Innovation Management

Author of the chapter: Thomas Heimann (original publication: Digital Cookbook Series)

According to Gartner, one out of four companies will lose its current market position because of its digital incompetence.[1] The MIT confirms this trend and prophesises that 40% of today’s Fortune 500 companies on the S&P 500 will disappear by 2025.[2] We can already see this trend in history. Established companies such as Kodak (USA), Quelle (Germany) and Nokia (Finland) suffered crises or complete breakdown. Most companies recognise the importance of digitalisation today. Although the radicalism of the digital business transformation will not have the same intensity and depth in each sector,[3] the modernisation of business models to meet the requirements of the digital world is high on the agenda of most companies.[4] But how do you find a business model that will make your company digital on the one hand, but will also make money on the other? More than ever, the statement of Abraham Lincoln holds true: ‘The best way to predict your future is to create it.’[5]

Effective innovation management techniques are core defining the target state of digitalisation

In order to cope with this situation, an increasing number of companies are putting innovation management at the heart of their organisation. By using innovation management, we distinguish between two phases: ‘Where to play’ and ‘How to win’.[6] Businesses follow trends in the market, while at the same time advanced technologies are being scouted. The business checks which technologies support the new trends, or whether existing technologies are already well-suited. Then the business can decide which trend/technology combinations it will pursue.

Business portfolio management extracts, in addition to the financial aspects, the core elements of existing strategies, and then supports the prioritisation of the innovations and their scope. The decision to identify the right playing field is not an easy one. Innovation is needed in both the optimisation of the core business as well as in the identification of new business.

Use spin-offs, partnerships and acquisitions to complement and amplify internal efforts

It is especially hard when these two changes to the business model are to be implemented within one organisation: new business models based upon new technologies usually neither bring sufficient immediate revenues nor belong to the core business of the company.[7] Different approaches are available to solve this conflict. In a company with a high level of maturity, it makes sense to establish an innovation management team or strengthen an existing one. If this is not feasible, the following table indicates alternative approaches.[8],[9]

It is essential to integrate employees, partners and customers in the generation of ideas and set up an innovation roadmap. Then change the perspective and consider ideas from the customer’s viewpoint.

Methodologies such as BMC, customer insight, ideation, visual thinking, storytelling, scenario-building or prototyping help to do this.[10] Support change by establishing innovation objectives in the company and/or by rewarding new ideas.

Validate new ideas iteratively so as to avoid building solutions that customers do not want. First it is important to find the right speed of innovation,[11] and second you need to be in close dialogue with the user. Visualisation and prototyping help to trigger immediate feedback from the business or from the customer. Another instrument used to validate ideas is the minimum viable product (MVP) technique, whereby a new product is developed with sufficient features to satisfy early adopters, and the final, complete set of features is only developed after considering user feedback.

Implement innovation management at the heart of your organisation

The innovative power of an enterprise is closely linked to its culture. Innovation inherently increases risk, and the organisation needs to embrace risk in the sense that people are rewarded for taking well-managed risks. 

Innovation is not only about having great ideas, but having the determination, stamina and dedication to venture into the unknown. ‘Against all odds’, as the proverb says. Such responsible risk-taking must be rewarded, even if it leads to failure. The organisation can then learn from failure and take the next attempts at innovation. Without risk-taking, there is no true innovation, and such risk-taking must enter the cultural fabric of the organisation.

But, besides an assessment of market feedback and the promotion of internal risk-taking, do not forget to make visible your success in the implementation of innovation. By measuring strategic success indicators [12] it is possible to assess progress along your path. For example, you can measure the innovative capability of the enterprise with the following KPIs, which you can govern through the digital matrix:

·       Development of an innovation strategy: for example, share of turnover spent on innovation, share of turnover spent on the development of new markets, relative increase in market share.

·       Generation of ideas: for example, average innovative suggestions per employee, project profitability.

·       Evaluation and selection of ideas: for example, the innovation adoption rate, i.e., successfully realised innovation proposals in relation to adopted innovative proposals.

In summary, you need to launch appropriate activities to embark on the journey to a new digital world and tear down remaining obstacles. It will cause pain, because current leaders could feel threatened and hence resist joining you along the way. But, as highlighted at the beginning, you have no choice but to continually innovate if you do not want your company to lose its market position.

[1]        Hodge, L. T.: ‘Gartner digital Workplace Summit: Trends and Transformation in the Workplace’, Polycom, 2015. 

[2]        Ioannou, L.: ‘A decade to mass extinction event in S&P 500’, CNBC, 2014.

