As the pace of change accelerates, companies need to continually innovate to stay ahead of the competition. Greg Caimi and Elizabeth Spaulding, partners with Bain's Digital practice, describe how businesses can orchestrate a digital transformation to scale innovation throughout the organization.
Read the Bain Brief: Scaling Your Digital Transformation
Read the transcript below.
ELIZABETH SPAULDING: It's great to be together here in beautiful Hong Kong and have a chance to actually sit back and reflect on what we've been observing the last five years as we've been building our digital practice.
One of the things that I feel like our clients had been asking for is really how to play catch-up in a world that has been so heavily disrupted and continues to move at a new pace of change. And so a lot of the questions, and frankly a lot of the capabilities that we've been building, have been about helping create new infrastructure. But what's really starting to change, and what I think is really exciting, is more of a focus on innovation and sort of second-engine, next-wave and really going on offense.
GREG CAIMI: Yeah, I think that's true. I actually think if you start to look at industries where leaders have differentiated themselves from laggards, you will see things like, for example, in wealth management, a bunch of disrupters entered the space, gained share, but now incumbent companies are actually leveraging some of their assets to regain the offensive.
ELIZABETH SPAULDING: Yeah. I think one of the questions that we often get: how do you really orchestrate a transformation, and how do you scale and move quickly?
GREG CAIMI: If the prior period was one where incumbents really viewed scale as sort of a stumbling block or an impediment to growth and innovation, now a lot of them are waking up to the fact that these assets can be real competitive differentiators for them. Things like new funding models. If an incumbent wanted to, they could fund and grow innovation much more rapidly than a start-up could. They don't have to go to the venture markets or anything to raise money, and innovative companies have actually found ways to kind of replicate venture funding within their own portfolios. They unlock rounds of funding to grow innovation and push it forward.
ELIZABETH SPAULDING: One interesting point on that one. I feel like that question is coming up a lot lately, and not just the funding and the access to capital, but also, almost, how do you separate things? You know, one of the questions we often find is if you're trying to start something new, how do you prevent it from entering the creosote zone, so to speak? That part right around the cactus where things basically die. So, things are too close to that core business that are more disruptive, more in exploration vs. exploitation - there's really a lot of risk to that. So we would experiment with both ways, I think, in the past; now we really know that separation is quite important.
GREG CAIMI: And it's interesting because then you are able to leverage some of your nonfinancial assets. You can take advantage of things like a strong brand, like a set of customer relationships, like a deep wealth of data, because it's far enough away from the core business that you're not worried about disrupting that business, but you're actually able to build something new.
The other issue I think that's much more clearly articulated now than it was probably five years ago is the role that the ecosystem can actually play in innovation.
ELIZABETH SPAULDING: Yeah, absolutely. So there are some things that are not the core of that they need to actually tap the extra market for. You know, as we have engaged in building our Bain Innovation Exchange, where we're bringing together venture funds, start-ups and our corporate clients with the intent of helping the right kind of matchmaking between them to find those opportunities, we've seen just the power of that. One of the areas of power I feel like we see is the corporates sort of seeing the future, and then being able to capitalize on that so much more quickly rather than simply trying to figure that out themselves. And back to the funding point, with such a flush capital going into venture, it's just creating a lot of opportunities and almost de-risking if you can find things a little further along, real technologies that are ready to scale vs. trying to build that from scratch.
GREG CAIMI: So, as we look forward to the next five years, what is something to keep in mind?
ELIZABETH SPAULDING: Well, I think actually I would just go back to that last topic, would be the one for me, is really the power of the ecosystem and that being a central part of that next phase of the digital transformation. How about you Greg?
GREG CAIMI: The point that stands out for me is just with the foundation laid, with some of these critical elements in place, it's really a time for incumbents to think about going on offense, to actually start to disrupt disrupters in their own space. And we've seen examples of it, and I think we'll see a lot more future.