Blog Post

May 17, 2018

A Guide to Generating Disruptive Digital Innovation

By Tara Matamoros Carter

What do industry disruptors do differently? Looking carefully at companies that have added value and been wildly successful, a few commonalities become apparent.

There are four essential factors that have come into play for companies that have developed a successful digital transformation strategy to disrupt industries:

  • Telemechanics – automation controlled at a distance by wireless connectivity
  • Digitization – replacing physical processes and hardware with virtual ones
  • Restructuring of the supply chain – elimination of hand-off intermediaries and expansion of sourcing
  • Diversity – by prioritizing diversity as a value, companies are able to establish greater runway and generate more innovation, ultimately increasing capital

When it’s laid out like that, it’s easier to see the difference between digital transformation and digital optimization. This is not a problem of vagueness in terminology but a reticence to think deeply enough about the scope of change.

George Westerman at MIT Sloan’s Initiative on the Digital Economy suggested, “Digital transformation is when companies use technology to radically change the performance or reach of an enterprise." Optimization makes existing processes more efficient. Transformation sets off waves of disruption to drive value and spark entirely new industries.

The First Trap: Underestimating the Problem

Oracle research found that while strategic leaders at nine out of 10 companies say they have a digital strategy in place, only 14 percent (one in seven) have the level of technology and IT talent they need to make it real.

That’s the first trap: heading into digital transformation without the necessary infrastructure to give it a chance at success. The tools and the talent are out there, but the means of acquiring and using them have changed forever. A combination of efficiency improvements in the sharing economy alongside massively powerful distributed processing hubs have generated new market forces that favor networks and dynamic marketplaces over traditional firms with privately controlled assets.

A great example of how this plays out in the real world is atomic pricing, which refers to buying increments of cloud-based infrastructure by the microsecond. This concept has redefined the possible for small businesses and tech-based firms. Dr. Shez Partovi, Chief Digital Officer at Dignity Health, told CIO magazine that understanding this cultural shift changed everything for them. “We’re willing to invest even more because our investment goes further since we’re only paying for our atomic demand…. I don’t need to purchase legacy infrastructure and support it while we wait to scale. Leveraging economics in cloud infrastructure are, without question, a big part of my digital strategy.”

The Second Trap: Preferencing Plans Over Planning

The second trap that companies tend to fall into when pursuing digital transformation is to set their goals around specific technologies -- like chatbots, AI and IoT -- instead of starting from a map of customer expectations. Digital transformation is going to look very different for each company based on their individual innovation potential and the end-goals of the customer base.

In a panel discussion by Econsultancy, digital transformation experts came to the conclusion that four basic ingredients are present in successful initiatives:

  1. Breaking down assumptions – The entire organization got involved in rethinking talent, technology, go-to-market strategy and established processes to meet a competitive threat.
  2. The plan was highly detailed – Companies knew the following before they began a digital transformation initiative: a vision for the end results, the talent they would need to access, employee incentives to make the necessary changes and the concrete steps they would take.
  3. Digital incorporated into strategy – Digital transformation is not an end in itself, it’s a pathway to establishing an enhanced market position. Successful companies laid out what competitive advantages and new business lines would be opened up by the project.
  4. People came first – The most advanced AI is not able to match the flexibility, ingenuity and innovative thinking of humans. Digital transformation works best when companies equipped their teams with training and strategic goals, then allowed them to determine the best way to execute the change.

The Third Trap: Shallow Thinking

The third most common trap is giving up too soon. Often this stems from a failure of imagination or from rushing into an initiative without adequate brainstorming. Remember that every pain point could be a potential epicenter for disruption, but not every one is equally worth pursuing. In reality, there are millions of fissures in the global economy where there’s a hard disconnect between supply and demand or markets where buyers are unhappy with the limited options they have. There is no shortage of great ideas. The complexity enters into the equation in matching problems to companies with the innovative capital to fix those problems.

Digital Mindfulness

In a single sentence, the takeaway is that intelligent digital transformation is the foundation of disruptive change that can restructure markets. The pressure is on companies to brainstorm digital ways to keep ahead of competitors and craft a better future for their customers. It is all part of the larger global trend in collaborative consumption that has turbo-charged productivity, giving companies original ways to profit from idle assets and providing smaller companies with access to enterprise-level data center processing by the microsecond.

Disruption requires more than an incremental tech upgrade. It calls for new market logic that rewards innovative resourcefulness. Perhaps it’s fitting that in a world increasingly determined by automation, AI and robotics, the greatest need is for unconventional thinkers.

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 Digital Disruption, Product Development

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