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Digital innovation needs to move beyond the next clever product

Successful innovation in business increasingly moves away from clever product to new business systems. This trend is accelerated by digital and is the right way to create value with your digital  growth plans.

In the article the ‘ The New Corporate Garage’ Scott D. Anthony presents analysis that shows that from 1997 to 2007 more than half of the companies that made it onto the Fortune 500 before their 25th birthdays—including Amazon, Starbucks, and AutoNation—were business model innovators.  This fact supports his analysis that in this day and age the requirement for successful  innovation are not determined by the most clever product, technology or app, rather the most successful approach focuses on finding new ways of conducting business as part of a business ecosystem.

Digital is not just the subject, but also the catalyst of this fourth era of innovation. In my view this insight has important implications for the digital innovation agenda in businesses:

  • Digital innovators should focus on building new business models by networking within and outside their companies, rather than on building the best standalone functional innovation.
  • The focus of networks or syndicates that are built to dominate a digital service by being the largest integrator, should shift their attention. Not the largest position, but innovative ways of doing things should be the first priority in establishing a networked innovation.
  • Larger companies should focus on leveraging their existing network an business ecosystem to innovate digitally, rather than play a mini VC.

Such a shift in focus from clever product to new business systems has several benefits:

  • Digital innovation will be pulled closer to the core business, increasing it’s impact on corporate performance.
  • The digital innovation process shifts form a risky, low return looking for the golden bullet approach toward building capabilities that make the company more successful
  • The Netherlands, as an open networked society, has an excellent position to compete and is less dis-advantaged by its lack of venture capital. A good example is TomTom that  moved  from a consumer product company towards a trip information service company .

I suggest that if you are working in innovation and have several digital focused initiatives in your portfolio, you have an excellent opportunity to increase your impact on business.

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