[3]        Bradley, J., Loucks, J., Macaulay, J., Noronha, A., Wade, M.: ‘Digital Vortex – How Digital Disruption is Redefining Industries’, Global Center For Digital Business Transformation, 2015.

[4]        Capgemini: ‘IT-Trends 2016’, Capgemini, 2016.

[5]        Brown, P. B.: ‘The Best Way to Predict the Future’, Inc., 2014.

[6]        Durst, M.: ‘End2End Innovation – Vom Umfeldscanning zur Roadmap’, itonics, 2015.

[7]        Fr?nhoff, B.: ‘Wie gro?e Konzerne ihre jungen Ideen schützen’, Das Handelsblatt Online, p. 3, 2007.

[8]        BMW: ‘BMW Startup Garage’, BMW, 2015.

[9]        WELT: ‘Daimler schluckt die App MyTaxi komplett’, Die Welt Online, 2014.

[10]      Tarabichi, H.: ‘Design Techniques for Business Model’, Slideshare, 2014.

[11]      Briggs, B., Foutty, J., Hodgetts, C.: ‘Tech Trends 2016 – Innovating in the digital era – Right-speed IT’, Deloitte University Press, pp. 5-9, 2016.

[12]      Kunau, O., M?bus, S. A., Petsching, M., Schniering, N.: ‘Kennzahlen im Controlling von Service-Innovationen’. in: Gleich, N. R., Schimank, C.: ‘Innovations-Controlling – Der Controlling-Berater’, Vol. 13, Haufe-Lexware, pp. 87-106, 2011.

About the Author

Thomas Heimann is a graduate computer scientist. His career began in the savings bank industry, where he worked as a software engineer, enterprise architect and group leader. Since 2000, he has been working for Capgemini in various roles and different industries in the context of IT architecture. In addition, he was temporarily responsible for marketing in Germany. During this time, he took over the responsibility for the Capgemini IT Trends study. Thomas is currently working for a large public sector organisation providing advice on IT strategy, enterprise architecture and innovation management

About 'Modelling for Digital: Best Practices for Digital Transformation in Everyday Project Life [Practitioner Edition]'

In this edition, we focus on the practitioner. We mean those colleagues, who conduct the day-to-day work in the concrete projects delivering digital capabilities. Some aspects presented here are very specific to digitalisation projects, while others are general best practices in projects and hence also apply to digitalisation projects. In digitalisation undertakings, however, speed is of the essence, and a certain explorative approach must be chosen in order to match the needs of the customers best. At the same time, security is a pervasive challenge, as is compliance.

About the 'Digital Cookbook' series

Digitalisation is highly relevant in our private and business lives, and it is better to face up to the changes it drives. Setting aside the sociological, cultural and macroeconomic changes driven by digitalisation in our societies, our focus here is on the microeconomic impacts on our businesses. It is probably the biggest upheaval for society and the economy in this century. 

Altogether, 'Modelling for Digital', 'Managing for Digital' and 'Digital in Action' assist you in the shaping, planning and execution of a comprehensive transformation of the status quo (and you should not settle for less). It will accompany you and your business in meeting this challenge, to open up opportunities unthinkable even just a couple of years ago. It provides the context and best practices for such initiatives from a variety of industries, businesses and viewpoints, strategic, functional, operational, technical and executional. The authors lay out a general, abstracted vision of digitalization across different industries.

About the authors of the 'Digital Cookbook' series

Dirk Krafzig spent the greatest part of his professional life working for large enterprises. As the author of the bestselling book 'Enterprise SOA – Service-Oriented Architecture Best Practices', Dirk coined the term 'SOA' and the concepts behind it in 2004. Today almost all large organisations in the world apply service orientation as the foundation of their enterprise architecture. Since 2007, Dirk has been running his own company, SOAPARK, which specialises in strategy consulting in the area of digital transformation and SOA.

Manas K. Deb is currently the Business Head of Cloud Computing at Capgemini/Europe. He is a veteran of the software industry with more than 30 years of experience including deep work in development, product management, architecture, management of transformative customer projects, and sales and marketing. During his career at TIBCO and Oracle, he focused on the whole spectrum of middleware technologies.

Martin Frick is currently COO at Generali Switzerland. He has held executive positions in large multinational corporations, BPO service companies and start-up incubators in international settings, with a focus on IT and operations in financial services. He has been responsible for large-scale business build-up initiatives and turnaround situations in large organisations, always with a strong need for pervasive change management.