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Over the last few years, most discussions about the next innovation and digital transformation trends started to feel a bit repetitive. 5G, AI and machine learning, advanced data analytics or else, must begin and end with improving the stakeholder experience in mind. Two world-class professors at BMI, Prof. Carlos Osorio for Innovation Management and Prof. Joe Peppard for Digital Transformation elaborate on innovation and digital transformation concepts, its applications and ambiguities.
What is innovation and how to use this knowledge?
C. Osorio: Innovation can be understood in three different and related ways. Innovation is a management philosophy guided by strategic intent that allows us to set goals that seem impossible to achieve, and develop unique ways to reach them. As a method, innovation is the systematic process by which we achieve those goals and allow a firm to create innovations in consistent and predictable manners. As a result, innovation is anything new, or any non-trivial improvement, that solves a need or problem and creates payback for making it financially, socially and environmentally sustainable.
Name two innovation aspects/theories that businesses never heard about or evades to acknowledge?
C. Osorio: One that most business have heard and talk, but few acknowledge, is "disruptive innovation". Disruptive innovation is not about how "cool" or "new" is a value proposition, but how you create a change in market impact. The bottom line is: disruptive innovation in action drive companies to become their own disruptors, instead of reacting to others. A second is a concept of "future-proofing" that allows firms to internalize the natural risk and uncertainty of innovating and avoiding the negative effects of unforeseen events and courses of action.
Do all innovations now must be digital?
C. Osorio: Not all innovations must be digital, but almost all must have a digital angle or related activity, in the same way almost all have an electric-powered process.
J. Peppard: No, not all innovations must be digital. Take for example agile ways of working that many companies are introducing. This new way of working, popularized in software development, do not necessarily require any technology. Being customer centric, which is often a pillar of an organization digital transformation strategy, does not require any technology, although obviously tech can greatly help in this quest. However, it is likely that new process designs and innovative business models will have some digital element, even if it is only in their delivery.
What should business seek to achieve with technological strategy and digital transformation? What KPIs to reach?
C. Osorio: Technology strategy guides the long and medium-term plans and actions that firms need to pursue in order to have the necessary knowledge and tools to accomplish with their objectives and deliver the highest possible value at the lower possible cost over time. Therefore, a mature technology strategy includes all technologies inside a firm, and digital is only one type of them. As the markets evolve, a firm's tech strategy should take care of the process of learning and adopting new technologies. Thus, digital transformation is embedded and a natural result of a mature tech strategy. When a company engages in a long process of digital transformation, now in 2020, it is most likely the result of not having a mature and sound tech strategy. That, right there, is a low KPI. Tech transformation is always ongoing.
What's the purpose of digital transformation in business environment?
C. Osorio: I'm very critical about this. Now, in 2020, most digital transformation efforts fail and are oriented to catch up with what others did long ago. The decade of the real digital transformation was 1995-2005.
J. Peppard: I would argue that the concept digital transformation is nothing new, although the label itself might be novel. Literally, digital transformation is the changing of business operations, ways-of-working and business models, taking advantage of the capabilities of technology. Since computers first appeared, they have provided opportunities for organizations of all types to leverage them. Early technologies were limited in what they could do, constraining applications to automating routine processes like accounting and payroll. As technology capability has evolved, it has opened up different ways in which they can be applied. Today we have technologies like IoT, blockchain, social media, analytics, biometrics, mobile and cloud that provide tremendous opportunities to re-imagine processes, ways-of-working and how to compete. The challenge for organization is to figure out from the myriad of technologies how they will leverage them. This will demand creative thinking, what we typically refer to as innovation, as well as successfully managing any accompanying change. It is the latter, the transformation, that is most difficult.
What are the main issues/ triggers for business in this new decade regarding the digital transformation?
C. Osorio: For most firms, the most important trigger is "We have to do it now because we waited too long". A second one is a promise of lowering costs and growth. What many firms fail to recognize, however, is that digital is only one type of technological aspect in which they need to change. What should be a trigger, however, is the understanding that this type of transformation is not about being digital as it is about adapting and transforming the ways in which they operate.
J. Peppard: No organization can exist for very long without their IT systems. In fact, the reality is that today, technology is a competitive necessity. So not engaging with technology is not an option. Every organization needs to consider how it might harness the capabilities of technology for both operational and strategic purposes.
What is the future of digital transformation? How does it look like and how to plan for it?
C. Osorio: Anyone wanting to understand the "future" of digital transformation should look at the past of Amazon and how they've done things since 1995 until now. It is uncertain, and we should plan for uncertainty. There is nothing new about how to do this: innovation, tech strategy and the future of any technology are intertwined.
