In times of financial uncertainty, innovation can become a lifeline for businesses. Discover strategies for balancing the pursuit of innovation with the need to generate revenue and maintain profitability. Necessity is the mother of invention, after all.
Economic threats often lead companies to cut innovation resources, a phenomenon known as ‘the threat rigidity effect’. In today's rapidly changing business landscape, the role of innovation has never been more critical.
In this article, we explore practical strategies and frameworks that can guide leaders in embedding innovation at the core of their business operations, ensuring not just survival but sustainable growth and competitive advantage.
A Culture of Innovation
We often talk about innovation and its importance, but why does it actually matter in business? Let’s consider the COVID-19 global pandemic and its subsequent economic downturn. Though challenging, it presents unique opportunities for innovation.
Many companies have had to readjust their business models and pivot quickly to adapt to new customer needs.
This is more easily achieved if a culture of innovation already exists, motivating individuals to engage in activities like risk-taking, idea recombination, prototyping, and testing. An innovative environment allows for the incubation of new concepts, which are vital for long-term success. Innovation is needed to succeed in a time like this.
A lack of innovation can make organisations rigid rather than adaptive, inhibiting agility and the ability to adapt to new circumstances. This type of culture can lead to a decline in innovation and new concept introduction, affecting performance. While such responses may prevent immediate failure, they can be detrimental in the long run.
Studies in Innovation
The Great Depression
In some cases economic crises can be catalysts for big changes. A recent study by Kellogg Insight explores the impact of the Great Depression on innovation, focusing on the shift from independent inventors to firm-based innovation.
Researchers found a steep decline in independent inventors’ patents, driven by a lack of local funding due to the economic crisis. But large companies weathered, and in some cases actually benefited from the tough economic situation. Independent creative thinkers didn’t disappear; many of them moved to companies, where they continued to innovate.
Economic situations can force a shift in how innovation is organised and accelerated by circumstances, as in the case of the Great Depression.
The Great Recession
It can be tempting to reduce spending in times of trouble. Cutting costs in areas like innovation might seem like a good idea, but is it really?
McKinsey research shows that in the three to five years that followed the recession of the late 2000s, companies that had continued or increased their investment in innovation during the global downturn generated three times more growth compared with their industry peers. In many cases, these companies actually leapfrogged their competitors.
A crisis doesn’t mean that customer needs suddenly stop evolving. In fact, such evolutions often accelerate during trying times.
The European Commission’s Joint Research Centre found that in 2020, innovative firms faced a drop in performance that was only half as big as for non-innovative ones, underscoring the importance of innovation in times of crisis.
Strategies for Balancing Innovation and Profitability
McKinsey’s Eight Essentials of Innovation is a useful strategic framework to help leaders navigate crises, in particular economic downturns. By focusing on the key areas below, leaders can effectively navigate the crisis, adapt to rapidly changing market conditions, and position their organisations for future growth. These essentials are designed to help businesses rediscover customer needs, evolve business models, prioritise resource allocation, and ultimately emerge as innovation leaders in the post-crisis era.
Focus on understanding changing market dynamics and customer needs. Leaders should encourage teams to gather insights from various touchpoints and rapidly synthesise this information to identify valuable problems to solve. This involves prioritising research, analysis, and direct customer engagement.
Adapt business models to meet new market realities. Leaders should evaluate which aspects of their current models are less effective and explore new approaches. This may involve experimenting with alternative business models and challenging previous assumptions.
Reallocate resources towards the most promising innovation opportunities. Leaders should critically assess their innovation pipeline, discontinuing or pivoting initiatives that are less relevant in the current context, and redirecting resources to areas with higher potential value.
Set a new strategic direction or ‘North Star’ that aligns with post-crisis realities. Leaders should redefine their business aspirations based on the evolving market landscape and internal capabilities, ensuring that these are communicated clearly across the organisation.
Accelerate and Scale
Increase the pace at which new ideas are brought to market and ensure that operational capabilities keep up with these innovations. Leaders should foster an environment that supports rapid development and scaling of successful ideas, leveraging agile methodologies where appropriate.
