Digital Innovation: Developing Digital Maturity Through Collaboration & Ecosystems
“Digital transformation” — it’s a phrase that we’ve all been hearing a lot! Countless reports (Forrester, IDC, McKinsey, Dell Technologies, etc.) imply that C-suites at organizations of all sizes across industries are making digital transformation a top priority for their business; and some are devoting significant time, effort, and capital to achieve it.
Yet, I find, from speaking with various businesses (albeit, my view is likely slanted as I come from a technology company), that many executives equate digital transformation with the implementation of technologies. However, digital disruption goes beyond onboarding discrete technologies to developing an ecosystem of technology-related assets and business capabilities that will enable the organization to mature towards becoming a digital enterprise. This means that companies need to consider both the organizational aspects of digital transformation as well as their digital maturity in order to make significant progress towards moving from “business as usual” to a culture of innovation.
What is Digital Maturity?
There’s no denying that digital transformation requires an investment in technology, but that’s just the beginning. Digital transformation is not about simply implementing more and better technologies, but involves aligning culture, people, structure, and tasks. Digital maturity lies in integrating the organization’s operations and talent in the digital process and vice versa. This means having a workplace where a) talent has the right tools to digitize and automate processes (e.g. being able to automate invoice processes with vendors), b) the adoption of the technology is high, and c) decision-making is data-driven. And, of course, the most important aspect of assessing digital maturity is stepping back and understanding where you are so that you can know where to go.
“If I had asked people what they wanted, they would have said faster horses” ~Henry Ford
As such, assessing where you stand in the digital maturity curve is an important step towards ensuring success and positive outcomes from the hefty investment being made in digital transformation.
How close is your organization to digital maturity?
Collaboration & Digital Ecosystems
While the foundation of digital transformation is built around data mastery, flexible and secure infrastructure, and open talent networks, one of the drivers for moving towards maturity is ecosystem engagement. Companies that are further along the maturity curve are realizing increased agility through innovation that is driven by collaboration — internal collaboration via cross-functional teams and external collaboration via digital ecosystems. Increasingly, we find that these external partnerships and alliances are less based on contracts and relational governance and more on less formal, controlled relationships. According to a comprehensive study by MIT Sloan Management and Deloitte, digitally mature companies are twice as likely to work with external organizations for innovation and to use partnerships to support various dimensions of the innovation process, building wide ecosystems that address both short- and long-term goals.
Interesting to me is the idea that the digital ecosystem extends past traditional partnerships to cover a wide range of relationships, including academic institutions, government entities, customers, and even competitors!
But how do these ecosystems actually contribute towards innovation? Well, let’s look at platform companies such as PayPal and Amazon — they’re partly open and allow anybody to participate, which in turn attracts value-added partners who are not previously identified or vetted — i.e. no due diligence, etc. Integrating platform companies together as hubs within an innovation ecosystem provides collective access to diverse customers, forming a wider web from which to draw valuable insight on audience feedback and behavior that can play a huge role in the innovation process. While companies such as Google and Facebook have been able to monetize the data crumbs they’ve uncovered from their platforms and ecosystems, the majority of businesses will be able to innovate and capture positive outcomes by using ecosystems to uncover data-driven insights into their existing and core products/services and organizational processes. And these platforms which are part of an ecosystem can integrate with other platforms, enabling even broader ecosystems (e.g. YouTube is a platform company that is part of the video ecosystem).
Now, let’s bring in the internal cross-functional teams who advance innovation efforts within the ecosystem. Cross-functional teams, as the name implies, bring in people with multiple departments reporting to project managers or corporate innovation executives rather than functional managers. While these teams can provide management challenges (team alignment, culture, etc.), they allow for diverse perspectives, more skill sets, and new ideas.
Leader or Laggard
According to MIT Sloan Business Review, participating in digital ecosystems is a very important way for digitally maturing companies to innovate. In fact, 80% of higher maturity organizations — those who have progressed on their digital transformation journey to the point that they’re driving positive growth — are creating digital ecosystems or networks and communities comprised of complex interdependent parts to drive innovation. And 81% view external partnerships as vital to their digital innovation efforts. Similarly, within the organization, networking is vital — 54% of higher maturity firms have cross-functional teams that work together as a cohesive unit and are even evaluated as a collective whole rather than as individual participants.
So if, as an organization, you’re still in the early stages of your digital transformation efforts, it’s important to start taking action. This can start by reassessing organizational aspects such as hierarchies and team structures and how they’re cultivated and supported, looking beyond the organization for innovation drivers, and evaluating technology investments as more than a single solution but as ecosystem players.
Of course, there’s a risk that comes with increased agility and it shows itself primarily in governance policies — just like a startup that experiences rapid growth begins to find that it’s low-key policies of early days no longer work, governance policies need to keep pace with the speed of innovation on the path to digital transformation.