The future of digital innovation is not one-sided, report finds
A new report from Capgemini Invent and the MIT: in order to adopt emerging technologies and maximize associated business benefits, large corporations today turn to and need to coordinate multiple sources of innovation
Capgemini Invent and the MIT Initiative on the Digital Economy (IDE) today announced the release of their latest report, “Lifting the lid on corporate innovation in the digital age”. The report outlines the value of mastering digital innovation to gain competitive advantage and the challenges that emerging technologies are creating in aligning the required capabilities. The introduction of new technologies, like the Internet of Things (IoT) and artificial intelligence (AI), present companies with a myriad of business opportunities; however, to successfully deploy these innovations, organizations will require a profound transformation of corporate innovation systems, including their processes and capabilities to co-ordinate multiple external sources such as universities, start-ups, third parties, and crowd-sourcing.
Highlighting the trends in corporate innovation, the research reveals that firms continue to up their investment in digital transformation with 62% of companies saying they have invested “more” to “a lot more” in digital innovation compared to five years ago. This skew towards digital is even more pronounced when assessing the most successful business projects; 95% of executives surveyed said their most successful projects were primarily digital. The recent years have also witnessed a new wave of digital technologies – AI, IoT, virtual reality / augmented reality (AR/VR), 5G, and others – opening up endless business opportunities to further innovate.
“The evolving digital economy and the continued rise of disruptive technologies are greatly changing the corporate innovation landscape. Companies need to adapt their innovation practices and move to hybrid models balancing internal and external sources,” said Didier Bonnet, Executive VP at Capgemini Invent and sponsor of the MIT research partnership. “The key to meeting the innovation challenge in the digital age is to identify the critical capabilities needed early, build clear innovation architectures to strike a balance between internal and external innovation, and have a clear plan for bringing key strategic capabilities in-house.”
According to the research, 94% of the 320 large companies surveyed used at least two or more external sources of innovation, underlining that this has become the new norm. New capabilities required to harness innovation are not always available internally, so large corporations must find and access them wherever they are available. However, the research also highlights that firms are not abandoning their internal sources as they hold a lot of advantages. When using internal sources, 87% of company projects produced an advantage that persisted. In contrast, only 60% of projects externally sourced yielded persistent competitive advantage, whilst 40% of the time, competitors or outsiders matched or overtook them. To successfully explore new technologies, markets, processes, or business models, big firms must use a combination of internal and external innovation in order to succeed.
The report recommends the below three-step innovation approach to build the required capabilities:
- Identify technological competencies: Identifying the technological capabilities that are likely to be critical in the future, with the key element for consideration being if the acquisition of the new technologies will differentiate from competitors.
- Create an architecture: Developing new sources of innovation requires companies to rebuild their innovation architectures, so they can manage both internal and external sources of innovation. Getting the foundational blocks in place is therefore important.
- Develop transfer processes: Creating a roadmap that demonstrates how externally developed capabilities and skills will be brought into the company in the medium term or long run.
Dr. Neil Thompson, an Innovation Scholar at MIT and co-author of the report said, “Our work highlights that there isn’t a single ‘right’ model of innovation that is always applicable. Instead, firms must map out the technologies that they’ll need and the capabilities that will get them there and then build their innovation system around this. To access rare, cutting-edge expertise, this will mean having a portfolio of external innovation sources. For building those capabilities into a longer-term competitive advantage, it will mean bring as many of those key skills in-house in the longer term.”
To read a full copy of the report, please click here.
