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01/08/2016
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By Subhinder Dhillon

The Problem with Digital Innovation is You’re Not Open to It

The Problem with Digital Innovation is You’re Not Open to It
By Subhinder Dhillon

The Problem with Digital Innovation is You’re Not Open to It

Digital innovation is increasingly seen as the corporate answer to growth or a defence strategy against new disruptive start-ups. Beyond forming a Google X Division or opening an office in Silicon Valley, how can organisations implement digital innovation in practice? What does a real world digital innovation model look like?

The traditional image of innovation conjures up the ‘light bulb’ moment or a protracted process, where bets are made and you may strike lucky in the long run. In contrast, agile start-ups are adopting digital innovation to quickly unleash new business models, products and services that shake up incumbent businesses. The pace of digital innovation and the ability of digital technology to quickly reach customers at low cost, is a game changer.

Not a Level Playing Field

For start-ups, their environment naturally fosters a culture for innovation since there is no constraining legacy way of working or risk of cannibalising sales from new business models. In some cases, Private Equity (PE) funding only fuels the innovative culture further.

For incumbents, it is not a level playing field as there is a need to protect current revenue streams and business models, to meet shareholder demands. Even where innovation is nurtured, the culture looks for a business case upfront which serves to stall innovation. So in this new digital age, what is a credible approach for innovation? To start with let’s understand what digital innovation is and isn’t.

Digital Innovation is about..   

 Digital Innovation isn’t about..

Taking risks and breaking rules

Being conservative

Better, cheaper, faster

Protecting current business models

Being open to suppliers and partners    

A ‘company knows best’ mindset

Significant gains

Incremental gains

A balanced portfolio of bets

A single ‘moon shot’ bet

Driving business strategy

Being driven by business strategy

Open or Closed?

Through working with clients, start-ups and PE firms I have observed a number of approaches to digital innovation. The adopted approaches largely depend on the available innovation funding and the degree to which an innovation aligned culture exists. Most approaches to innovation are closed being confined to the boundaries of the incumbent business as below.

The approaches have specific characteristics:

  • Funnel - building and progressing an internal ideas funnel with a supporting governance structure and decision gates
  • Skunk Work - addressing a specific problem statement by applying focussed company resources in a small team environment
  • Acquire - buying a start-up company or innovative digital technology
  • Collaborate - harnessing supplier partners and the wider business ecosystem to share funding, ideas and risk

The closed approaches are limited, however open approaches embrace a wider business ecosystem to:

  • Increase funding through supplier partners who contribute to a shared innovation fund
  • Increase quality by injecting leading ideas and new ways of working from other industries, start-ups or academia
  • Balance innovation by challenging business models as well as process, services and products
  • Align the culture towards innovation by learning to embrace successes and ‘failures’ 

Level the Playing Field

Open innovation is already proven in crowd sourcing models.  The approach is equally applicable where supplier partners are involved in digital innovation. Partners are able to provide ideas and funding whilst also sharing the risks and benefits.

By helping organisations transition to open digital innovation, I have implemented successful approaches that realise digital benefits. In one model, a client’s supplier contributed 2% of their revenue from the client into a pooled funding pot for innovation. The supplier committed to bringing digital ideas to the client business through a defined governance model which led to ideas testing, incubation and implementation. The provision of funding and ideas by the supplier partner was underpinned by a contractual commitment.

In this case both parties had an incentivised need to innovate for mutual gain. The open approach immediately unblocked funding issues to drive a collaborative and innovation based culture. For the client there was the benefit of enhanced business models, products and services. Whilst for the supplier there was the prospect of increased profitability through new service revenue.

So, open up. Innovate like a digital start-up and level the playing field.

To find out more contact me at subhinder.dhillon@capgemini.com


This article was written by Subhinder Dhillon from CapGemini: Capping IT Off and was legally licensed through the NewsCred publisher network.

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