DIGITALLY ENABLED ORGANIZATION INNOVATION
It’s not surprising that a key focus at 2021 Advanced Practices Council (APC) meetings was digitally enabled organization innovation. APC members, all senior technology and digital executives, recognize their accountabilities to be both flawless delivery of current organizational systems and capabilities as well as innovative solutions for transforming products, services and business models that are enabled by digital technologies.
Digitally enabled transformation can include reinventing a company’s vision and strategy, organizational structure, processes, capabilities, and culture to match the evolving digital business context. It can go further by redefining markets and industries.
Since APC members have mastered flawless delivery, the focus of their APC learning is on innovation using digital technologies.
Although research presented at 2021 APC meetings covered many aspects of digitally enabled innovation and transformation, three themes are notable: organization conditions necessary for promoting innovative thinking that results in digitally enabled transformation; business model possibilities that have delivered value to enterprises; and the essential role of ecosystems in successful transformation.
Organization Conditions that Promote Innovative Thinking
Dr. Michael Wade and his colleagues at IMD in Switzerland noted that the most profitable companies worldwide had certain conditions in common: nimbleness, robustness, and responsiveness. And digital technologies can amplify all these conditions.
Nimble companies, such as J. Crew, are characterized by speed, agility, and resource mobility. Digital solutions enhance speed and support agility, and digital assets are easier to move than physical ones.
Robust companies, such as Proctor & Gamble, are characterized by efficiency with slack capacity, empowerment, and diversification. Digital platforms, such as Amazon’s, provide on-demand capacity. Digital information can be shared quickly and efficiently in support of empowerment as practiced by ABN-AMRO. Digital business models such as ecommerce can provide diversification.
Responsive companies, such as Airbnb, are characterized by forgiveness, learning, and resource modularity. Digital experiments, such as those performed at Google, can promote trial without error and forgiveness. Digital information analysis, storage, and sharing as practiced at Microsoft promotes learning. Digital assets are inherently more modular and reconfigurable than physical assets.
Dr. Jennifer Jordan, also at IMD, shifted the focus from organization conditions to specific behaviors of leaders who demonstrate innovative thinking enabled by digital technologies. They listen carefully and ask provocative questions, especially in complex situations when they aren’t experts. They know what data to seek and use these data to make decisions, especially when they are forging new ground or must convince others. They emphasize speed over perfection, knowing when to satisfice to get to market early. They are open to changing their minds when contexts change. They recognize that in disruptive environments – or environments they seek to disrupt – that they must be visionary to inspire others to follow them. They know how and when to share power and let others take the lead. And finally, they continually survey the environment for potential disruption or transformation opportunities, often identifying them before others.
In 2017, Dr. Vijay Gubaxani of the University of California at Irvine identified six organizational dimensions needed for successful digital transformation: strategic vision, strategic alignment, the right talent, technology assets, knowhow, and a culture of innovation. His follow-up survey in 2021 found that companies have made progress in building these dimensions, but not equally. More progress has been made on vision, strategic alignment, knowhow, and technology assets; significantly less progress has occurred on talent and culture. He highlighted recommended actions to enhance the organization’s culture of innovation. He suggested examining the company’s entire operating model, including the allocation of decision rights, incentive systems, monitoring and measuring systems, and roles. He also suggested building a coalition of influencers throughout the company. In addition, he recommended that leaders ask themselves how effective they are as role models of innovation: do they find opportunities to think differently; do they make decisions based on data; do they encourage devils advocates; do they ask “why” questions?
Business Model Possibilities
The hype about business model possibilities enabled by technology, most especially artificial intelligence (AI), has been high for several years. Dr. Amit Joshi and his colleagues at IMD have pinpointed many reasons why reality doesn’t meet the hype. Companies may not have the right high-quality data or know how to create or access them. Models that use data for AI may not be adequately integrated into a company’s work process and overall architecture. Algorithms may be wrong in unusual situations in which consequences can be serious, such as with incorrect medical diagnoses. Moreover, ethical considerations may not have been adequately considered.
But these reasons should not detract from the potential benefits, such as (1) using AI as a complementary system to humans (e.g., Zebra provides second opinion on medical scans for $1); (2) using AI as a substitute for humans (e.g., help driving); and (3) using AI as a service (e.g., offer of-the-shelf solutions for high level machine learning applications).
Dr. Nicholas Berente of University of Notre Dame advocates thinking about two-sided markets where buyers and sellers meet through a platform and both sides benefit from transactions. Platform business models typically generate large volumes of data from all participants on both sides of the platform and AI makes sense of it all. Machine learning provides a seamless experience by matching customers with the products and services.
Philips Healthcare, formerly a health device manufacturer, developed its HealthSuite Digital Platform to capture and integrate consumer/patient information using its devices through a common user experience. Individuals have dashboards to monitor personal health goals depending on their connected devices (e.g., heat rate, activity, sleep, blood pressure, and body weight). Hospitals and health systems track patient flow capacity and support telehealth on the Philips platform. As a result, Phillips thinks of itself as a software-based data-oriented company in which devices support its platform.
Ocado, the world’s largest online grocery retailer with no physical stores, created the Ocado Smart Platform, a combination of end-to-end e-commerce fulfillment, logistics, and swarm technology that other retailers around the world use to manage their own online grocery businesses. The platform allows them to profitably replicate Ocado’s model in their own regions. Running in the cloud, the Ocado Smart Platform provides features such as real-time stock projections, last-minute order processing, and intelligent delivery-van routing. Grocery retailers such as Krogers, Sobeys, ICA, Groupe Casino, Bon Preu, and Aeon have signed on.
Dr. Berente described two approaches to digital transformation that can redefine business models: servitizing products and productizing services. Hilti is an example of servitizing products. Instead of selling power tools, it delivers and lends them to construction sites based on specifications of the construction as a service. Littler, a global employment and labor law firm, created Case Smart, which provides a dashboard for tracking discrimination charges filed with the Equal Employment Opportunity Commission. The dashboard provides data-driven insights to proactively address business risks, in some cases preventing escalation into litigation.
Dr. Richard Watson of the University of Georgia identified ecosystems of companies working together as a notable key future trend in our increasingly uncertain business environment. Ecosystems help companies strengthen their core businesses by creating greater value for customers than they can alone. Amazon and Microsoft are two familiar examples of keystone organizations that took an early lead in successful ecosystems.
In the Deloitte 2021 State of AI in the Enterprise survey, the two highest-achieving groups of AI users were substantially more likely to have two or more ecosystem relationships (83% among the two highest groups versus 70% and 59% among the two lowest groups). Companies with more diverse ecosystems were 1.4 times as likely to use AI in a way that differentiates them from their competitors.
Philips Healthcare Digital Platform relies heavily on such ecosystem partners as Ali-Health, GE Healthcare Digital, CARE, Epic, IBM, Samsung, Fitbit Health, and GE Healthcare Digital to capture and integrate consumer/patient information regardless of location, source, or vendor through its platform as a common user experience.
Yet another example is Quantas, Australia’s leading airline, which has built loyalty ecosystems across categories with hundreds of partners, such as Woolworths (the leading Australian grocer), Hilton, Avis, eBay, and major Australian banks, enabling customers to earn and spend points in according to their preferences.