Develop external partnerships to extend the organisation’s reach and capabilities. Leaders should seek collaborations with other companies, including competitors or firms from different industries, to jointly pursue innovation opportunities and share risks.
Create an agile culture and working model that supports innovation. Leaders should ensure that the organisation has the right talent, incentives, and organisational structures to execute on innovation plans effectively.
After focusing on the immediate needs through Discover, Evolve, and Choose, leaders should revisit the Aspire essential to ensure the company's long-term vision and aspirations are aligned with the new market context.
Lessons on Innovation from a Crisis
It seems easier to develop new ideas and drive change during an emergency. So what about when there’s no crisis? Can we apply the same ideas and learn to innovate in the absence of a crisis? Absolutely!
A crisis teaches us:
A Sense of Urgency
Crises create a real sense of urgency that focuses attention and action. In non-crisis times, organisations can approximate this by proactively recognising future threats and opportunities.
During a crisis, organisations can drop all other priorities and focus resources on solving the immediate problem. Leaders in non-crisis times should be disciplined in setting clear priorities.
Diversity of Perspectives
Crises bring together diverse teams, unleashing greater creativity. Leaders should encourage diverse perspectives and set specific parameters to focus innovation efforts.
Legitimation of Experimentation
The urgency of a crisis legitimises experimentation and learning, allowing for more risk-taking. Leaders should value projects for the learning they provide and create slack in the organisation to encourage experimentation.
The temporary nature of a crisis allows organisations to commit to intense efforts. In normal times, leaders can create similar conditions by setting deadlines and maintaining engagement throughout the innovation process.
Innovation in the face of adversity is not just about survival; it's about setting the stage for future success. As we've seen through various historical lenses and strategic models, those who embrace innovation during economic downturns position themselves for remarkable growth and competitive advantage. It's time for businesses to rethink their approach to innovation, turning challenges into catalysts for transformation and growth.
The Future of Digital Products: Trends and Technologies Shaping Our TomorrowExplore transformative trends in digital technology, from Sustainable Technology to Democratised Generative AI and Digital Humans, shaping the future of how we work, interact, and innovate in an increasingly digital world. Introduction In an age of rapidly advancing technology, digital products are at the forefront of driving growth and innovation in all facets of our lives. These products of the future seamlessly blend technology with human experience, creating new and exciting possibilities. As we navigate an increasingly connected and digitalised world, digital solutions are poised to enhance every aspect of our daily lives. In this article, we explore the key trends and technologies set to shape our digital landscape in 2024 and beyond, highlighting how they will transform the way we work, interact, and innovate. Key Trends Shaping our Future Sustainable Technology The concept of Sustainability has evolved into so much more than just a trendy topic in recent years. It's become a measurable, non-negotiable aspect of many companies and industries, reaching far beyond the tech sphere. Sustainable Technology encompasses a holistic approach. Technology is used to assist in achieving sustainability goals by investing in innovations that reduce carbon footprints, improve energy efficiency, and promote sustainable practices in technology design and usage. In essence, it's about the integration of environmental considerations into technology development. By 2027, it's expected that 25% of CIOs will have their compensation linked to sustainable technology impact. With stats like this, it's no wonder that tech giants like Google and Apple have been heavily investing in renewable energy projects to reduce their carbon footprint. Examples of Sustainable Technology in action include process automation, carbon data transparency, circular product design, and sustainable business models, with a view to reducing emissions by 45% to 70%. Technologies like Artificial Intelligence (AI), The Internet of Things (IoT), and blockchain play key roles in creating sustainable operations and products. The Augmented Connected Workforce We've all become a lot more familiar with digital collaboration tools like Slack and Microsoft Teams over the past few years – that's just the tip of the iceberg. Tools like these are already facilitating remote working and improving employee productivity in increasingly complex work environments, and the addition of interactive technologies is set to enable even more immersive and effective remote collaboration and training. This trend signifies a shift towards a more interactive and connected work environment, blending physical and digital experiences. The integration of technologies like Virtual Reality (VR), Augmented Reality (AR), Mixed Reality (MR), The Internet of Things (IoT), and Artificial Intelligence (AI) has the power to