The source of innovation is just as important as the speed
It’s not just the pace of innovation that is changing the landscape for businesses. Sources of innovation are expanding rapidly too. Entrepreneurial hubs to rival Silicon Valley are sprouting in Berlin, London, Tel Aviv, Sao Paulo, Bangalore, and beyond. Start-ups, emboldened by a record-setting $128 billion of VC investment in 2015 are profiting from access to low-cost, cloud-based infrastructure. These younger firms are just as likely to invent a category's “next big thing” as the R&D arm of a major conglomerate.
The threat of extinction looms large
52 percent of the companies on the Fortune 500 list in 2000 have since been bankrupted, bought or closed.
This shift poses an urgent problem for incumbents. A report from Capgemini Consulting and Altimeter revealed that businesses continue to struggle with innovation and that the current R&D model is broken. Not only are businesses failing to understand the pace of change, the majority lack the requisite structure, knowledge, skills, culture, risk tolerance, and confidence to rise to the challenge.
For large organizations, innovation is a three-step process.
First, discovery: With so many potential sources, how do businesses position themselves to spot the next breakthrough idea? Do they forge closer ties with a handful of high growth start-ups or develop partnerships with the local university? Second, application: Is the concept ready to be incorporated into the business, or is further development required? Third, scale: How do we adjust our structure, people and processes to accommodate this innovation? How do we manage change?
The importance and challenge of Applied Innovation
Any business playing catch up must learn to master all three steps. It's a virtuous cycle that we call “Applied Innovation". Incumbents in all industries are finding applied innovation difficult. Telcos are urgently looking to apply and scale business model innovation in order to fight off the $380 billion threat from over-the-top (OTT) providers such as Skype and WhatsApp. Automakers are scrambling to discover and apply the product innovation required to combat disruptors such as Tesla.
The journey to take innovations and apply them is complex. It requires access to sources of innovation such as start-ups and academic institutions. It needs freedom to apply emerging technologies experimentally. It needs support from subject-matter experts with an understanding of sectors and technologies. It must be underpinned by tried and tested tools and methodologies for implementation. And it must also be conducted at speed, at scale and on a continuous loop. Only a handful of organizations have all these capabilities under their own roof.
Stay ahead of the curve with Applied Innovation “Exchanges”
This is reflected in the proliferation of what we refer to as "Exchanges" —high performance experience and delivery facilities and platforms dedicated to the application of innovation. These are safe places for learning, experimentation and concept development. Capgemini just opened its ninth—in the heart of Silicon Valley—earlier this year. Embraced as part of a broader push towards applied innovation, these facilities can have a substantial digital transformational impact.
It was Brian Solis, principal analyst at Altimeter, who coined the phrase “Digital Darwinism” to describe society and technology outpacing an organization’s ability to adapt. By learning and adopting the process of applied innovation, organizations can stay ahead of the curve, sustain their business in the short term and reap the rewards of market disruption in the long.