7 Ways Traditional Companies Can Succeed with Innovation
In our work with clients around the world, we’ve identified a set of capabilities needed to compete successfully against start-ups that are unfettered by bureaucracy and inflexible processes.
Good management practices and healthy R&D budgets are no longer the only elements needed to compete in business today. The following are the seven capabilities that incumbent firms need to shape, design and successfully launch disruptive products.
- Dig deep to the root of business change to find the opportunity. A company’s first clue that the market is changing is often a business metric, such as slowing revenue growth. Finding the opportunity hidden in the problem starts with reframing the question in terms of the customer’s experience. In response to slowing revenue growth, the question might be, “What induces customers to leave their current provider?”
- Ethnography: uncover customers’ motivations to make them the center of business decision-making. Trying to guess what customers want (or asking them what they think they want) rarely produces innovation. Companies need a repeatable approach to identifying innovations with high revenue potential. We recommend combining big data with field research on behaviors and emotions (sometimes called “thick data”) to gain a deep understanding of customers’ motivations and desires.
- Design an experience that meets customers wherever they are. After the ethnographic study, design a user experience (UX) that matches the identified customer desires. UX designers should focus on the challenges customers want to solve and the events that trigger the customers’ use of the product.
- Build a business case that would excite venture capitalists. Conduct market research to define the market and business so precisely that it could withstand the scrutiny of venture capitalists. This includes answering questions about optimal product and market fit, emerging target market, and current players and their activities.
- Develop and implement a flexible product architecture that delivers rapid value and can be adapted quickly. Traditional product development release cycles take 18 to 24 months – far too slow to compete successfully with start-ups that use agile development tools and processes. Aim for market launch in a few months and continuously faster deployment for successive releases.
- Baptism by fire: launch to market. Launching to market exposes the digital service to real-world demands, forcing the team to behave like a real start-up. Rather than inserting the new digital product or service into the current sales and marketing organizations, consider creating a dedicated marketing team and a go-to-market approach tailored to the new market’s requirements.
- Turn operations and maintenance into an asset for continuous innovation. With a microservices architecture and agile processes in place, operations teams can monitor service uptake in real-time, detecting shifting market conditions in days instead of months. Some companies may want to conduct a cost-benefits analysis to decide whether to host, operate and maintain the solution internally or engage a partner.
Not allowing a cautious culture or rigid organizational structure to stifle innovation might be the most important piece to master. Here, you can read more about The Culture Cure for Digital.