enhance employee capabilities and productivity. Applications include remote collaboration, workflow automation, and monitoring of facilities. This concept has the potential to significantly improve operational efficiency and innovative problem-solving across a number of industries. Democratised Generative AI The ability to create new content (images, speech, text, code and more) and its widespread availability is set to democratise access to information and skills, making this one of the most disruptive trends of this decade, if not century. By automating and personalising content generation, Generative AI technology has the power to enhance productivity, creativity, and efficiency in various industries, from product design and development, right through to sales and marketing. By 2026, more than 80% of enterprises will have utilised generative AI APIs, models, or deployed generative AI-enabled applications in production environments. ChatGPT is just the beginning. We can expect this trend to truly explode in the near future, making generative AI technologies accessible to a broad range of users. Democratised Generative AI promises increased innovation, fosters rapid ideation, and opens up access to advanced technology for small businesses and individuals. Intelligent Applications AI-driven applications are becoming increasingly sophisticated, capable of learning, adapting, and sometimes operating autonomously. They are enhancing customer experiences, optimising operational efficiencies, and driving intelligent decision-making. In particular, their use in the personalisation of customer experiences, illustrates a shift towards more intelligent and efficient business operations. It's predicted that 30% of new apps will use AI to drive personalised adaptive user interfaces by 2026. Within this trend, one of the key developments is Automated Machine Learning (AutoML). This aspect of AI focuses on automating the process of labelling data and tuning neural network architectures, making AI more accessible and cost-effective. It's anticipated that improvements in semi- and self-supervised learning will minimise the need for manually labelled data. Additionally, multimodal learning is gaining traction, allowing AI to support multiple modalities within a single model, such as text, vision, speech, and IoT sensor data. This advancement enables AI to perform a wider range of tasks more efficiently, such as document understanding in healthcare, combining machine vision and optical character recognition for optimised information presentation. Industry Cloud Platforms The emergence of industry-specific cloud platforms is providing tailored tools and services for distinct sectors. This trend indicates a move towards more specialised and industry-focused digital solutions, enabling businesses to address unique challenges more effectively. By 2027, more than 50% of enterprises will use industry cloud platforms to accelerate their business initiatives. Industry Cloud Platforms (ICPs) blend software, platform, and infrastructure as a service (IaaS) to offer tailored solutions for specific industries. These platforms enhance the agility of businesses, enabling them to rapidly adapt their processes and applications. ICPs stand out by not only providing predefined solutions but also offering modularity and composability, supported by a catalogue of industry-specific packaged business capabilities. This approach facilitates easier integration of technical and business innovations from one industry to another, and a robust industry cloud ecosystem enriched by independent software vendors and system integrators is key to their added value. Digital Humans AI-driven avatars, or digital characters, are creating more engaging and personalised user experiences. Used in customer service, entertainment, and as virtual assistants, these digital humans are redefining interactions in the digital realm. The trend of digital humans and AI avatars, especially generative AI avatars, is revolutionising digital interactions. These avatars, which can be 2D or 3D models, are designed to mimic human-like personas and are increasingly being used across various industries for applications like e-education, virtual assistance, medical care, gaming, media, and customer service. They are particularly valuable in enhancing user experiences in online retail, offering personalised interactions and improving customer service. The technology behind these avatars involves several phases, including accumulation, analysis, language processing, and visual shaping. Despite their benefits in task automation and interaction, challenges like maintaining human likeness to avoid the uncanny valley (the sense of discomfort or unease we experience when we encounter a robot with human-like characteristics), and ensuring proper training for teams to use these avatars effectively, persist. The global AI market, fuelled by these advancements, is expected to reach $1,811.8 billion by 2030, indicating the significant potential of AI avatars in transforming customer engagement and interaction experiences. Soft Skills and the Human Touch As technical tasks become increasingly automated, the value of human-centric soft skills like emotional intelligence, communication, and problem-solving is rising. This trend highlights the growing importance of these skills in complementing technological advancements. In the age