Why focus on your company’s digital innovation strategy?
According to the Harvard Business Review, “The most digitally advanced parts of the economy have increased their productivity and boosted profit margins by two to three times the average rate in other sectors over the past 20 years. Sectors that lag in measures of digitization also post lower productivity performance, and since this group includes some of the heavyweights in terms of GDP contribution and employment, this creates a drag on the broader economy.”
Reworking your approach to integrating digital into your business can make you more agile, more productive, and more effective at delivering those advantages to your clients.
However, being focused on a digital innovation strategy is different than actually implementing one. It’s about more than paying lip service to the idea, or reading a few articles. Digital innovation requires integration into your organization’s DNA.
We have never been more surrounded by technology. In most people’s pockets is a device that can connect them by voice and video to anyone else in the world, look up any fact within the realm of human knowledge, and create content that has the potential to be promoted and re-broadcast to millions of people. And that’s just for now.
In the future, we’ll be able to leverage our phones’ motion-tracking and VR capabilities to create even better mediums for communicating, collaborating, and innovating. Just last month, Microsoft demonstrated VR technology that enabled them to simulate face to face meetings by capturing a 3D model of each participant, and transmitting it into the other’s headset. The result is a stunningly real conversation that feels as if it’s in-person, even if it’s happening over thousands of miles.
With the exponential leaps in technology available to both employee and consumer alike, it’s no wonder that companies are hurrying to find ways to adapt to the current technology landscape, and integrate ever-growing capabilities into their business to help them do what they’re already doing, better.
Companies are adjusting in a variety of ways. India-based HCL Technologies, a $6.8 billion corporation faced with onboarding and operational expenses, recognized that it could take advantage of its employees’ nearly universal access to smartphones and tablets. By digitizing company information, they could make it more readily accessible and mobile-friendly, resulting in substantial organizational improvements.
Digital Innovation Starts at the Top
“In a digital business every member of the senior team must be able to contribute to discussions about technology, as well as understand and articulate the importance of technology to the organization[ML(1] [MJ2] .” As Computer Weekly wisely points out, a sincere commitment to digital innovation needs to start at the top of an organization. “It is the same level of understanding the board should have about the company’s financial accounts.”
Fundamentally integrating digital innovation into your business’s day-to-day operations doesn’t happen by accident—the people steering the ship need to be fully committed to the changes you are trying to implement, and, most importantly, understand what they mean and how they fit into the overall strategy.
It’s vital to get everyone onboard with the necessity to push your company in the direction of digital innovation. The sorts of major changes that can come from rethinking the core tenants of your business model can only be implemented through firm commitment and savvy political maneuvering. This kind of support can only come from the top.
Digital Innovation Requires Structural Innovation
Traditionally, changes to digital strategy are handled by the CIO or perhaps, if the position exists, the CTO. However, several companies, including Starbucks, have decided to go a step forward and create a new position: the Chief Digital Officer (CDO).
As opposed to a CTO’s job of making sure that all of the tools you already have in place are working properly, or the CIO’s job of making sure that everything is integrated and working effectively, a CDO is working to make sure that your approach to digital innovation is streamlined and agile. A CDO will work closely in sync with a CIO or CTO, but with an eye specifically towards innovation and coordination. While a CTO might support the technology already in place, “The CDO’s job is to turn the digital cacophony into a symphony.”
Rethinking Business Models
A key question for Harvard Business Review’s Ron Ashkenas: “Why do leaders wait too long to modify or abandon their business models?” The Postal Service knew for years that its business model would unravel when email became ubiquitous. Kodak knew that digital photos would mean the death of film, but lagged behind in its investment strategy. Even though AOL knew dial-up subscriptions were falling, it still shied away from retooling its business model.
Revisiting Computer Weekly’s piece: “The fact is digital transformation spans the entire organization and requires businesses to rethink their business models, products and services. It may even involve disrupting an existing and healthy revenue stream to create a new, digitally-enabled source of income that is more sustainable in the long-term.”
With the dot-com boom in full swing in 1999, GE CEO Jack Welch made a bold move to force his company to think critically about how digital innovation could affect their core business models. The Destroy Your Business initiative encouraged executives to come up with a plan for how an outside company with a digital business model could beat their branch of the organization with a web-based strategy.
In the second Grow your Business phase, executives were encouraged to apply what they learned in bold new ways, using perceived weaknesses to innovate and re-strategize. In this way, GE found a way to “welcome the anxiety of competition instead of avoiding it.”
What You Can Do Right Now
- Find ways to take advantage of ubiquitous technology and leverage it to improve core operations.
- Take the time to get the top levels of your company on-board with digital innovation.
- Consider structural changes to encourage digital innovation—who is taking the lead?
- Use threats to your business model as opportunities to innovate.