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Digital Innovation: 5 questions that business leaders need to be asking

By Peter Thornton
On their own, each of the recent global shifts would have been significant, but it is the combination that has been genuinely transformational. Technology empowers people and consumers and is forcing a fundamental re-think on the relationships between organisations and their customers. 


 

The world is transforming under the onset and adoption of new and exciting technologies that, for many, would have seemed like unlikely science fiction just 20 years ago. Consumer behaviours and demands are rapidly changing and all organisations need to quickly understand what to do about it. In this paper I set out my interpretation of what has happened and why, and focus on the implications for the future transformation of our world and the leaders of organisations. We need senior managers and leaders to understand how expectations are changing rapidly and see what to do about it. During the 2020 world pandemic the changes enabled by digital technologies have just accelerated.

The key enablers

Digital disruption has seen the demise of long-established companies and brands and the birth of many new ones. The whole question of digital transformation is engulfing entire organisations, requiring businesses to rethink their business models, products and services. Today’s innovations have the potential to change the world and the world of business. ‘Unicorn companies’ such as Uber, Airbnb, Snapchat, Dropbox and Spotify were born after 2006 and have become household names in just a few years, worth billions of dollars.

Internet based technologies, often stemming from Silicon Valley in California, are rewriting the rulebook. The key enabler for this disruption is often cited as the coming together of mobile internet, connectivity and social media. 2007 was seen by many as a tipping point when the iPhone was launched, broadband had become widely available and Facebook’s users passed the 50 million mark, establishing the foundation of a pervasive culture of social media. On their own, each of these shifts would have been significant, but it is the combination of all three that was genuinely transformational.

In the last decade, the disruptors have been quick-moving, without high-cost structures and cultures resistant to change, damaging well-established organisations beyond repair, many of which have been household names. They use technology to disrupt and rapidly improve efficiencies and levels of service.

Changing behaviours

According to the Office for National Statistics the amount of ‘stuff’ used in the UK – including food, fuel, metals and building materials – has fallen dramatically since 2001. On average people used 15 tonnes of material in 2001 compared with just over 10 tonnes in 2013. This is in no small part due to a shift away from buying physical goods to digital consumption instead. In January 2016, Ikea said the appetite of western consumers for home furnishings had reached its peak and consumption of many familiar goods was at its limit. Households now spend more on services than physical goods. Why?

Devices

Through the widespread adoption of mobile technology devices, be it a smartphone, tablet or something in-between, people’s behaviours are changing. The convenience of effectively having a personal computer with you at all times is transformational.

Today, mobile devices dominate consumer behaviour – 46% of UK consumers now use their mobile devices as their primary tool for purchase decision-making. Mobile users turn to their devices at multiple points while considering a purchase and often rely on it as their exclusive source for information. There are now officially more mobile devices than people in the world and they are multiplying five times faster than the population. Consumers are being used to test ever newer ideas which are thrown out to the market such as wearable and lifestyle enhancing devices, devices and chips embedded in everyday objects, the ‘Internet of Things’. Don’t expect the innovations to end any time soon, rather this will increase exponentially.

Social Media

The way in which people communicate with each other, message and locate contacts and friends has fundamentally changed since 2007. This has altered the work life and social patterns of interaction for many, often the younger the generation, the more so. The result is a transformational set of cultural changes including how people communicate, manage relationships with each other, organisations and brands, and express their opinions and thoughts.

The use of social media, instant conversations, new communities, forums and memberships is, in many ways, a real shift. The exchange of experiences and sharing of products just purchased on Twitter or Facebook, or commentary on review forums has enriched the process of purchase. The world of entertainment has seen a convergence on the media web - news, music, TV, movies, videos and gaming are available to us 24/7 anywhere. The most visited website in the world was Facebook up until recently, but video is now on the rise - YouTube and TikTok are rapidly becoming as important as Google when it comes to searching on the internet. Look out for more like this to come, both from China and the US who dominate in this area.