of automation and AI, soft skills such as critical thinking, emotional intelligence, and effective communication are becoming increasingly important. These skills are key for humans to add value in ways technology cannot, focusing on thinking and emotionally connecting in ways beyond the capabilities of machines. Businesses and HR leaders are encouraged to develop these skills among employees to stay competitive. Concrete behavioural definitions of soft skills, such as humility and empathy, and training strategies are essential for embedding these skills in the workplace culture. The Customer Experience Revolution Companies are focusing more on ensuring every interaction with customers is positive and personalised. This involves tailoring marketing efforts, streamlining delivery and setup processes, and efficiently resolving issues, all aimed at enhancing the overall customer experience. The Customer Experience Revolution trend highlights the importance of AI-powered customer experiences and personalised interactions. AI's role in customer support is growing, with many businesses using it for 24/7 customer support and predictive analytics. This enables businesses to anticipate customer needs and offer solutions proactively. Additionally, there's an emphasis on data security, as customers are increasingly concerned about how their data is used. Businesses must balance automation and human interaction, understanding customer perspectives, and offer omnichannel support. The trend also involves every part of a business in shaping customer experience, not just customer-facing roles. Conclusion The evolving landscape of digital products is being profoundly shaped by these emerging trends and technologies. They reflect a significant shift towards more innovative, efficient, and sustainable digital solutions. As these technologies continue to advance in 2024, they promise to transform various aspects of our lives, from the way we work, to how we interact with each other. The future of digital products holds immense potential for driving growth, enhancing user experiences, and addressing key challenges in our increasingly digital world. Sources: Gartner – Gartner Top 10 Strategic Technology Trends for 2024 Gartner – Gartner Identifies Five Technologies That Will Transform the Digital Future of Enterprises Deloitte – Tech Trends 2024 Forbes – The Top 5 Tech Trends In 2024 Everyone Must Be Ready For TechTarget – Soft skills key to employability in age of automation CDOTrends – What Are Industry Cloud Platforms? IBM Newsroom – IBM Explores the Future of Cryptography DaveAI – The Rise Of Generative AI Avatars: How Virtual Avatars Are Revolutionizing Digital Interactions HubSpot – How Customer Experience Has Evolved Over the Last Decade [+ 2024 Trends]
Enhancing Customer Experiences Through Digital Transformation: A Simple, Practical GuideThis article unpacks Digital Transformation, emphasising a customer-centric approach to revamp business operations. It navigates through the key pillars – People, Process, and Technology, with a spotlight on the Financial Services Industry. Introduction Digital Transformation involves integrating digital technology into all areas of a business. No longer just a buzzword, the concept has become a core necessity in today's ever-changing business world, proving essential to staying competitive. The power of Digital Transformation lies in its ability to fundamentally alter how businesses operate and, most importantly, deliver value to customers. In this article, we explore how a customer-focused approach to Digital Transformation can help businesses not only meet but exceed customer needs and expectations. The Shift to a Customer-Centric Model Traditional business models focused mainly on products and services. However, digitalisation has driven a shift towards Customer-Centric Models. Amid the current landscape of the Digital Age, Digital Transformation helps create a business culture where customers, and their problems, are at the heart of every strategy. This shift not only elevates the customer experience but also unlocks a wealth of benefits for businesses, aligning business success with customer satisfaction. Implementing Digital Transformation So how can business leaders embrace Digital Transformation? How can they put a customer-centric approach into practice? There are three key areas to consider: People, Process and Technology. People Training and Development: Foster a digitally adept workforce. HR leaders must focus on ‘citizen-led innovation', which involves learning, development, and upskilling efforts enabling employees to effectively develop skills for future roles. Change Management: Establish a clear change story for Digital Transformation and include digitally savvy individuals in leadership to help ease the transition. Employees should be encouraged and empowered to challenge old ways of working. This approach facilitates smoother adaptation to new digital processes and procedures. Leadership: Ensure leaders are committed to playing a crucial role in executing the Digital Transformation roadmap. They lead the implementation of technology and process changes, ensuring that the transformation excites customers and makes them eager to interact with the company. Engagement Across Roles: Involve everyone! All employees, not just those directly involved in tech, have an important role to play in the Digital