Winning in Digital Innovation: Turning Scale and Legacy into Strengths

Many corporations struggle to match the agility of companies born during the Internet age. Even though size and an established position can be weaknesses, they can also create an advantage.

Innovation: The New Competitive Advantage

Scale and efficiency used to be the driving forces for industry leaders, but in the digital age, success depends on being able to innovate with technology and new business models. With developments such as artificial intelligence (AI), 3-D printing, and the Internet of Things causing waves of disruption, adapting requires far more than learning to use technology.
Speed and unpredictability are the defining features of the digital world, which introduces a fundamental shift in the nature of business and what constitutes success. In this paper, we explore how established corporations can take advantage of their legacy and scale and learn from companies that are innovating at the speed of digital.

Why Disruption Matters

Over the past few years, disruptive forces have hit industry after industry. Travel has been disrupted by Priceline, Expedia, TripAdvisor, and Airbnb, transportation by Uber, and retail by Amazon and Alibaba. For established businesses, the most disruptive threats tend to come from outside traditional competition. New companies not only spot opportunities to create value that many incumbents fail to see, they also tend to operate with different business models. In fact, it’s no longer about having a level playing field. The disruptors are playing an entirely new game.

Google is a master of this new game, converting an array of industries into advertising revenue. Amazon is another serial disruptor with its Amazon Prime now in a two-horse race with Netflix— undermining the model of traditional broadcast industries.

Even those that have not yet been significantly impacted by these forces are not safe. Over the next five years, 40 percent of companies will face some form of digital disruption, according to Forbes magazine. Artificial intelligence is beginning to attack knowledge-based industries previously seen as safe from disruption, thanks in large part to companies such as Google and Amazon offering “AI on tap.”

According to our research, digitalization is the number one disruptor expected to shape industries, with 72 percent of executives believing the full digital impact will unfold over the next five years.1

For large companies, the problem is how to respond since turning around quickly is a herculean effort that can involve tens of thousands of employees, legacy processes, assets, and systems. These incumbents operate using established business models that shareholders have no wish to put at risk, made more challenging by activist investors that are keen to strip companies back to the core for short-term value creation, even if this condemns the company to oblivion in the long term. It is no surprise that the history of innovation in large companies is so disappointing.

Lessons from the Leaders

So what do these incumbents do to set themselves apart? Drawing lessons from companies that have forestalled disruption—learning to innovate as fast as those seeking to disrupt them—provides valuable insights for all businesses, big and small. To find out how they did it, we looked at a range of established companies that are leaders in rapid innovation. 

Lesson 1: Create a strategy for a digital world

The starting point for transformation is realizing that innovation is not optional, nor is it an add-on. Technologies have redefined the ways people communicate and interact, and this new reality must be at the core of all business strategies.

Companies that have adapted have embraced the new dynamics, developing big ideas that allow them to reset and motivate the whole organization behind a shared, meaningful vision for success.

Lesson 2: Think big

Market leaders have bold visions and set lofty targets. When Bill Gates founded Microsoft in 1975, his vision was of a computer on every desk even though the popular image of such machines at the time was a large cabinet with whirring spools of metallic tape. Several companies offer compelling mission statements for thinking big:

Uber: “Transportation as reliable as running water, everywhere for everyone.”

Stemcentrx: “Our mission is to develop that cure and significantly improve survival for cancer patients.”

Bloom Energy: “To make clean, reliable energy affordable for everyone in the world.”

Pinterest: “Help people to discover things they love and inspire them to do those things in real life.”

Airbnb: “Belong anywhere.”

This commitment to a bold vision is essential to get the organization to embrace the need for change. It also sets the context for innovation, defining not only why a company is driving innovation, but also what type of innovation it is seeking—the “search fields” for innovation. For example, when Takeda, Japan’s oldest pharmaceutical company, set out to embrace digital, it did so with a vision to become the world’s most digital pharmaceutical company and to become a “33,000-person start-up.” Within this overarching vision, the company defined the specific areas where it was seeking to lead the field.

