Harnessing Innovation

Creativity and technology are both key to success in the digital age. But as pointed out by Vijay Govindarajan and Chris Trimble, co-authors of The Other Side of Innovation: Solving the Execution Challenge, while most companies have plenty of both, many still lack the means to convert creativity and technology into earth-shattering innovation.

How do successful organisations harness innovation?

The first step is to understand what they need—the managerial skills, abilities, and traits that enable digital innovation. To help managers and executives do this, this article examines the role of the digital innovator as a leader of digital change inside both mature enterprises and startup organizations.

Based on interviews with two venture capitalists and former executives at Microsoft and Hubspot, we characterize the salient traits and attributes of the digital innovator.

What Is Digital Innovation?

Digital innovation uses invention to conceive a new enterprise or to modify an existing one. It is the force of transformation in the digital economy. It is capable of conceiving new products, processes, or services with a digital component. It relies heavily on platforms that accelerate the rate of recombination and testing to improve the digital process.

When digital innovation creates business value within an existing organization, it is known as innovative digital “intrapreneurship.” When digital innovation creates new digital enterprises, it becomes innovative digital entrepreneurship. As noted by Daniel F. Spulber, author of The Innovative Entrepreneur, a digital innovator does not need to create an enterprise, and digital entrepreneurship can rely on the replication of innovation to build an enterprise.

The skills of the digital innovator span the digital and physical domains. Digital innovators possess business acumen, a deep understanding of technology, a firm grasp of possibilities for the organization, agility, and a bent for experimentation. They are masters of digital platforms, and use them to accelerate the pace of business innovation. They use their social networks to access know-how and mentorship. They pace the growth of digital businesses and the rate of redesign of brick-and-mortar processes, ultimately influencing the economies of regions and countries.

We need to not only acknowledge digital innovators, but promote their role as creators of economic and social value. We need to start a conversation about the strategic position of academic institutions in the preparation of entrepreneurs in the digital age.

Innovative Digital Entrepreneurs versus Digital Innovators

In the digital age, it is entrepreneurship that incorporates digital technologies and focuses on innovation to create the most value. Digital innovators are the business leaders of digital change, but longstanding labels in industry and technology fields disguise their nature and critical role. Engineers and IT professionals have the technical know-how and, frequently, the responsibility to develop and implement business technology, but they are not necessarily the source of digital innovation.

Digital entrepreneurs exist in a continuum where technologies are reused, recombined, and invented. They co-exist in response to market forces and internal attempts to create disruption. And when they create value through the recombination of digital technologies or inventions, that’s when they become digital innovators. The transformation can occur inside the enterprise or in a new organization. Either way, the transformation is the key.

As numerous management experts have pointed out, it’s not necessarily the invention itself that matters. It is its ability to create new product offerings, production processes, and organizational models with which to reach new markets. What makes a digital innovator markedly different from an innovator of the Industrial Revolution is the ability to act across domains: the digital domain, in which data and other digital objects are manipulated; and the physical domain, where products and services are ultimately consumed.

The Digital Domain

Digital refers to more than mere objects represented as binary code in computer memory. Digital is a domain. New rules and a new playbook are needed to define what digital brings to an enterprise. Although the concept of digital as a domain is not new, its ability to completely transform the enterprise is. The new digital innovator is the master of the digital domain.

The digital domain has been described as a “constellation of technologies—a mutually supporting set.”[i] Domains enable certain types of transformations, but the digital domain has particularities that make it different from other domains.

Market forces and accelerated innovation are shaping the definition of the digital domain. Experimentation takes place within the digital domain to create value and fit the innovator’s inventions to the business context. Agility is critical, as are the technologies and platforms that operate inside the digital domain, where the recombination of digital objects and the identification of business opportunities work together. This is why the digital innovator must also have strategic business acumen.

What Makes a Digital Innovator?

Traits and skills that characterize digital innovators, and make them good at what they do, include deep knowledge of the digital domain and cross-domain, as well as a strategic understanding of the enterprise. Successful execution, combined with strategy, is essential. The digital innovator evaluates opportunity, executes strategy, and manages outcomes, then shares all decisions and lessons learned with upstream levels of management. Without strategy, the most agile experimentation only serves to fill the room with expensive equipment.

But what does an industry expert look for in a potential digital innovator? We asked that question to two distinguished authorities in the field, and they were very forthcoming with advice. S. Somasegar, a venture partner at Madrona Venture Group and a former senior executive at Microsoft, readily shared his views on assessing digital business opportunities and what drives the success of the digital innovator. Michael Volpe, angel investor and former chief marketing officer at HubSpot, discussed the ideal digital innovator’s profile.

Below are key excerpts, arranged under six major themes, from an interview with Somasegar and Volpe.

Playful Attitude toward Technology

The digital innovator looks to the online environment to seek new challenges—eager to learn and undaunted by risk. Somasegar confirms the value of playful experimentation:

There is no better or more effective way to learn a new technology and understand its capabilities than to try it out yourself. If it is a consumer-facing product, all the more reason to do that, since each and every one of us at the end of the day is a consumer.

