Digital Transformation Is Not Innovation
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Most large organizations have two concurrent initiatives going on now — a digital transformation effort focused on leveraging and implementing the benefits of a software-driven business across the company and some kind of an innovation practice. The latter often manifests as a lab, skunkworks or internal accelerator. Yet, stop any executive to discuss either of these efforts and you find they are often conflated as the same initiative. They are not. While one could argue that the innovation effort is a byproduct of the digital transformation, the reality is that regardless of what kind of transformation is going on at your company (or even if no transformation is going on at all), innovation would still be on your company’s agenda.
If you’re in charge of your company’s innovation effort or just a part of it in any way, it’s critical to the success of that initiative that you divorce your success from the ongoing digital transformation initiative. The transformation drive is an ongoing effort to increase organizational agility and should be measured differently than innovation success. In fact, the survival of your innovation practice depends on it. How then should you measure and communicate progress when it comes to your innovation practice?
I set out to answer this question by interviewing Ryan Jacoby — founder of innovation strategy company MACHINE and former leader at IDEO’s NYC office. (Ryan is also the author of one of our first books on Sense & Respond Press, Making Progress). I wanted to understand what innovation leaders should do first when taking on their new mandate. Ryan said, “…start by being really clear about the customer problems you’re exploring and ultimately solving in the market. Often there are implicit problems already being prioritized, but they’re not clearly expressed yet, and often not in the language of the customer.”
[We are launching Sense & Respond Press this November as part of Eric Ries’ Lean Startup Week in San Francisco. Every attendee will get a copy of our first book, Lean vs Agile vs Design Thinking. Haven’t bought your ticket yet? Good, you can use code: GOTHELF to get 10% off a ticket. See you there?]
This is perhaps one of the biggest distinctions between digital transformation metrics and innovation metrics. While both should be focused on effectively changing human behavior (outcomes), transformation efforts focus on employees while innovation efforts focus on changing customer behaviors. To help draw a clear delineation between these two processes and how their efficacy is measured, I asked Ryan what innovation leaders should measure and how they should communicate about:
“Ultimately you’re going to be measured on launches of new products, services, and businesses that help the organization serve customers and close the profit/revenue growth gap. That’s the end game. Doing so, especially responsibly, leads to more funding. By responsible I mean by working lean / preserving budget and collaborating with others in the organization so they feel good about where ideas go once they’re launched. Process metrics are important, and they can help change the way you work, but they aren’t the end game.”
You’ll notice a clear call for collaboration outside the innovation “bubble” in Ryan’s advice. Innovation efforts, like transformation efforts, are prone to large-scale failure. Where as transformation efforts can falter due to poor communication, rollouts and incentives, innovation efforts often fail because they are seen as ivory towers or silos onto themselves. Ensuring that your innovation efforts are collaborative, outside of the innovation group, and that your work is aligned strategically and financially to organizational goals ensures a greater chance for effort’s success.
Finally, I wanted to know if there are any pitfalls that innovation leaders should watch out for as they set out to deliver new products and services. Again, Ryan warned of conflation with the process changes going on more broadly, “I think the big mistake is getting sucked into a process quagmire. It’s easy to confuse a transformation job with an innovation leadership job for instance. Innovation process is important, but instituting process isn’t the job of innovation leadership. Making progress and getting new offerings launched is the job.If the discussion revolves solely around process, I’d be less inclined to predict a ton of progress in the next 12–24 months.”
Digital transformation is crucial to your organization’s survival but it’s not innovation. It’s good business hygiene. Innovation efforts must stand on their own and be measured separately. Their job is to push the organization forward — regardless of process maturity. Are you seeing these two activities conflated in your organization? I’d love to hear about it.
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Sense & Respond
If you haven’t read it, Josh Seiden and I essentially make two points in the book: (1) You are in the software business and (2) managing a software-based business is different. This book is for managers, leaders and aspiring leaders trying to understand how to manage and incentivize organizations transforming into digital businesses.
If you’ve had a chance to read it, we’d be grateful for your review on Amazon.
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Barcelona — Lean, Agile & Design Thinking Masterclass (half day) — December 5, 2017 (joining me on stage will be executives from Mango, eDreams and Telefonica)
As always, if you want me to work directly with your company on training, coaching or workshops on the topics of organizational agility, digital transformation, product discovery and agile leadership, don’t hesitate to reach out.
Don’t forget, you can now hire me for short, remote consultations 30 minutes at a time. Get started by picking a time here that works for you.