There are three types of innovation that businesses can look into – Product, Process and Business Models while going through the process of Digital Transformation.
1. Product Innovation
This is the most well-understood and common form of innovation and is related to a) either a completely new product e.g. Bitcoin currency or b) a new feature in an existing product e.g. the introduction of camera features in a mobile phone or c) the enhancement of an existing product feature e.g. a higher resolution version of the camera. Product innovation is most often a result of new technology or new insights about customer needs (sometimes even before the customer knows what these needs are).
2. Process Innovation
Process innovation is how a product or service is produced or delivered to the client. It can be a combination of methods, capabilities and technologies to produce, market, deliver and support a product or provide a service. There are of course innumerable ways to improve a process so that the customer sees additional value.
An example of process innovation to produce the product/service is an automated assembly line for car manufacturing. This was process innovation to find ways to reduce human error while enhancing output at the same time. An example of process innovation in how to deliver a product is the way Dell allowed clients to customize their PCs during the order stage. Banks and other organizations now deploy automated AI-based chatbots to provide intelligent 24/7 support to their clients.
3. Business Model Innovation
Business model innovation is usually not about incremental change but more holistic and organization-wide transformation. Business model innovation can impact everything from product to marketing channels to pricing. It is most often seen in startups that do not have a established business structure and who have the ability to experiment with the way they operate their business. But there are also several well-established organizations that have leveraged their large customer base and resources to change their existing business model.
Probably the finest example of a large company that has transformed its business model and in fact created a new industry is Amazon. Amazon found a new way to reach and market to its customers online without going through the conventional retail distribution route.
The type of innovation that is most relevant for an organization at a particular point in time is a function of the most important questions that the organization is asking itself or is addressing. Questions such as:
How to Create a Tactical Plan of Action
As Described in The Change Blocks:
– Take the innovations at hand
– The capabilities available
– Align the business resources
– Answer individual needs, create clarity and inspire
– Review the diagnosed challenges defined in the strategy.
– Select the appropriate course of action to solve the near term challenges.
We all want to ‘get stuﬀ done’. It’s rare that a company focuses on the strategy as they favour tactical ‘outputs’ over strategic ‘inputs’. The quality of those tactical outputs depends very much on the quality of the leadership and their ability to articulate their strategy.
With a Clearly Defined Strategy, Trained Marketing and Technical Professionals Usually Deliver Superb Tactical Work
UCLA Management Professor Richard Rumelt suggests in his highly acclaimed book, Good Strategy/Bad Strategy, that a good strategy should contain a strategy kernel.
The Diagnosis defines the nature of the challenge, the Guiding Policy is the overall approach that can be taken to overcome defined obstacles, and Coherent Action is a set of coordinated actions and resources which overcome the diagnosed challenge.
Most businesses in their haste to achieve tactical outcomes start with Incoherent Action. Tweeting and Facebooking, website designing, integrating systems and buying ‘platforms’ to perform jobs better.
Digital Businesses, however, look for the near term challenges that need to be solved. While the solution to the challenge may be digital, it doesn’t have to be. For example, wholesalers or manufacturers wanting to sell directly to consumers online and bypass their retail channel don’t solve the big issue of channel conflict using technology. That requires diplomacy. Whereas, logistics companies wishing to solve their information flow with customers do need technology to overcome their challenge. Tactical Excellence is achieved when the diagnosis is accurate and the guiding policy is clearly articulated, creating coherent action.