Somasegar has advice for the learner amid fast-moving technological development:

Don’t hesitate to try out new technologies . . . play with [them] . . . be curious. . . . Being on the leading edge of technology adoption (as a business or as a consumer) will help you immensely in understanding the technology landscape.

Volpe echoes the idea of not being afraid of experimenting:

The kind of person . . . that goes, “I don’t know, I will click on a button. What’s the worst that can happen?” . . . has more chances to be successful.

Agile Experimentation

The digital innovator possesses adaptability, context, and cultural awareness. He or she has an ability to “pivot” whatever does not work and define new strategic lines of action without changing the organization’s vision. Successful agile experimentation also requires tolerance for ambiguity in untested situations. When an outcome presents uncertainty, or when the time to formulate the perfect question for the definite answer is not available, deriving a logical approximation is the best outcome. This is known as agile development, as Somasegar explains:

The world has mostly transitioned from a waterfall development methodology—clear separation between design, development, test, and deployment, where each phase of development takes a considerable amount of time—to an agile development methodology, a fast iterative development process. One important cornerstone of agile development is MVP (minimum viable product) . . . building a product or a service that is both minimal (in terms of features) and viable (in terms of providing an end-to-end solution), and that is good enough to get into customers’ hands to get feedback and iterate fast.

However, Somasegar cautions against making the common mistake of creating too much of a “minimum” product and too little of a “viable” product. Both aspects are equally crucial. Volpe explains how the development of the MVP process is favoured by current market conditions:

MVP appears in more and more industries and in more and more businesses because it is faster and easier to build something that is somewhat usable. . . . Consumers are becoming more used to trying things that are not perfect.

But what about market feedback? How does agile experimentation turn the customer into a partner in the process? Somasegar has some thoughts on this topic:

Early market feedback (customer feedback) is absolutely critical to ensure you are building the right product and that it solves a real pain point for the customer. The sooner you can get the feedback, the more opportunity you have to build a product that will resonate really well with your customers. Another way to look at it is to use your intuition to form a hypothesis and then use data and analysis to prove or disprove your hypothesis. . . . [But don’t] fall into the trap of “analysis paralysis.” The earlier the stage your company is in, the more you have to rely on your intuition, [without] enough data to make a thoughtful analysis and decision.

Mastery of the Digital Domain

Hands-on experience is essential. A digital innovator that has mastered tools that align industry with business navigates smoothly between physical and digital domains without loss. However, as Volpe explains, an innovative digital entrepreneur without mastery of the digital domain faces key challenges:

There are a lot of people with business experience, and maybe who gained this experience within a certain industry, but they have very little digital, and especially digital product, experience. [If] they expect to be able to hire an agency to build a particular piece of software . . . [they] need to [have] a core competency [in technology], even if [they] are not primarily a software business.

Of course, the opposite scenario is also possible. Digital technologists with limited business experience will find it difficult to find a market for their innovations:

I see people that are product people—developers, coders, etc.—who have the experience developing things but they have no experience in how to go to market. They [think] they can put up something in the app store and get a ton of downloads. . . . “But what are they doing in SEO and online? What are they doing in the app store? What are they doing in social [media]? What are they doing for all the different types of content (text and video, podcasting, etc.)?

Technological Innovativeness

Apart from learning new technologies, the digital innovator needs to find innovative and simple digital solutions to business problems, frequently building upon what others have done and relying on recombination. Somasegar relates this type of innovativeness to the rise and expansion of the open-source community and the vast online repositories of code:

Ten years ago, if somebody was building software, they would whip up Visual Studio (or their favourite development tool) and start writing code. Today, most people start with Google and Stack Overflow or GitHub to search what is already available so that they can build on what already exists, as opposed to continuously redoing stuff that has been done.

Strong Online Identity

The digital innovator has to develop a strong online identity. To be successful, digital innovation as an entrepreneurial or intrapreneurial activity needs the support and buy-in of others. An online identity showcasing the competencies of the innovator serves as a reference and builds trust. Somasegar is well aware of the importance of a strong online identity:

When I was at Microsoft, I used to blog regularly. That helped me establish a level of visibility and connection with the developers around the world. Establishing a digital identity via blogging was a great way for me to have a two-way connection with my customers and potential customers around the world. The amount of feedback (both positive and constructive) that you get in the process [is] invaluable. . . . You don’t always act on every piece of feedback, but you at least hear it, think about it, and then decide what makes sense and when.

Reliance on Social Network

For the digital innovation process to be successful, the innovator relies on an extensive social network for expertise and advice, as Somasegar will attest:

In today’s day and age, social network plays a very important role in the early stages of the business. Whether it is to get the first set of advisors, the first set of angel investors, the first set of early adopters and customers, the first set of partners—any and all of these come through your personal network (directly or [through] one degree of separation). Also, your social network plays a crucial part in getting the good word out about your business and what you are doing (as appropriate) to a broader set of people who can then turn around and potentially act as ambassadors to the rest of the world.

