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 that 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=20170926&utm_campaign=resp
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