How to Make Innovation Strategy Work
Remember the time — like, a year or two ago —
when moving to the cloud, developing a mobile strategy, and analyzing big data
represented the cutting edge of business technology? Well, even as many
companies are still waiting to see the results of these transformations, a new
wave of technologies — artificial intelligence, the Internet of Things, and
augmented reality, to name a few — is already shaping the present and future of
business.
Given the pace of technological change,
trying to keep up by simply reacting is futile. Yet most companies don’t
approach innovation strategically and fail to think about how technology will
affect their long-term future. In fact, it is clear the processes and
departments that focus on innovating may need to be revamped. The key to
successful innovation is to enlist the right mix of employees, customers, and
technology partners from the start. Then, leaders must be sure that their
company owns the innovation process, develops technology strategies that sync
up with its overall business strategy, and consider how new developments will
affect users’ experiences.
In our
annual PwC
Digital IQ survey, we found just 33 percent of companies had a
team dedicated to exploring emerging technology; that’s down substantially from
52 percent 10 years ago. The data suggests that companies are outsourcing
innovation: Nearly 60 percent of respondents said they actively engage with
external sources to gather new ideas for applying emerging technologies.
Of course, having open innovation models and
obtaining more external input are valuable. But innovation needs to be a core
competency, and core competencies shouldn’t be outsourced.
Why? Companies that outsource innovation
today risk becoming dependent on external sources at a time when technology can
be the biggest differentiator for success. They typically place a higher
priority on revenue growth and increased profitability than on creating better
customer and employee experiences. They consider investments on the latter a
tax to stay in business and maintain relevance rather than developing
innovation as a way of working and a cultural norm. It’s a defensive rather
than an offensive posture.
By contrast, for those companies that
prioritize fostering creativity in-house, the money always follows. Indeed, the
top financial performers in our Digital IQ survey rated higher than their peers
on most measures of innovation, and 75 percent of those top performers said
their innovation processes include identifying and commercializing digital
products.
But simply throwing money at innovation is
not, in and of itself, a winning strategy. Too many companies make blind bets
on technology without thinking of the business implications. It's a waste of
both time and budget if a company develops a new cloud-based customer relations
management system that fails to contribute to its vital business goals. The
Digital IQ survey found that only 40 percent of companies proactively explore
new innovations with specific business needs in mind.
At the same time, companies must always keep
in mind how their innovation will affect the human experience, be it that of
the external end user or the employee. Getting the experience right for customers
and employees helps transform a great strategy and technology into an engine
that changes and improves the way we live and work. And yet, our survey found
that just 10 percent of respondents ranked creating better customer experiences
as their top priority, down sharply from 25 percent just one year ago.
Board members and the C-suite are putting
pressure on their organizations to drive technology adoption, which is a vast
improvement from years ago. But taking technology shortcuts and chalking up a quick
win without a business plan in mind never pays off beyond the short term. Too
often companies chase the latest technology fad without understanding how it
will impact their business over the coming decade.
One
way to ensure a greater harmonization of technology strategy with business
goals and the human experience is to create physical
spaces to incubate, prototype, and test
innovations. Visa, the credit card and payments giant, has set up eight Visa
Innovation Centers around the world. They are designed as collaborative,
co-creation facilities where the company and its clients can see how emerging
technologies will work in the real world.
Nesta, the U.K.-based innovation foundation,
similarly sets up workshops with employees, end users, and other stakeholders
to consider innovative approaches. “When you’re trying to design and implement
a new way of working, you really need a feedback loop,” says Eddie Copeland, Nesta’s
director of government innovation. “And that feedback needs to come from all
the people involved and not just what senior management thinks is the right
thing to do. This helps foster a culture of innovation.”
Among
the companies that took part in our Innovation
Benchmark survey, roughly two-thirds echoed the
sentiment that bringing in employees with fresh thinking and establishing an innovative
culture were the most important factors for successful R&D — much more so
than increasing the budget for innovation or establishing a clear business
model for it.
The organizational mind-set to prioritize
innovation capabilities has to go far beyond evaluating what to buy or where to
invest. Companies must determine how to organize internal and external
resources to find the emerging technologies that can help the business achieve
its goals. This approach should include establishing a formal listening
framework, learning the true impact of bleeding-edge technologies, sharing
results from pilots, and quickly scaling initiatives throughout the enterprise.
And it will require dismantling walls within a company. At PwC, we have our own
process, called BXT, that’s designed to break down silos and bring together
business, experience, and technology to facilitate a holistic transformation
for digital growth.
Creating
a culture of innovation requires strong C-suite leadership. Gone are the days
when most businesses looked to technology to help them simply keep pace with
market demands. Instead, more companies are looking to technology to help
them create markets for future products and services that
don’t yet exist — and to meet customers’ unknown future needs.
Tom Puthiyamadam
https://www.strategy-business.com/blog/How-to-Make-Innovation-Strategy-Work?gko=4f60c&utm_source=itw&utm_medium=20170810&utm_campaign=resp
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