Lesson 3: Know that transformation is a process, not an event

Just as important as aiming high is realizing that this transformation is not about having a three-year plan. The defining quality of digitalization is its continuing and exponential rate of change. Successful organizations focus on building the capability not only to respond and adapt but also to anticipate and readjust to take advantage of opportunities offered by new technologies and the changing business environment. For example, with a long history of reinvention, General Electric is aiming to transform from an industrial conglomerate into a leading software firm. CEO Jeff Immelt plans for the company to join the world’s top 10 software firms with sales of programs and services worth $15 billion as early as 2020.

Lesson 4: Learn to experiment, and experiment to learn

Having a strategy is all very well, but strategy without execution is nothing more than a dream. The biggest challenge for many organizations is to embrace experimentation as a means of execution. In the digital world, things move too fast to rely on linear models of innovation, and consumer research rarely leads to radical innovation as most people know what they like only when they experience it.

Experimentation is an unnatural process for many companies as it requires a willingness to embrace failure. However, the process of trial and error is in our nature. When we were children, for example, experimentation was how we learned to walk, ride a bike, and communicate. Start-ups channel our spirit of curiosity to create radical new ideas. In the same way, larger established companies can take an important step toward a digital transformation by relearning how to experiment. Fortunately, a few concepts can help:

Embrace the minimum viable product. In his seminal book on digital innovation, The Lean Startup, Eric Ries introduced a powerful but widely misunderstood concept of a minimal viable product (MVP).4 An MVP is not a fully working product but the minimum activity needed to learn something. For example, if you want to know if consumers like the idea of a product, you do not always need to make it. 

Reframe failure as learning. An unsuccessful MVP is not a failure; it is a valuable piece of information. The concept of failure as learning is not new; it is the basis of scientific development, where proof of a null hypothesis is as valuable as a successful outcome. Companies need to embrace this truth within their cultures. But be clear about what you are testing, and learn from it. If something does not work but you do not learn anything, then that is indeed failure.

Lesson 5: Commit to innovation

Innovation is a core feature of the new operating model. In the same way that digital needs to be at the core of strategy, so the ability to innovate at the speed of digital needs to become a central part of the organization’s operating model. In other words, the willingness to experiment needs to extend to the company’s structure. Successful innovators are not afraid to try radical ways of organizing.

Incremental change. When the aim is to improve the way the company does business, the challenge is to engage the organization and ensure implementation so projects tend to be run and sponsored within the existing business. GE’s FastWorks, for example, is based on Lean Startup. The operating model deploys a staged investment approach for early, rapid revision of initiatives and promotes “transaction learning experiments” in which teams “make a little and sell a little,” gathering feedback from customers. Portfolio optimization tools help managers nurture the best ideas and identify and terminate the least promising. This type of innovation is often intensely local. Even though Uber uses the same concept around the world, its implementation varies by country based on a series of experiments about what works in each environment.

Adjacent innovation. Focused on doing business in new ways, more separation is required from the day-to-day business. Common models such as accelerators and “skunkworks”—where teams work in unconventional and unstructured ways—are often combined with an internal venture capital model.

General Electric works in this way with its FirstBuild micro-factory. Located on the campus of the University of Louisville in Kentucky, the facility is linked into a global community that enables internal teams and external partners to rapidly co-create new home appliances using the FastWorks methodology. Teams experiment with appliances until they reach scale, building up to 1,000 units and then moving on to full-scale production when demand exceeds 1,000.

In a similar vein, the Capital One Labs initiative sits outside the main businesses, operating like a start-up accelerator within the broader company but maintaining close links with the core to ideate and incubate adjacent digital products and services. Meanwhile, P&G has created an organizational and funding mechanism that specializes in high-risk, high-reward ideas. Seed money is provided to projects with potential to create major disruptive innovations. Because the fund is separate from individual business units, it can focus on innovations that span the organization.

Lesson 6: Teach the organization to experiment

Foster employee ideas. A common complaint is that employees resist change and do not think outside the box. Leading digital innovators have a different view and get different results. The reality is that good ideas are abundant in every organization and are almost unlimited if companies can expand their horizons outside their organization and industry. The challenge is to capture and achieve the best ideas.

Organizational structures—not employees’ lack of imagination—often hamper original thinking, with slow and cumbersome processes and disincentives to improve. Labels such as creative director, for example, are unlikely to foster innovation; rather, they can discourage creativity among the rest of the organization. Innovative companies know that a good idea can come from anywhere, and anybody can be an innovator if they are suitably trained and empowered.

