Monday, April 08, 2019

What I'ved learned so far about digital transformation and innovation

Lately I've been drinking from the firehose.  It seems every day there are new reports on digital transformation and innovation.  My good friend and collaborator Paul Hobcraft is constantly reviewing new reports and creating insights of his own, which inundate me with more information.

At the same time I've had the honor of chairing the Innovate Carolina conference, where the theme considered the interplay of innovation and digital transformation, and I'm teaching a class at NC State on digital transformation and innovation.  Well, teaching may be a strong word.  I have had the good fortune to attract a number of excellent speakers, from RIoT, IBM, RTI, NC State and others who know more about these emerging technologies than I could possibly know.

But through this I've learned a bit about both innovation and digital transformation.  Below I'm going to share a few things I've learned so far, and my sense of the implications.

Learnings so far:

  1. Innovation and digital transformation both impact efficiency; only innovation is about creating dramatically new stuff (so far).
    Most new technologies are first deployed to reduce costs or improve efficiencies.  In this way they demonstrate a rapid return on investment, so it's not surprising that many digital transformation initiatives are initially focused on efficiency gains and cost improvements.  So far digital transformation hasn't really addressed the question of transformative innovation - that is, innovating beyond the core.  I think there is great potential for digital transformation, especially big data and predictive analytics, to create new insights that lead to new innovations, but that seems to be still a few years away.
  2. Innovation and digital transformation both impact customer experience.
    Increasingly the focus within innovation is around design, human centered design and customer experience.  This focus is increasing because we need to provide more value to core products and because many innovations aren't centered around products but services and experiences.  It's interesting that a significant number of benefits from digital transformation are also focused on customer experience, whether this is based on smart bots on websites or more predictive data flow in an interaction.  Perhaps one of the best places for these two management philosophies to work together is in customer experience.
  3. Digital transformation is widely discussed, but not widely distributed (stealing from William Gibson).
    Digital transformation is a category term, embracing and encompassing a number of technologies, strategies and other factors.  The fact that the pace of change and adoption of the underlying technologies is different won't surprise you, but the gulf between the different technologies and their practical applications is rather large.  Machine Learning is being applied everywhere, and IoT is just a new way of saying "sensors".  There are billions of sensors already deployed across the globe.  However, blockchain is still in its infancy and few companies have a compelling use case for artificial intelligence.  Robotics are already widely deployed in factories and will become more so in service operations and human facing operations relatively quickly, but autonomous vehicles are still some distance away due to acceptance, regulations and insurance concerns.
  4. Few are prepared to manage all the data that will soon be generated.
    As more "digital transformation" occurs, as more sensors are deployed, more data gathered about people and their product usage, as more products produce more data about usage, far more data will be generated and stored.  Few companies are in a position to capitalize and use all that data efficiently, and those that do will have a major head start and gain so much more knowledge and experience that they will leave other competitors in the dust.
  5. Digital transformation (and all of its requisite technologies and implementations) may crowd out innovation.
    Digital transformation is not a blanket concept but a category of technologies that will be implemented, including IoT, Big Data, AI/ML, robotics, autonomous vehicles, blockchain, and their enablers - 5G, ubiquitous connectivity, cloud computing.  There are many technologies and many implementations in order to gain benefit.  My sense is that these technologies and their promise may overwhelm many companies and detract from innovation work, because a technology implementation (such as a project to implement more machine learning capability) has a definitive outcome and may quickly demonstrate benefits from cost cutting, whereas most innovation activities are somewhat risky and may or may not demonstrate value.  I continue to believe that innovation is on tenuous ground while this new phenomenon of digital transformation is paramount.
  6. In the end, it's just business and mostly about people.
    Our closing speaker at Innovate Carolina, Bermon Painter, said it best.  All of this, whether it's digital transformation or innovation, are just ways of doing business, and eventually all of this should be centered around people - customers, people in our company and in our value chain.  Does any of the technology get in the way or create frustrations for people anywhere in the value chain?  Do our innovations improve lives and create seamless interactions, or the opposite?  Whether it is new or old technology, new or old products, it is the people who ultimately matter.  Is that where your focus lies?
I'm interested in where all of this goes next, and how the interplay between digital transformation and innovation unfold.  Regardless of how it unfolds it will be an interesting ride.

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posted by Jeffrey Phillips at 7:22 AM


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