Transformation process. Employees interacting with customers, selling to them, and designing the solutions they need are absolutely crucial to any Digital Transformation process. Process Data-Driven Decision Making: Transition to a data-driven organisation by ensuring that key decisions, actions, and processes are based on data-driven insights – this is the essence of Digital Transformation. Process Analysis: Use tools like process mining to provide insights into business processes, identify bottlenecks, and assist in the optimisation of workflows. Process Engineering: Rethink and streamline how your organisation uses technology, people, and processes to fundamentally improve business performance. Technology Explore Technology: Embrace technologies like Artificial Intelligence (AI) and Data Analytics to enrich customer experiences. Digital Experience Platforms (DXPs): Consider a DXP, like Optimizely, to create a unified and personalised customer experience across various touchpoints. They combine analytics, content management, and powerful integrations to nurture a rich, insightful interaction between businesses and customers. Cloud Computing: Employ Cloud Computing for agility and reliability. In many ways the cloud is a cornerstone in Digital Transformation, offering scalable resources, enhanced collaboration, and a secured data repository. Data Streaming Technology: Utilise a platform like Confluent for real-time data processing. Capture, process, and respond to customer interactions as they happen, enriching the customer experience with timely insights and actions. Spotlight on Financial Services The Financial Services Industry, especially retail banking, is at the cusp of a digital revolution, driven by emerging technologies and evolving customer expectations. This transformation is not a mere option but a necessity to stay competitive and relevant in the modern financial landscape. Financial institutions globally are investing billions every year in Digital Transformation initiatives, although the investment strategies and the returns vary significantly across different entities. Take the overhaul witnessed in the retail banking sector; the advent of new digital services, propelled by the demands of an increasingly digital-savvy consumer base, is transforming the traditional banking paradigm. Established banking incumbents alongside new entrants are developing digital services to meet the escalating consumer demands. These digital services form a new baseline for retail banks, meeting the expectations of modern consumers who seek seamless, quick, and transparent banking services. The digitalisation journey in financial services comes with its set of challenges and enablers. The pre-pandemic era saw a rapid evolution driven by changing customer expectations and heightened competition. The momentum has further accelerated post-pandemic, with financial firms striving to leverage Digital Transformation for value creation through innovative solutions, partnerships, and overcoming the inherent challenges. The narrative of Digital Transformation is continually being written with newer technologies and strategies shaping the future of the financial services industry. The Financial Services sector stands at a juncture where the Digital Transformation journey is not merely about adopting digital tools but about creating a digital culture that prioritises customer-centricity, innovation, and continuous improvement. Addressing Challenges and Moving Forward Common challenges like resistance to change, and security and privacy concerns are often roadblocks on the Digital Transformation journey. But with adequate strategic planning, these hurdles can be mitigated and overcome to ensure a smooth transition. The adoption of emerging technologies combined with a culture of continuous improvement and innovation are the key to achieving a sustainable competitive advantage in the customer-centric Digital Transformation narrative. Conclusion Digital Transformation, with a focus on enhancing customer experience, is a practical step towards meeting and exceeding customer expectations. As businesses embrace Digital Transformation, the paths to customer satisfaction and business success converge, resulting in a win for customers and businesses alike. Sources: McKinsey: Enhancing Customer Experience in the Digital Age Forbes: Customer Experience and Digital Transformation: Challenges and Opportunities Harvard Business Review (HBR): Using Technology to Create a Better Customer Experience BCG: Winning Financial Institutions Build on Digital Strategy Springer: The Digital Transformation of Banking Deloitte US: Realizing the Digital Promise in Financial Services IBEF: Digital Transformation Shaping the Future of The Finance industry HR Executive: The Importance of the People's Role in Your Digital Transformation McKinsey: Unlocking Success in Digital Transformation TechTarget: Building a Digital Transformation Team Kissflow: Unlocking Success: The Key People Digital Transformation Roles: Who Should Lead Digital Transformation IBM: The Role of Process Mining in Digital Transformation for Business Optimization Harvard Business Review (HBR): The Essential Components of Digital Transformation AVEVA: Digital Transformation of Process Engineering in Rethinking Digital Transformation SAGE Journals: Digital Transformation: An Overview of the Current State of the Art Research