill and David Robertson and Dean Spitzer's Transforming Performance Measurement: Rethinking the Way We Measure and Drive Organizational Success. Read more ›