If history has taught us one thing, it is that companies need to continuously innovate in order to survive.
In the past decade alone, the world has witnessed a number of household names, including the likes of Kodak, Nokia, Blockbuster, Blackberry, and Myspace descend from global market dominance to economic irrelevance. Many of these firms fell victim to a wave of digital disruption, with rapid technological advancements in data generation, analysis, and communication leading to a fundamental rethink of business models. This includes the rise of the platform economy, where focus has shifted away from individual corporates (and their employees) to marketplaces (and their external contributors). Central to this model has been a much greater emphasis on stakeholder value and enhanced data utilisation.
Recognising the imminent threat of technological disruptors and rapidly evolving business models, management teams at many leading organisations understand the urgent need to digitally innovate. With the outbreak of COVID-19 leading to widespread lockdowns and work-from-home arrangements, this need to “go digital” has, literally overnight, shifted from being a strategic advantage to an operational imperative for companies both large and small.
In response to tectonic shifts in the global economic landscape, companies across the globe are doubling down on their digital transformation efforts. We estimate that corporates spent USD 514 billion on digital innovation initiatives in 2019 and forecast this number to reach USD 1.02 trillion by 2025. While we believe these investments are
warranted, we estimate that nearly two-thirds of total spend (~ USD 670 billion by 2025) will end up as money down the drain; not because it isn’t needed, but because the investments – and organisational ecosystem that drives innovation – are missing the mark.
While not an easy task, it has become abundantly clear that most large organisations are terrible at innovating. Given the many barriers to innovation, many companies simply resign themselves to a poorly defined strategy that is heavily reliant on marketing Innovation Labs and lavish Innovation Days, but short on genuine innovation itself. Although this is a logical tactic for maintaining brand reputation and espousing a company’s technological capabilities in the short-term, it is simply unsustainable in the long run.
In order for genuine innovation to take place, companies need to develop a robust innovation strategy, supported by sound processes for effective enablement and delivery. In the context of digital innovation, firms must also address specific internal and external considerations with respect to their resources, people, processes, and systems. One of the most important barriers to cross, especially for large organisations, is culture – in particular, a deeply ingrained internal resistance to change and failure, both of which are crucial parts of the innovation process.
For the many companies that continue to get their digital innovation strategy wrong, a painful wake-up call awaits. COVID-19 has merely accelerated the pace at which many firms will need to confront economic irrelevance. Faced with the world entering a new normal, we believe the time for experimenting is over – it’s time for companies to move beyond the buzz.