Setting up Innovation Management Efficiently: Four Strategies in the Digital Transformation
Innovation is like salt. We need it, but too much can also be dangerous. In addition, innovation management today is increasingly controlled by customers, which changes the rules in the market.
New technologies in the digital transformation make companies’ ability to innovate a crucial competitive factor. Implement new knowledge and ideas quickly is the motto for staying ahead of the competition. But innovation is like salt. We need it, but too much can also be dangerous. In addition, innovation management today is increasingly controlled by customers, which changes the rules in the market.
What factors do companies need to pay attention to today in innovation management, and how can you introduce a profitable innovation culture? We will show you four strategies: from ignorance to bullshitting to the manufacturer in the ecosystem. One spoiler: two of them are fatal for companies.
Innovations are customer-driven
Generally, innovations in companies mean new products and updates are introduced. The classic understanding of innovation management is highly process oriented. Entrepreneurs assume that the course from finding an idea to implementation is clearly defined. According to this understanding, the control over product developments and business models is with the company itself. But what happens when markets change? These days, innovation management is primarily customer-driven and economic success is therefore customer-dependant. This change has disruptive potential. Companies must adapt obsolete business models, focus on the customer and engage in communication with the customer. As a result, control is taken from companies to a certain extent, and they must learn to deal with uncertainty and rapid change. In order to continue to exist in a digital world, the specific problems of customers must be precisely identified and innovations which benefit the customer must be promoted, rather than the other way around.
The characteristics of innovation management in the digital transformation
Good enough for the customers:
Customers think according to the principle of “good enough.” That means they don’t want to buy every possible feature connected with a software product; they only want what they need right now. What does that mean for software manufacturers? Solutions should be developed to be modular, and more features should be added step by step at a later time. Agile work methods in companies promote quick action and changes in direction at short notice in product development. A step-by-step development of innovative processes rather than a major project also enables the quick testing of solutions, while at the same time minimizing the risk of poor investments.
From complicated to complex
Customer don’t want any complicated processes, but on the contrary expect simple solutions with user-friendly, intuitive interfaces. The technical requirements for this are becoming more and more complex. Existing customer systems need to be networked intelligently with new systems. In addition, companies must give up silo thinking and establish an integrated IT architecture. Otherwise in the end everything will be digitized, but nothing will cooperate.
The innovation cycles of technologies have shortened. If technologies change, for example through the Internet of Things or blockchain, and a company’s products are fundamentally based on them, those changes must, of course, also be taken into account. Here, too, the company is increasingly driven by an external innovation pressure.
Four strategies for companies
Companies are able to deal with new technologies and innovation pressure by ignoring them and carrying on as before. All according to the motto, “That’s the way we’ve always done it.” It is often the large, established companies which are beset by ignorance and are sometimes overtaken by innovative startups. For example, Kodak had already developed the digital camera by 1975, but did not rely on this technology and was forced to declare bankruptcy in 2012. The mail-order company Quelle, at the time the most state-of-the-art and efficient mail-order company, was not impressed by the new competitor Amazon in 1994 and missed entry into the online business, with irreversible consequences for the traditional company. Ignorance as a strategy is thus fatal for companies.
Don’t miss the connection. Engage with new developments, promote a culture of innovation in the company. Only in this way will you be able to hold your own as a company.
Agility, New Work, blockchain, Internet of Things, artificial intelligence – everyone is talking about the new technology megatrends and everyone wants to be involved. But often there is too much talk and not enough action. The bullshit bingo of digitization can turn out to be an illusion. Companies purport to command a new technology, although they de facto have only a rudimentary knowledge. As a consequence, projects with customers fail, subsequently have to be expensively “repaired,” and customers feel cheated.
The second is known as self-bullshitting or self-satisfaction. The company overestimates its abilities or underestimates the transformation and the new technology. “That won’t affect us,” “We’ve already survived trends like this,” or “We’ll let others do it and then overtake them”: Those are typical attitudes when a company is affected by self-bullshitting. And this strategy is also toxic.
In summary, it is important for companies to engage impartially with new trends and technologies, to test and evaluate them, to find constructive applications options which can be sensibly used in the company and then take measures. And it also important to promote an open attitude in the company. New technologies or methods of work such as agility are not introduced in a day, rather it is a company-wide change process which takes time and which managers must exemplify anew and promote every day. In times of the digital transformation, that is probably one of the central tasks of the future for top management – and also a success factor.
3. Create an ecosystem
The company constantly and lastingly builds competencies in its field and takes on a roll of “thought leadership.” It advises customers faithfully about new developments and implementation options and covers all phases of innovation management, from vision to idea to solution and finally to the finished product. As a company you have to be able to say to customers, “We can do that, or we know someone who can.” It is important here to be able to cover the entire innovation process or, if necessary, to enter into partnerships with companies which provide a segment. Otherwise, customers may go to competitors who can offer and deliver integrated consulting. However, cooperation with partners means a greater coordination effort and may be unreliable.
4. Manufacturer in the ecosystem
Here, it is not so much about your own strategy, but rather a continuation of the ecosystem. As a manufacturer in its field – whether product, software or service – the company is the heart of the ecosystem. What matters is evaluating innovations quickly and reliably and taking the right measures for customers which also fit our DNA. Constant close cooperation with partners and customers is crucial and at the same time the most state-of-the-art and effective form for mastering innovation management in the digital transformation.
So what can companies do to hold their own in the competition for innovations?
- Recognize innovation management as one – perhaps the most important – discipline for company management, one which also deals with technology and processes, but especially with an appropriate company culture and attitude.
- Listen to your customers and identify their specific problems to implement innovations sensibly.
- Don’t jump blindly onto every technological trend, rather consider carefully if the innovation fits with your company and how you could apply it.
- Create a sustainable ecosystem of partners and customers, become a thought leader and, as a manufacturer, a driver of innovations.
Author Michael Nowarra is an expert on building and optimizing alliances, ecosystems, and partner networks as Alliance Bliss Managing Director. Learn more about Alliance Bliss at http://alliance-bliss.com/