It is impossible for any company to ignore digital innovation. In fact, in many sectors, success depends on how good it is implemented. It gets difficult when the innovation process is pushed too fast and the digital basics are not implemented sufficiently yet. Developing new digital business models without the experience of well-established eCommerce and Digital Marketing processes is probably not an easy undertaking. iq! developed a three-step model that describes the different phases which are necessary in order to implement a smoothly running digital business.
Digital Innovation Phase I “Base”
Without laying a solid digital groundwork, all other efforts to implement innovative digital business models will probably fail. The core organization has to adapt digital processes first, before new initiatives are economically sensible. GE converted its production facilities into digital factories before offering Digital Products and Services to its Clients. Employees should experience a digital company in order to be prepared for further Innovation. Investing in an IoT product without operating an eShop, having advanced experiences in Online Advertising or operating a Digital Customer Communication Center may pose some difficulties.
These connections may seem very logic and straightforward but nevertheless, a lot of companies struggle to set up a smoothly running own Digital Operation. eShops lack traffic, Marketing Departments fight to find the right channels in the abundant and confusing Online Advertising World besides Google. This initial Phase is especially important for manufacturing companies that usually do not have any experiencies with end consumer processes which are one of the first to digitize.
Digital Innovation Phase II “Grow”
Once the digital foundation is laid, the next Innovation step may be tackled. The product world is getting connected and every company should analyse possible ways to integrate Digital Products and the related Services into its portfolio. In order to be fast, Retrofit Options often make sense. By offering them, digitization is not tied to the product replacement cycle anymore. Sufficient reach is gained quickly which allows companies to design relevant Digital Services. The “OnTrack” Asset Management system of tool manufacturer Hilti works with simple RFID codes in order to digitize all assets of clients. But adding digital versions of products to the offering is not enough. The whole process world around these products is new. Significant changes have to be implement throughout the company in order to grow a working digital product system. Enormous amounts of data flow in and need to be analysed and translated into convincing Services. Prototypes are developed quickly and are afterwards optimized based on the data obtained. Customer communication becomes real-time and always-on.
Digital Innovation Phase III “Boost”
After interconnecting the own offer, the next step is to integrate this offer into a wider Ecosystem of interconnected Products and Services. One option is to maintain this out of own power by investing into suiting start-up companies and innovative ideas. The other way is to partner with companies that possess matching offers. Either way, the company has to open up and manage new external relationsships that did not exist before. In many cases this means also entering new business models or even new business segments. So Apple for example is entering the healthcare market by adapting digital expertise to other business segments. Many established companies with long-grown organizational patterns have to learn to co-operate with young, fast-changing and innovation-driven teams.
The economic world is changing fast and the change is mostly driven by the digital revolution. This development comes with high pressure on companies to adapt fast to an environment which is interconnecting at an enormous pace. It concerns all industries – Automotive, Manufacturing, Consumer Products, Healthcare, etc. The possibilities in an interconnected world are abundant and companies have to choose wisely which path they are going to strike. But it is dangerous to jump e.g. on the Internet of Things or aquire a start-up with a promising digital business idea without gaining enough digital expertise first and without fixing the basics: a working Digital Commerce Operation, successful Digital Marketing initiatives and Communication channels as well as over and above all the digitization of internal processes.