J. Peppard: Digital transformation will be around as long as new technologies continue to appear. Consider the tremendous opportunities that the internet or mobile opened up. New technologies will provide new capabilities and, as I have said above, organizations need to figure out whether they offer their organization any opportunities. This digital era will shift when quantum computers begin to appear. The implication is that it is incumbent on all organizations to stay abreast of new technologies.
Please, elaborate more on Big Data phenomenon. What does it mean to properly operate Big Data?
C. Osorio: There are two ways to understand this. Big data in terms of size and in terms of how to manipulate data. In terms of size, a firm can say it has "big data problems" if its data goes over various zettabytes. Just to put things in context, 1 zettabyte equals 1 trillion gigabytes. If a firm has these types of problems, then it will require parallel computing processing capacity and "big data" algorithms, because the firm's problems cannot be solved with high capacity regular computing. Thus far, most companies like to talk about it, but they don't have big data problems and don't need big data solutions.
J. Peppard: One thing to note about the IT industry is that it is great at using new labels for old concepts. Big Data is one of these. Essentially it refers to the fact that today companies have lots more data (i.e. it is ‘big’) than they did in the past. This data can be in different formats (quantitative and qualitative), from different sources (internal and external to the organization) and of varying quality. It is advances in technologies such as IoT, video imaging, digital twin and social media that is contributing to this increased volume of data. The business challenge is to figure out how to potentially use all this data, generally to generate new insights. There may also be technical challenges to bring all the required data together to be interrogated in order to reveal these insights. Technologies like machine learning can help in discovering patterns in data that might be difficult for humans to discern, this helping in the knowledge discovery process.
How to bring innovation in to your organization. How to prepare your employees for implementation of innovation processes in company? Can innovation change organizational culture?
C. Osorio: That's a short question with neither an easy nor a short answer. Innovation culture is a by-product of consistent behaviour on innovation. It's a process of change and capability building that takes 2-3 years of seeding and preparing to create innovation autonomy, and a never-ending journey of discovery, learning and transformation for creating the future.
J. Peppard: My mantra for companies considering the topic of digital transformation is to see investments in digital, less about investments in technology and more about investments in change. All the research shows that the biggest barriers to achieving a successful digital transformation is getting the right behavioural and cultural change. My experience is that companies usually underestimate the time and effort that achieving any change will take. We need to remember that as we digitize our organization and how we engage with customers and the wider ecosystem, we are asking employees to work, think and behave in different ways. Decision rights, i.e. who get to make what decisions, will change. Accountabilities are likely to be pushed down the organization, but with this shift comes accountability. Employees will like be expected to work in different ways, particularly in agile ways, and this can be challenging for some employees. The role of managers, particularly middle managers, will change and this can be threatening. Data becomes a key ingredient in decision making. Experimentation is likely to be required. The role of the IT unit and IT professionals will also be different. Models of leadership are also likely to be affected. To answer your question, digital transformation doesn’t change the culture, but it will require a cultural change.
Professor Carlos Osorio recently taught the BMI International EMBA course, “Innovation Management.” This course will also be included in the UCLouvain BMI International EMBA programme to be launched in 2021 in Brussels. Prof. Carlos Osorio is cofounder and partner at Yuken, a global design and innovation capability-building impact research lab based in Chile, adjunct professor at Universidad del Desarrollo in Chile, visiting professor of innovation at Deusto Business School in Spain and guest lecturer on innovation at Singularity University in USA. He has been International Faculty Fellow at MIT School of Management, faculty associate at Harvard’s Berkman Klein Center, and visiting research scientist at MIT Medialab, among other faculty and research positions. His research and teaching focus on innovation processes and methods for innovation capability building in high-complexity environments. The emphasis of his work has been on: 1. understanding the processes, methods and techniques used by the most innovative teams in the World, 2. experimenting on ways for effectively enabling learning of those processes, and 3. synthesizing and developing new methods for training autonomous high-performance innovation teams.
Professor Joe Peppard is BMI Executive Education Programme “Innovation & Digital Transformation” lecturer and the Principal Research Scientist a MIT Sloan School of Management, USA. He teaches and consults in the domains of IT leadership, digital strategy and innovation, the execution of digital transformation programs, the creation of value from IT investments, and the role, structure, and capabilities of the IT unit in contemporary organizations. Professor J. Peppard aims to advice business and IT leaders to navigate an appropriate route through what is an increasingly complex landscape. His research investigates contemporary issues and challenges that managers face in a world of accelerating technological change. Professor recognizes that managers want frameworks and models to help them understand their own predicaments, insights to figure out options and consequences, and clear actionable advice and guidance. His most recent book (with John Ward) is The Strategic Management of Information Systems: Building a Digital Strategy (Wiley).