Driving Growth In UK SMEs With Digital Transformation: Part 4 - Innovate

This is the 4th and final article in a 4-part mini series written to help UK SMEs drive growth and create enterprise value by following a simple 4 step framework:

1. Consolidate
2. Integrate ?
3. Automate
4. Innovate

You can find the full framework complete with support on the Full Stack Consulting website .

In Part 3 we explored the Automate step and in particular we learned that:

• Before we automate a process, we should audit a process
• A bad process is still a bad process even after you automate
• Automation is not free, you will incur costs in multiple places and your business case needs to check out
• The people who operate the process should be part of the automation project team.

Part 4 will focus on the Innovate step.

This is where you will shift gears.

You have spent time getting your IT estate in order.

You have made low risk, predictable ROI investments to tech enable the business.

Your IT estate should be more reliable, easier to manage, more cost effective and integrated. Your data should be high quality, trusted, accessible and used to make value adding business decisions.

You should have made frequent, iterative improvements to the existing business. On top of operational efficiencies you should have improved customer experience. For example:

• Your joined up data means you don't ask for multiple re-entry of personal data
• Your integrated systems allow customers to service their account on-demand, 24/7
• Your accurate data means customer comms no longer contain incorrect, out of date or incomplete data
• Your auto scaling infrastructure gives customers decent performance even during peak times

At this point you have proven that you can invest in technology and deliver a solid result.

Now it's the time to take some big swings, but always observe the golden rule of the Innovate phase:

Make asymmetric investments in innovations that offer uncapped reward but that can't screw up your core business.

Let's unpack that, how can an innovation offer an uncapped reward?

This rules out most operational efficiency gains. There is only so much efficiency you can squeeze so the reward from finding efficiency gains is capped. Besides, you should have tackled this in the Consolidate, Integrate and Automate phases.

That means we are looking to grow the top line.

We are looking for innovations that allow us to:

• Sell more to existing customers
• Expand our reach to new markets
• Disrupt our business model by developing a unique product/service that can leverage the IP/brand that has been built over years to bring something novel to the market

At the same time we take a defensive position in refusing to screw up the core business by chasing such innovations. That means we don't divert huge sums of cash that will starve the core business of working capital, instead we design an approach that can be delivered with relatively small initial investments and then we iterate.?

It isn't all about cash though.

You also need to ensure you don't over commit your people, leaving them without enough capacity for core business operations. If they are overstretched you will likely end up with the worst of both worlds - deteriorating efficiency and quality in your core business and failed attempts to innovate.

With those ground rules out of the way, let's start to think about how we can innovate. A simple framework to help you uncover innovation candidates is as follows:

Rigorous business case assessment is vital. If you don't know how to get started check out this article that takes you through estimation of the costs, benefits, risks and how to choose which opportunity is best .

Once you have identified the innovation with the strongest business case it is almost time to bring it to life.

Almost, but not quite.

First you need to know what success looks like. Your business case must have made some assumptions about the value the innovation would create. Which KPIs did you use in those assumptions? Now is the time to figure out how you are going to track those KPIs.

You need to know whether your assumptions were sound. As things progress you need to look for signs that you are on the right track and if not you need to consider how best to course correct.

Now, how are you going to create your innovation?

In-house, outsourced delivery partners, freelancers etc?

I have used most models over the years and anybody who tells you that one is universally better than the other probably has their own agenda. They can all work fantastically well, they all have situations to which they are better suited and they can all be a disaster. My advice, regardless of which route you go down, is to make sure you have internal technical leadership setting the strategy, overseeing the delivery, talking to stakeholders, talking to the board etc.

The final step in the Innovate phase is to bring your innovation to the market.

Is it a cross-sell that your existing team can crack on with? Is it defining a brand new category in the market requiring specialist domain knowledge? Or is it somewhere in between?

At this point I'm starting to drive outside my lane, so I'll leave a more detailed discussion of routes to market for another day….perhaps we'll see a Part 5 guest post from a GTM specialist.