The era of incremental innovation has passed. Transformational innovation wins the day and the game has been changed to winner take all. Incremental innovation is best defined by optimizing existing products or services for existing customers. This method of competition primarily requires organizations to become more agile internally to support incremental customer-centric improvements. Transformation on the other hand mainly occurs by creating something entirely new.
We define Transformational Innovation as inventing new products and services for markets that currently do not exist. Transforming an industry involves optimizing around new metrics involving a drastically improved user experience or outcome.
Both Market Leaders and Fast Follower companies have the opportunity to win in this new economy, however technology dabblers or even worse, late adapters will be significantly marginalized by repetitive transformations. Organizations that fail to control or leverage their customer data will also be marginalized.
The new Digital Economy represents a fundamental shift in the business cycle and is no ordinary disruption. This new reality means increased market disruption with increasing unpredictability. In addition, there will no longer be deep business cycles, just trends that rapidly advance the customer experience. As businesses compete and attempt to outperform each other, the key long-term differentiator is the ability to recognize data-driven opportunities and adapt the fastest to changing market dynamics.
In order to transform and compete in the Agile Economy, organizations are required to have transformational leadership, agile technology platforms, adaptive processes and a culture that functions in an agile manner. This involves not only having a 360-degree view of the Customer, but also having a 360-degree view of all corporate assets and operations. This is critical so companies can quickly morph as market dynamics change. This requires that a company’s resource allocation, organizational structures and reward systems all need to be designed for an ever-accelerating pace of change.
Being part of the Agile Economy requires periodic breakthrough innovations that address the fundamental root cause of customer problems in a new way. While insights are often borrowed from other adjacent industries, they are often enhanced by new and improved user experiences. A good example of this comes from the growing shared economy. In this model, customers do not need to own physical assets, but obtain the benefits of those physical assets as if they owned them. Companies like Uber, Expedia and Hotels.com are becoming increasingly important as they intimately know the customer preferences. The same model that Uber leveraged for automobiles, also transfers across Private Aviation, Bicycles and other peer-to-peer rental markets.
Culturally the transformation takes place when the company moves from sense and respond to anticipate and lead. Unfortunately, this means a constant focus on research and development as the company that thinks it is done innovating is done in the marketplace.
Business / Technology Synchronization
Many organizations have undergone one time alignment projects that are meant to bring the Business and IT together on a common static roadmap. In today’s world, alignment is not enough. Constant synchronization needs to be the new model. New strategies need to be rapidly and consistently synchronized with new skills, capabilities and organizational structures. In addition, the ability to adopt and experiment with new business models even though it could cannibalize the existing business is key.
Changing the Organizational Culture
No company can consistently win on their own. Frequently organizations need to renew themselves by boot-strapping new capabilities and skills from other organizations. This ability to be open up and co-create or co-innovate with outsiders is also a critical success factor. Having the visions and values of openness to new thinking, entrepreneurial spirited teams and adaptive infrastructures that can easily incorporate new ideas is also key to success. A recognition that ideas regarding the latest Best Practices will often come from outside the organization.
Changing the Corporate Architecture
On the technology side, iBPMs, service-oriented architectures, predictive analytics, cloud applications, integration and infrastructure and business process modeling technology all play an important role in becoming more agile. On the methodology side, IT governance, SOA governance, IT portfolio management, CobiT, ITIL V3, enterprise architecture all place a key role in design of agile organizational process. On the execution side, strong project management, IT service management, data management all play an important role in transforming the organization.
The choice remains, either periodically disrupt your current industry or wait to be disrupted. The ability of organizations to innovate and adapt over time is a critical success factor for longevity. If your organization is considering Digital Transformation, HBSC Strategic Services can help. Please contact us at firstname.lastname@example.org or visit our website at www.hbsconsult.com.