Social networks also provide an opportunity to learn about technologies that others have already tested, evaluated, or employed:

Sometimes, when you are looking at enterprise-focused technology (for example, a data centre technology), trying it out and using it yourself may not be practical or realistic. In such instances, talk to early-adopter customers who have used the product to understand whether it solves a real pain point for them. What is working, what is not working, what do they like about it and what changes, if any, would they like to see? How valuable do they think it is? Are they willing to pay money for that solution and, if so, how much?

Volpe draws from personal experience to explain the benefits of social networks:

Every time I see something that is half-way interesting to me, I am trying to figure out, “Who do I know that knows something about this?” From the growing-a-company perspective, your best hires are typically somewhere in your network, not random people off the street.

Where Do We Go from Here?

Entrepreneurs have historically taken one of two approaches to defining IT:[ii] it’s either a necessary evil or the product itself. The first group typically hires third parties to help with IT and never makes it part of its core business. The second group, typically with an engineering background, takes a do-it-yourself approach and develops software to support its organizational needs.

Today there is a third approach, one that will become the dominant path for most innovators and entrepreneurs, especially those building information products. IT is essential for interacting with all stakeholders involved in a new venture. Entrepreneurs with this perspective use existing IT building blocks to create interfaces and digital processes, taking a “bricolage” approach. Bricolage is a French term that refers to the construction of things from a set of available items. People practicing this approach use available resources to solve problems, much like a handyman or jack-of-all-trades who improvises to solve problems. In a similar vein, entrepreneurs today who practice digital “bricolage” can construct amazing companies and organizations from existing pieces, in many cases offering capabilities that were once only available to large businesses.

Over the last 15 years, industry giants built platforms and utilities over the Internet to make innovation easier and faster. Amazon created Amazon Web Services (AWS), a cloud services business that enables established firms and start-ups alike to rent IT infrastructures and processes. AWS is a robust infrastructure that can handle heavy demand and has the spare capacity to let others use it. Microsoft, IBM, and Google offer similar services. Companies can also rent business applications such as accounting and finance, human resource management, marketing and sales, collaboration, and project management directly from companies like Microsoft, Salesforce.com, Workday, HubSpot, Yammer, Dropbox, Basecamp, and others.

Digital innovators use modern-day infrastructure like they would interlocking plastic building blocks to build new and interesting products and services. Take a company like Airbnb. It identified variability in supply and demand for lodging services and created a platform for accommodation seekers and accommodation providers to find one another. Airbnb uses smartphones and their location information to learn about customers, and uses existing payment platforms and AWS for its infrastructure needs. The magic building blocks that Airbnb adds are tools for matching, spot pricing, and analyzing the data it collects on all participants in its ecosystem. By empowering renters and hosts with relevant data conveniently delivered through the smartphone, Airbnb is disrupting the entire travel industry. But it is not stopping there. It is partnering with third parties like American Express, Nest, Tesla, and KLM Airlines to provide its customers with more value-added services.

Other fast-rising digital companies like Uber have employed similar approaches. Digital technologies have provided innovators and entrepreneurs with the ability to conduct low-cost experimentation, improve speed to market, and provide them with easy access to mentors, experts, partners, and data. As a result, digital entrepreneurs and innovators today are only limited by their imagination.

As Volpe explains, “It would be hard for us to think to start a business today, even in an old-school industry, that does not leverage digital.” But to understand digital innovation, we must look at the human factor and the business context. An important challenge in digital innovation is to elevate the organization to the level of innovation leader. A culture of innovation and effective innovative teams begins with the innovative individuals that contribute to the organization’s strategies and processes to enhance innovation.

REFERENCES

Peter Gray, Salvatore Parise, and Bala Iyer, “Innovation Impacts of Using Social Bookmarking Systems,” MIS Quarterly 35, no. 3 (2011): 629–643.

Bala Iyer and Wendy Murphy, “The Benefits of Virtual Mentors,” Harvard Business Review (April 26, 2016).

Bala Iyer and Thomas Davenport, “A New Way for Entrepreneurs to Think about IT,” Harvard Business Review (June 28, 2016).

David Landes, Joel Mokyr, and William Baumol (eds.), The Invention of Enterprise: Entrepreneurship from Ancient Mesopotamia to Modern Times (Princeton, NJ: Princeton University Press, 2012).

Roger Martin, “The Execution Trap,” Harvard Business Review 88, no. 7–8 (2010): 64–71.

Brian Arthur, The Nature of Technology: What It Is and How It Evolves (New York, NY: Simon & Schuster, 2009).

About the Author

Ruben Mancha is an Assistant Professor of Information Systems in the Technology, Operations, and Information Management division.  He received his Ph.D. from the University of Texas at San Antonio.….Read Ruben Mancha's full bio

About the Author

Bala Iyer is a professor and chair of the Technology, Operations, and Information Management Division at Babson College in Wellesley, Massachusetts. He received his Ph.D. in information systems….
Read Bala Iyer's full bio

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