Connectivity

As the speed of connectivity has gone up, the cost has come down, and the world has become increasing joined up. High quality connectivity and availability is increasing all the time. Internet access is now commonplace across much of the world’s population. In 2020 it is estimated there are more than 4.5 billion Internet users.

The number of mobile connections or contracts exceeds the total world population figure. Over half of smartphone owners regularly use their devices on public transport, at work and while shopping. And the younger a consumer is and the faster their network, the more likely they are to use their phones as they go about their day. These quick glances add up – collectively, just in the UK consumers check their smartphones over a billion times a day.

Resulting Customer Experience

Customer demands are constantly moving with new services and products – driving higher and higher expectations. With access to mobile apps, consumers can gain certainty of availability, real-time insights, reliability in the supply chain and trust in products and services in an instant, whether private or public sector. Transactions take place simply online and new financial services offer us a multitude of options to pay - contactless, PayPal, Apple Pay, and even more new financial services on the way.

Interconnectivity changes the game again, as mobile devices talk to all manner of products and things and machines learn. People can now control the temperature in their house while travelling home from work and cars can update the maps for their navigation system while sitting on the driveway.

The result of all this is a transformed customer experience compared with the pre-iPhone era. Customers expect a seamless shopping experience. They want their favourite brands to know what they like, how they shop, provide them with a fast service and deliver the same experience wherever they are buying. They want to quickly find out: how attractive is the offer? And if it isn’t attractive enough, they will be off in the tap of a finger to another provider. Moments of truth have become instantaneous in the user experience through connectivity.

Data and customer insight

Technology empowers people and consumers and, increasingly, is forcing a fundamental re-think on the relationships between organisations and their customers, both actual and desired. Organisations must identify trends and changes early using analytics to monitor patterns and help make predictions.

Data is increasingly available to a larger extent than ever before – exploding through websites, product sensors, GPS and more. Social media is a source of insight but, in itself, doesn’t give an organisation any competitive advantage any more. In truth, handled badly, data and customer feedback gathered through the internet can actually distract organisations. The key is in the interpretation and use of the data and insight together – research and data combined to form intelligence that can be acted upon to inform decision making.

To continue to succeed, organisations need to lead with their user experience and win trust. Organisational efforts to monitor competitors, disruptors, identify trends and predict the future requires more and more focus. Denial is the easy option and leads to loss of value and even organisational demise. Early identification of trends and monitoring changes drives learning, which we think is the key to winning the future.

 

Riding the wave of digital innovation - five questions

To ride the wave of digital innovation, organisations and their leaders should be asking themselves:

1. Have I accepted the new reality of digital innovation and customer behaviour?

If parts of your business are operating as though in denial about the direction your industry is travelling in, act now.


2. Is my organisation adapting as fast as consumer habits are evolving?

You need to connect what your customers think to what they to do. If it’s not already obvious, digital consumption has widely outstripped the desire for physical products.  


3. Are we using digital innovation to our commercial advantage?

If not, it’s time to think more broadly about innovation, proactively seek out opportunities and be open-minded enough to recognise them when they appear unexpectedly.


4. Are we listening to our customers?

Seek their feedback and tune in to their online conversations in order to understand how the value of your products/services is created and destroyed.


5. How can our collective knowledge and ideas be directly applied to driving organisational change?

To get ahead of the competition, educate and empower your leaders, future-leaders and middle management teams to ride the wave of digital innovation. It’s sink or swim.


Acknowledgements
This paper, which is is intended for thought-provocation, pulls together strands from my leadership development work and experience over the last 10 years. It draws upon client testimonies and conversations and delegate leadership journeys in both private and public sectors. I would also like to acknowledge the many colleagues with whom I have co-taught at Cranfield School of Management, University of Cambridge, University of Leicester and others.

 

Into Director Programme

Innovation and the role of Digital are featured as part of Cranfield's Into Director Programme.

 


About the Author

Peter Thornton specialises in the design, development and delivery of executive development programmes. He has worked with organisations across continents to deliver educational programmes that develop their focus, align their efforts and improve their processes to more effectively deliver their business goals. View full profile.

Tags: digitalization, article, organisational development, innovation