Creating a Digital Innovation Factory

Creating a Digital Innovation Factory

Becoming a digital leader is as much about strong, bold management as it is about technological savvy—maybe more.

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Creating a Digital Innovation Factory

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Many large, traditional companies view digital innovation in a particular way. They assume the explosive growth of native digital competitors can be largely explained by breakthrough discoveries or technological wonders. True innovation, they assume, is the realm of digital wonks and ambitious entrepreneurs. The corollary, of course, is we don’t know how to do that.

But as my colleagues and I wrote in a recent Bain Brief on leading a digital transition, becoming a digital leader is as much about strong, bold management as it is about technological savvy—maybe more. At a time when the pace of innovation is dramatically compressing cycle times, what’s most critical is to create an organization that can read weak signals coming from the marketplace and align itself to respond with speed.

Consider what’s happened with elevators. The obvious pain point for anybody trying to get to an office on the 49th floor is waiting for the elevator to show up. For years, elevator companies have been using electronics to coordinate banks of elevators and make the wait times as short as possible. But only recently have elevator companies found a way to personalize the solution by coordinating sensors in building employees’ access badges with systems that calibrate where each elevator should be standing by to optimize individual wait times. That, in turn, has allowed the elevator companies to revamp their business models. By giving them a metric to track, they can sell optimized wait times (elevators as a service) rather than banks of elevators based on price. They are selling performance, not hardware.

This isn’t rocket science, but it is game-changing innovation. And it shows that real-world innovation often resembles an assembly line. At one end is a pain point or a potential new market. At the other is a product or service that solves the problem at scale or addresses the market in a way nobody has thought of before. In between, people sit down and force themselves to examine the problem from a variety of fresh angles. Sometimes, they tap the lab and bring a radical new technology to bear. But much more often, they reach for pieces of technology that already exist and assemble them with new (or old) capabilities, to produce a solution that turns the pain point into a happy customer.

This idea of starting with the pain point and working backward is central to creating a more responsive organization that applies an agile mindset to everything from strategic planning to inventory management. Agile methodology brings cross-functional teams together and empowers them to gang-tackle problems. They are encouraged to test concepts early and often, and iterate better solutions based on a real-world data flowing from tight feedback loops.

We find that many of the most effective innovators have married an agile test-and-learn culture with the assembly-line paradigm to create a digital factory as part of their core value proposition. This factory receives constant input on how to adapt customer journeys, operational capabilities or the business model, based on new requirements. It then processes those needs by assembling the required digital technologies and feeding solutions into the “rapid design, prototype, test and deploy-at-scale” process that leads to constant and timely innovation.

This kind of innovation is often difficult for traditional companies to understand. Not every company can (or should) reinvent its operating model. But sustainable growth relies on developing a culture of constant innovation in everything the company does. Coming up with new ways to engage your customer is not so much a matter of experimentation in the lab. It is experiential. Organizations need to practice looking at pain points and opportunities in entirely new ways until it becomes a habit. The most innovative companies not only excel at deploying digital technology, but they also win by constantly challenging how to solve problems by recombining elements along the innovation assembly line in distinctive and unconventional ways. That ability is essential and will only become more so as the explosion of digital technology speeds up innovation in the years ahead.

Laurent-Pierre Baculard is a partner in Bain & Company's Paris office. He leads Bain's Digital practice for Europe, the Middle East and Africa.


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