Responding to disruption with innovation: a three-pronged approach

In today’s business environment, reinvention and adaptation are the new normal for companies in every industry. An organization’s average tenure on the S&P 5000 was 33 years in 1964, , but that number is forecasted to shrink to just 12 years by 2027. Additionally, 50% of companies will be replaced in the next 10 years. In this environment, change and evolution aren’t an option – they’re a necessity. So, how can companies respond to make sure they’re on track? And what can they do even when big investments seem like they’re out of the question? Companies facing disruption need to think about mitigating risk in the short-term while building in resiliency over the longer-term through innovation and transformation.

To do so successfully, they need to take a closer look at their application portfolios and assess each application in terms of business criticality. Once that has been done, it is possible to take a strategic response that covers the three core pillars of innovation: incremental, tactical, and strategic. By taking this three-pronged approach, organizations can ensure they’re addressing the most immediate needs while laying the foundation for longer-term transformation.

Incremental innovation refers to organizational improvements that cut costs and modernize the legacy estate to make it easier to transform in the future, whether by funneling savings into innovation initiatives or laying the foundation for emerging technologies or new business models. Incremental innovation initiatives include rationalizing redundant applications, shifting to lower-cost delivery models, consolidating licenses, hardware, and skillsets, and shifting to cloud to take advantage of elasticity and pay-as-you-go models. It also includes cost rationalization for workloads already in the cloud to optimize cloud models and ensures usage of the right cloud services. Some companies may also consider equipment sales lease-backs to raise some capital.

Tactical innovation refers to investments that update the organizational model and tooling to enable the level of business agility required in an increasingly fast-paced and digital world. For example, many organizations have pockets of automation, agile, and DevSecOps but struggle with how to scale at a true enterprise level. To build a resilient enterprise over the long term, it’s critical that organizations adopt widespread automation, shift to modern development approaches, rearchitect to cloud-native, and shift to SaaS to standardize non-differentiating processes.

Strategic innovation refers to the more significant transformation in which organizations take advantage of change to disrupt the market by shifting to new business models, creating novel customer experiences, or embracing breakthrough technologies like IoT or AI/ML. For organizations facing disruption today, this can mean creating a resilient supply chain, shifting to a more effective e-commerce module, or enabling better ways to work and engage with customers remotely.

There are two main routes to get started. In one approach, companies can begin with a landscape assessment that identifies opportunities to drive incremental innovation in the form of cost savings, rationalization, and cloud adoption, as well as the potential for equipment leaseback to self-fund transformation initiatives. The other path is going beyond cost savings to more fully take advantage of the transformative potential of disruption. This means quickly iterating to prepare your organization for the post-COVID-19 customer journey. For example, this can mean building in greater supply chain resiliency.

For most organizations, it’s rarely a matter of choosing one or another. Embarking on both routes now ensures that however your business needs to pivot, you understand how the legacy organization needs to change.

For more information, please reach out to learn more about eAPM (economic Application Portfolio Management), Capgemini’s highly visual assessment methodology that analyzes the app portfolio across multiple business dimensions to get innovation initiatives started at full speed.

Jennifer Marchand drives IT strategy within Capgemini North America’s Application and Cloud Technologies practice.