Beyond DX: The New Wave of Transformation

In my experience, organisations are designed to produce and scale their existing products or services as efficiently and repeatably as possible.

While this approach is great at addressing immediate market needs, it also creates an inherent resistance to change.?

Here's why: Ultimately, all organisational processes are designed to optimise one of four things: quality, margins, market share, and risk management. Given that transformation is, by definition, new and different, these processes can fall into conflict with the innovative changes required, leading to organisational inertia.

So any attempt to innovate means challenging a system that's designed to maintain the status quo rather than embrace the unknown.

Those of us who remember the dawn of the Digital Transformation (DX) era in the early 2000s can attest to this. In their rush to integrate digital technologies like cloud computing and social media, companies everywhere had to rethink how they operated from the ground up, from customer service to supply chains.

Therefore, to truly innovate, you need to look beyond the surface of new products or services and focus on making changes at a systemic level in order to pursue a new level of growth and success, or what’s called a new ‘revenue curve’.

The Curious Case of Nokia

A prime example of a situation where innovation didn’t work was the case of Nokia during the advent of the smartphone era.?

Throughout my time leading Nokia’s innovation team in China, I witnessed firsthand how, for a period, "mobile phone" became synonymous with Nokia. They were the innovators who disrupted the original inventor of the mobile phone, Motorola. Nokia’s leadership, the same team that had transformed the company from a paper mill into a telecommunications giant, was known for taking bold risks. Yet, this same leadership eventually oversaw Nokia’s decline in the smartphone market.

The critical question is: why did this happen?

Despite their pioneering spirit, Nokia struggled to transition from feature phones to the emerging smartphone market. Their failure wasn't due to a lack of innovation; it stemmed from a failure to adapt the underlying systems that supported their previous successes. The very structures and strategies that had driven Nokia's growth ultimately hindered its ability to pivot in a rapidly changing market.

The company's downfall wasn't just about missing the smartphone trend; it was about not going far enough in changing its decision-making processes, resource allocation, and organisational structure to support the radical shift needed.

Had Nokia been more aggressive in overhauling these core elements, they might have been better positioned not only to compete with Apple but also to innovate beyond the smartphone market, potentially discovering new growth opportunities.

This is what transformation means - innovation that changes the very systems that comprise an organisation.

The New Innovation Scorecard: Social Value Creation

Nokia's journey - the paper mill turned telecom giant that lost its hold on the market - illustrates how the demands of transformation constantly evolve. They aren't alone; corporate history is filled with examples like Kodak and Blockbuster, also felled by seismic industry shifts.

Indeed, digital transformation, or DX, was the most recent wave of transformation around the world. It taught the business community invaluable lessons about the systemic nature of transformation challenges, and how to overcome them.?

However, the era of digital transformation, while still unfolding, is giving way to a new wave: transformation for resilience, or RX.?

This new phase centres on building business models that are adaptable to external shocks and changes in a globalised world while also contributing to societal and environmental resilience, rather than detracting from it.

The signs are all pointing toward this new phase of transformation. Sustainability. ESG. CSR. Going “green”. The references are everywhere, and almost painfully so.?

So how can we learn from DX to make RX easier?

After all, just as organisations at the start of the DX era couldn’t imagine a digital future, most organisations now can’t imagine what a “sustainable” company looks like.?

Yet it will happen. These types of businesses will eventually be the organisations of tomorrow, that go far beyond current-day understandings and implementations of sustainability, which are often superficial and achieve little in the way of tangible business model shifts or management of negative externalities.

Today, no organisation is exempt from these rising expectations; shifting consumer expectations, increasingly tough regulation, and even employee conscientiousness all mean that transformation and innovation for sustainability will be essential to maintaining your organisation's licence to operate.

But beyond ensuring survival, organisations that successfully integrate social value into their innovation strategies will also position themselves to create lasting value for themselves, as well as the environment and society they rely on - this is what resilience means

The lesson? As always, innovate or stagnate.