Successful digital innovators put people at the heart of the approach and tend to share several core values:

Make connections. People need to be connected so they can work together. Online support communities in companies such as Bosch and IBM link innovation champions and intrapreneurs. 3M fosters a culture of innovation that allows it to sustain long-term internal value creation. Cross-pollination of ideas is encouraged, with technical staff regarded as part of not only labs or business divisions but also the global technical community. Employees are encouraged to move across boundaries, and most senior managers have worked in at least five different areas of the company. A network of informal mentors facilitates the transfer of knowledge and helps perpetuate the culture. One way to harness the value of relationships and networks is to use A.T. Kearney’s Connectional Intelligence.5 This approach can dramatically improve an organization’s ability to marshal resources and knowledge quickly to influence change, solve complex challenges, streamline operations, and develop leaders.

Provide resources. Leading organizations have resources to encourage people to develop their innovation skills. General Electric and Pfizer offer training and coaching in experimenta- tion methods and digital technologies, while Siemens and Google offer contingent and non- contingent cash funding for innovation. Adobe and Heineken ensure their people have access to tools, templates, and platforms to help ideation and experimentation. Adobe Kickbox offers $1,000 along with innovation tools to help validate ideas. Managers cannot veto an employee’s request for a Kickbox, and employees are under no deadline pressure to present results.

Understand that people need time. Perhaps the most valuable resource is time. Digital innovators recognize that the route to innovation is to allow people freedom and space to develop ideas. As early as 1948, 3M formalized what is calls “bootlegging.” Employees can dedicate 15 percent of their work time to their own ideas, with full access to technical facilities to experiment.

Time for a Transformation

From the Industrial Revolution until World War II, industries were driven by scale and efficiency. Then, quality and eliminating waste characterized the new industrial giant. In the digital age, the winners will be determined by new business models and their ability to innovate through technology.

Digital transformation means applying digital innovation to the whole business. The primary aim is to innovate at digital speed, and there has never been a stronger case for doing so. Technology is transforming every industry. Peer-to-peer communication is disrupting the travel industry, mobile platforms are challenging the taxi industry, and digitalization has revolutionized entertainment. In the coming years, AI, quantum computing, and machine learning will have an even greater impact on professional services, while 3-D printing, robotics, and automation will disrupt manufacturing. The speed of digital is increasing, and no industry is safe.

The Two Types of Article

Also of note, articles are classified as determiners. A determiner sits before a noun to indicate quantity, possession, specificity, or definiteness. Here are some more examples of the articles in use:

I fell over the chair again.

(The chair is specific. It is known to the audience.)

Can you pass me a chair?

(This means an unspecific chair, i.e., any chair.)

I loved the apple pie after the meal.

(In this example, the audience knows which apple pie is being praised, e.g., the one at last night's dinner.)

I love an apple pie after dinner.

(The audience understands that the speaker likes to eat an apple pie after dinner (any apple pie will do).)

Indefinite Articles Are Used

The most common mistake involving articles is using "an" instead of "a" (or vice versa). This mistake occurs because writers believe "an" is used before a vowel and "a" before a consonant. That is not entirely accurate. "An" is used before a vowel sound, and "a" is used before a consonant sound. The word sound is important because consonants can create vowel sounds, and vowels can create consonant sounds. Therefore, the use of "an" or "a" is determined by the sound not the letter.

A great many of the mobile applications require to first sign in on the part of the user. Nowadays the implementation of social media logins is already a standard, we should say. Actually, it’s rather a reliable method, beneficial for the app operator as well. The person’s profile can be created automatically then, providing good opportunities for personalization in the future. Though developing a user login system is not difficult, it may be rather time-consuming and consequently influences the end cost of your application.

It’s also important to remember here that mobile app users do not always have access to the internet and when the device is offline, the app is unlikely to distinguish between the users. So you may think of the offline authentication option for your app.

Before you book a room or apartment you can contact the owner, discuss every detail, observe the photos and research feedback from the previous clients. The service also allows you to make your own apartment available for rent to earn money. Everything can be controlled right from your smartphone or tablet.