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How to experiment digital opportunities for true business benefits?

In my previous blog, I opened the key challenges to scale digitalization from small experiments to true business benefits. Let's continue closing the scaling gap. As one of the three proposed steps I stated that a company (leadership team) should implement a practice of continuous experimentation, with a bridge to strategic planning. What are the key ingredients to make it happen?

In my previous blog, I opened the key challenges to scale digitalization from small experiments to true business benefits. Let's continue closing the scaling gap. As one of the three proposed steps I stated that a company (leadership team) should implement a practice of continuous experimentation, with a bridge to strategic planning. What are the key ingredients to make it happen?

Agree innovation baskets

When it comes to digitalization, baskets of change may be hard to categorize. More mature organisation have these baskets identified but for others, here is one easy way:

  • If you aim at increasing revenue, choose one potential product family to start with.

  • If you aim at improving cost efficiency, structure innovations around business processes.

  • All companies need to upgrade their ICT for mainstream digitalization. Create a basket for digital era ICT technologies and technology operations. Digitalization calls for new development environments, and cloudified infrastructure for global, edge and in-product computing.

  • Digitalization requires fast, cross-functional governance practices - reserve one basket to upgrade practices in governance, funding and digital ecosystem orchestration.

Innovate ideas

According to Gary Hamel in the Nordic Business Forum 2018, "the essence of successful change is that it starts at the bottom, with individual people, rather than cloistered executive". Top-down ideas may flourish in innovative companies, for example when a new digital intensive business model (e.g. fresh air as a service) is already identified and innovation focuses on improving the existing idea. All in all, amount of great digitalization ideas in an organisation is easily counted in hundreds. Key question is, how can organisation provide freedom for individuals and still direct the existing energy for business benefit. Our advice is that you start visualizing the fuzzy front-end of your digitalization ideas. In practice, you may run very practical, cross functional innovation workshops to clarify the idea pipeline. Organise the ideas around the agreed innovation baskets. Individual ideas may promise new revenue, improve efficiency of current capabilities or they may improve stakeholder experience. World Economic Forum estimates (dti-executive-summary-20180510) that 30% of industry revenues will come from new digital business models by 2020. You may choose one promising product family to start with.

Prioritize the idea pipeline

Consider using fresh, agile prioritization criteria that enable new ideas to flourish. These criteria differ from the mainstream business. For example, you should understand timing and cost of delay, you must be ready to accept risks of failure, even celebrate failures to promote fail & learn fast - culture. And you must fund ideas even though the outcome may not be clear yet. The output of these actions is prioritized, agreed innovation backlog that fits the experiment culture. When priorities are right, you are ready to pick the next experiment case from your portfolio.

Select the right digitalization competences

An experimentation can be run by any tiger team in the organisation, assuming needed digitalization competencies are available. A multi-company team is a very common choice in order to include needed competences. Tiger team level competence requirements reflect also a typical wider need to manage a digital competence ecosystem. But don't underestimate the competence challenge, success in experimentation requires experienced change leadership combining business, customer experience, people, data management and technical competencies. Even in small experiments, technology alone is not enough.

Experiment

Pick the next innovation case from your backlog when the team has capacity to perform. The case may be related to one product family, for example. Then start small, experiment and learn. Small experiments may be easier to fund, implement and they motivate innovative people. Try to implement something that is minimal in scope and still a working solution, a minimum viable product. It is typical that the "product" includes mainly technical components but I would encourage you to experiment also new aspects of customer experience, data utilization and related way of working. If you are lucky, already this early experiment can bring value both to the product management in question and the targeted stakeholders. In minimum, you learn.

Prepare to scale

When experimentation is successful, there is a need to continue digital transformation at scale. Game is changing when scaling up. Latest now, you need proper cross organisational collaboration in order to guarantee top management support for wider change. For example, you may want to update product family roadmap to include embedded IoT elements to monitor healthiness of physical product in customer location. In order to lead a transformation, you should be able to scope the actual change. A tricky part of scoping is that true transformation requires changes in surprising many business capabilities. Experiments may include only some of these areas but it is important to understand all the mandatory elements from the beginning. Midagon's digital transformation map helps you in scoping by introducing default change areas:

  • Digital intensive governance, lean business case & funding and upgraded way of development enable leadership priority for transformation

  • Digital business model keeps eyes on new revenue

  • Digital customer experience drives benefits for end users

  • Digital culture and competence development support people change management

  • Business domain optimised operating model, e.g. digital industrial maintenance model, ensure that organisation is optimised to use technology for business benefit

  • Case dependent digital technology solution is integrated from components for end users, physical product integration, data handling and applications

  • Case dependent digital technologies are running on top of the digital ready connectivity and digital infrastructure. In case the infrastructure is not yet ready for mainstream digitalization, infrastructure is a subject to a major transformation itself. ICT infrastructure is needed for centralized computing, for edge computing in factories and customer locations, and it is embedded in the products.

At this point you need a business reason and digitalization roadmap for your case. Initial business case identifies business benefit drivers and the roadmap clarifies smaller steps in the journey. With this input there is an opportunity to embed innovations into overall business strategy and product roadmap. Going forward and asssuming your case will be approved into the strategic development portfolio, you have leadership priorities in your side for successful transformation. The next step would be a proper start of digital transformation. This preparation phase is the bridge between innovation and strategy processes and organisations should agree how the bridge can be used. If the bridge is missing, digitalization at scale is very difficult if not impossible. And in more generic terms, innovation pipeline is not feeding the strategy process.

Consider innovation portfolio

If you want to collect experimental learnings at higher level of organisation, an innovation and experimentation portfolio is to be continuously managed. We know that larger organisations have established dedicated funding and lean governance practices for continuous digital innovation and early experimentation. This positive governance practice is also a way to bridge innovation and strategy work. Format is very much dependent on the size of organisation.

Start now and adapt

External expectations are changing rapidly and new innovations are needed faster and faster. The sooner you can bridge the gap between innovation and strategy, move from pilots to proper start of true transformation, the better business benefits can be expected. Together with a competent transformation lead and digital business architect, you can simplify your innovation in practice, run workshops and continue closing complex digitalization gap in experimental way. While keeping eye on true business benefits. One option is to start now with one product family or process area. What would be your priority case?  

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