Digital transformation is on everybody’s lips no matter what industry you are and not just residing in the CIO office, but now tops the corporate agenda in many companies driven by the CEO. Digital transformation may be defined as “a new state an organization can transform into based on the integration and synergies of digitalization efforts resulting in fundamental changes to how businesses operate and deliver value to customers”. So how do you execute on digital transformation – this is where digital innovation comes into play.
Incremental and radical digital innovation
You can basically divide digital innovation into two categories – incremental and radical digital innovation: A radical (or disruptive) innovation is one that has a significant impact on a market and on the economic activity of firms in that market, while incremental innovation concerns an existing product, service, process, organization or method whose performance has been significantly enhanced or upgraded or new products developed to be launched in known markets, based on known technologies. I have a financial background. People like me like business cases, how much does to cost to develop something, how long will it take to develop and what are the likely future benefits the investment can bring back and when. The more predictable (we have built something similar before – we have the costs detailed), reliable (we succeeded before – we have the detailed revenue stats) and transparent (we met our expected business case and project plans almost to the point before) you can make the business case - the more likely it is to be approved. People that approve business cases are also typically people like me.
Radical digital innovation is neither predictable, reliable or transparent. It is experimental by using new unproven technologies, exponential in nature (if we make it we gonna change the world…potentially) and highly unpredictable (we don’t know where this is going to end), hence difficult to compete internally with “old world” ideas and old world processes.
Pokemon Go probably wouldn’t have meet the internal business case criteria (it was put in a box for two years) and it had most likely not predicted it would be used for people with mental diseases – Pokemon go is now being prescribed by doctors to patients with mental diseases and by the way account for a significant part of Nintendo’s total company value.
Digital innovation skills
I often find many companies do not lack the good ideas, but in order to be successful you need four types of digital innovation skillsets in your core team
digital transformation tech domains (AI, cloud, big data etc.),
understanding of digital business models (digital platform models, algoritms business models, ecosystems etc.)
digital innovation skills (design thinking, preto typing etc.)
Communication and organizational change managementI often find companies focus on the first skillsets, but underestimate the need for the last skillset. We tend to underestimate the job of communicating changes (organizational change mgt.) towards the affected employees, partners and customers when the innovation to be implementedOne thing is getting the right people onboard with the necessary skillsets, but you also need to consider your digital innovation organizational set-up. Your radical innovation may take many forms e.g. handled through a detached unit X with independent resource and funding control, a venture model working with external upstarts a.s.o. It is important to thoroughly evaluate pros and cons of each model.
Digital Innovation is not question of choosing one type of digital innovation (incremental vs. radical) over the other. It is about doing both while ensuring each type of innovation is handled through different processes and organizational set-ups that supports each type of innovation. And finally ensure KPIs reflects the expectations. A whole new set of digital KPIs is probably more suited for your radical innovation. Or maybe you don’t really need KPIs – now that would be truly radical…
About NNIT Digital Transformation Insights
NNIT Digital Transformation Insights is a regular column where prominent NNIT consultants share their thoughts on current and future digital transformation.
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