Tuesday, 27 February 2018

Digital experimentation without industrialization is fruitless

Around five years ago, large companies rushed to set up digital innovation labs in tech clusters around the world. These would typically have all the hallmarks of a tech start-up: bean bags and pool tables, “big ideas” and minimum viable products (MVPs), eco-systems and meet-ups.

Many companies did little more than experiment (often in highly controlled laboratory conditions), essentially operating on the periphery of the core business. When innovations were brought back from the digital lab and rolled out across the business, progress often stalled. Business leaders pushed back on new offerings that they feared might cannibalize existing blockbuster products. Corporate IT struggled to integrate standalone MVPs into their complex legacy environments, and CFOs and corporate counsels flagged huge potential risks relating to cyber breaches, data privacy and regulatory compliance. It was often easier to press the pause button on a digital innovation than to try and scale it.

The questions are different now
Over the last 5 years or so, I’ve discerned a shift in the types of questions clients ask me about digital transformation, especially from those outside the sectors that have been living and breathing digital disruption for the last decade (including telecommunications, media, consumer technology and retail).

Sectors that have yet to see such a radical re-writing of the value chain (such as healthcare, life sciences, insurance and automotive) are now sensing that change is coming much faster than expected. They want to know “How?” and “What?” instead of just the “Why?”

I believe the “Why?” is reasonably clear. Boards across almost every sector accept that the fourth industrial revolution will re-write the value chain of their industries, creating both opportunities and threats. Simply digitalizing the front end of yesterday’s business is not an effective response and guarantees little more than a high burn rate of resource.

Today’s questions around “How & What” are more about pace and execution:
-       How do we move faster?
-       How do we cope with the co-existence of two business models?
-       How do we stop doing digital and start being digital?
-       Should we buy, build or joint-venture to accelerate our digital transformation?
-       How do we stop killing digital innovation and start industrializing successes?

The balance between separation and integration is critical
A truly effective digital transformation program impacts almost every aspect of the organization, from the business model to the end-to-end operating model. With such a huge challenge facing them, many organizations are tempted to start from scratch, and indeed, the response of many telcos in the early days of digital re-invention was to set up new mobile virtual network operators (MVNOs) and digital-first challenger brands.

In some cases, this could be a highly effective response to try and move as fast as the market is changing, without being constrained by legacy issues. However, it does little to accelerate the transformation of the existing company.

So, how does a large corporate that’s undergoing a digital transformation make the leap from stand-alone digital innovation to industrialized scale?  For this to work, the balance between separation and integration is critical. A digital lab needs to engender a certain degree of separation in order to have the freedom to experiment; but experimentation without industrialization achieves nothing.
Today, great ideas for the future digital re-invention of the company can come from anywhere — from a lab in a tech cluster to a front line customer-facing employee. Innovation, can’t simply be outsourced to one part of the business; rather, we need to build a culture of innovation across the entire business.

Exploring digital from every angle
Similarly, it’s no longer worth building MVPs in complete isolation from the realities of integration and industrialization. Increasingly, I see lawyers and corporate IT teams getting involved earlier in a design sprint, shifting the conversation from, “We’ve built this MVP, can you approve it from a legal/IT perspective?” to “We’re starting a new design sprint, how can you help us identify and navigate the legal and technology risks that we might come up against?” The former typically leads to rejection; the latter to earlier, better conversations.

As we move into an increasingly connected world – in which combining the internet of things (IoT), artificial intelligence (AI) and robotics will drive smart automation across the whole enterprise – the challenge for most large companies will not be around experimentation; it will be focused on transitioning from successful experimentation to industrialization and scale.
The central battleground of a digital transformation program is focused around how to drive re-invention and infusion of digital across the whole enterprise. It’s what EY refers to as looking at digital from every angle. From the back end, through the muck-in-the middle, and to the front end – all parts of a business need to be involved in the transformation process. That’s been clear for some time among the “post-disrupted” industries. What’s encouraging today is that it’s also emerging as a key theme in the “pre-disrupted” industries.

From 26 February to 1 March, global leaders will gather at Mobile World Congress under the theme of “Creating a Better Future.” This insight is part of a series addressing how to seize the upside of disruption in the face of rapid change. To read more visit

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The Customer Revolution Blog by Laurence Buchanan is licensed under a Creative Commons Attribution 3.0 Unported License.
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