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Innovating to Survive in the Digital Economy: Part 1

July 5, 2016 - 2 Comments

Disrupt or be Disrupted

In today’s digital economy, established organizations need to be more innovative than ever before. But why? And what does that actually mean?

The truth is digitization is driving a new pace of innovation. In fact, a new wave of competition is already here and companies that don’t go digital now may not survive.

Look at what happened to Blockbuster. In 2004, it had nearly 60,000 employees and over 9,000 stores. By 2007, when Netflix began streaming movies, it had all but lost the rental war. They missed the future. Kodak is another example.In this case, the company spotted the emergence of the digital camera, but failed to react in time and the rest, as they say, is history.

The need to digitize is one of the biggest challenges facing organizations today. The Internet of Things (IoT), security, data, automation, analytics, and cloud are rapidly defining the fourth era of Information Technology. When you combine this with ever-decreasing barriers to entry for risk-hungry entrepreneurs, organizations that don’t innovate fast will pay a high price.

The question on the minds of many executives is what to do, where to start, and how to build sustainable innovation capability. To disrupt or be disrupted.

At the same time, innovation can often mean different things to different people within organizations. In my view, a good starting place is creating value by doing things differently. Sometimes it’s incremental, other times it’s breakthrough. Regardless, in the world today innovation must be part of everyone’s job. It has to move beyond the responsibility of a few senior managers or R&D specialists. It must become the norm to harness the collective talents of the many.

These factors are why building a culture of innovation has become an even bigger priority for surviving the perils of the new digital economy.

Building a Culture of Innovation

There’s no one way for established organizations to innovate. It tends to happen across multiple fronts. Some of it is visible and some takes place in what I like to call the “underground railway.” It’s out there but you can’t always see it. There’s likely to be some chaos, some trial, and almost certainly some error.

It requires leadership, collaboration, diversity, risk-taking, creativity, and many other things. The bottom line is that building world-class innovation capability is multi-faceted. It’s best tackled using a systematic and integrated approach. That includes embedding a number of innovation tools and best practices into the approach.

To begin with, there are a few prerequisites for establishing the right kind of culture to foster innovation from the outset. In my next blog, I’ll discuss these prerequisites and share some simple, but tough questions any organization must ask themselves before embarking on building a culture of innovation.

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  1. Hello Matt,

    I appreciate your perspective. The two uses cases you mention, although based in digital, what is often overlooked is the hybrid business model. For example, during the growth phase of Netflix, RedBox was also innovating to change the form factor of the video shopping experience and how to serve an under served market with self-service kiosks.

    Another example relative to Kodak even at the time of mobile proliferation, are the CVS Photo Kiosks. These types of disruptions although based in digital also incorporate the business model. One could speculate today that the Uber we know is the precursor to a drivers-less fleet of transportation vehicles. This is analogous to how the iPod was the precursor to the iPhone.

    How many of us today walk into an electronics store and ask for a radio? Although digitization is a major contributor to transformation, we cannot afford to overlook the business model and how to make consistent incremental improvements. This is often referred to as DevOps

  2. Very good article indeed and couldn’t agree more on “Disrupt or be Disrupted”.

    As mentioned, the executives have questions and a lot. A lot of executives do think about innovation as a regular part of business. Rather they should treat innovation as a necessity for creating new businesses and values to bring diversity with controlled assumptions and goals. There is no need to think that innovation can be driven same as regular business. You can’t measure innovation results as same as normal business outcomes. Executives do not listen to employees about innovation and ideas. They always think of funds and risks associated with them first. Rather asking the teams to help by volunteering may produce better results for the organizations. This is why right culture of innovation is a need and every organizations can have their own strategies.