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Suppliers in implementation of digital innovation

Digital Discovery made a survey in January-April 2018 about the digital processes and actions. The target was to find out what practices are used and useful. The total number of respondents was 45 mainly from services and manufacturing.

Almost all of the respondents has used external suppliers to extend the bandwidth in digital activities. Several companies said that there is not enough professional experts on the supplier side. Some of the respondents said that their are looking for smaller suppliers to find new resources. However, the collaboration with startups is often experiments, only 13  out of 45 organisations said they have continual collaboration with startups. Only a few of the respondents had a partnership programs with vendors. This remarkable finding because most of the respondents are big companies, over 72% had more than 1000 employees. Thes startup collaboration was seen positive as one respondent said, “Discussions with new startups have been fruitful”.  

IT seems to be the area where outsourcing exists a lot, 84% of  respondents said that they use a lot or quite a lot of suppliers. Another area where the majority of respondents used suppliers is service design (54% of respondents). It is an interesting that the most innovative companies used a lot of service design. Hardware is also often provided by externals. In this case, hardware refers to robots, drones and other new digital devices.

For process  consultancy (21%), business consultancy (21 %)  and project management (13 %) vendor support were used much less. However, there were organisations that used a lot of suppliers in all areas. So the variation between outsourced and internal managed operations changes between the studied organisations.

In general, almost half, 42% of the respondents were  satisfied on their current suppliers. However, many mentioned that partners and suppliers have challenges to understand the business. As one respondent said, it is not enough to facilitate the workshops, you need to have business and process knowledge to really assist us. 

I was wondering, how wise is it execute everything by internal staff. There is a lot of opportunities for widening the collaboration, especially with start-ups.  Lack of resources was impeding digital innovation for the most of the companies. The biggest challenge for 55% of respondents was the recruitment and availability of internal specialists was a challenge for 36% of the companies. 

The three most important things I have learned while solving actual digitalisation challenges for 20+ years

World is not going to stop changing. Neither should we.

Disruptive startups, changing consumer trends and disappearing competitive advantages are shaking every business as we know them. Change and new ideas are needed everywhere. And sure: we have ideas, old and new.

But which ones will work? What does it take to make them fly?

In my experience, these are three things that you should concentrate on when creating an actual working business from a new idea.

Mechanical Turk - Chess Engine Hoax

1. Pretotyping (No, it’s not a typo)

When we talk about prototyping, you probably think it as has something to do with your app or maybe mock-up of your product. Maybe we should talk about Pretotyping instead.

So what is a pretotype?

In short, pretending we already have a working solution based on an idea, testing business before we build it. Pretotyping is about testing the initial appeal and actual usage of a potential new business/product/service by simulating it’s core experience with the smallest possible investment of time and money, with real customers.

Pretotyping answers the fundamental questions. If this product or service really existed, what real-world problems would it solve? Would customers pay for it? How much would it be worth to them? Is it something people really need or want?

Pretotyping is Agile Growth Hacking in order to find the Product/Market Fit.

Happy people. Old Photo. Public domain.

2. Design things for people to love

It’s still too common we still see concept creation done by the Old-World Diva Designer without any real user interaction. Change is on the way, however. Real design is being supplemented by end-user opinions and customer polls. That’s not the whole truth, though.

In this new age of UX/CX Design, we often fall into misconception about the role of Design itself. The new designer is someone who observes potential customers and finds uncovered needs and wants, and new ways to answer them. It’s rare to find a new concept just by asking from potential users what they need. Ask Henry Ford for details and quotes…

A lot of the time people really do not know what they want, and should be shown something you think they want. Design, Build, Show, Listen and Learn. Then do it again. Iterative development is about saving money by doing the right things early on. It’s ok to fail fast, but it’s even better to succeed early.

Too often an good idea is killed because of a bad implementation in the design phase. Try a few ways to solve the problem, test them. Don’t give up too easily. It may be that the idea is spot on, but the implementation is bad. Or vice versa.

Boxer - Jack Lester. Old Photo. Public domain.

3. Lean and Mean Start-up Culture

Become Agile. Foster agility. Breathe agility. Pick a good agile and lean process as a starting point, don’t deviate from that for a while. Agile methods are like training wheels on your child’s bike. They are great help to get you started, but you can take them off when they are no longer needed.

Methods like Scrum or Kanban don’t offer you everything you need, but when creating new ways to work they give you a structure to start with. Once the Lean way of development feels natural, it’s the time to take the training wheels off and streamline the work even more. That’s the core of agility, just Keep It Simple.

Make sure the cultural change happens company-wide. It might be tempting to start small – Create innovation center, internal start-up or Lab-of-New? That’s much easier to do, to find a few out-of-the-box thinkers in your organisation. It might even if they work with rest of the organisation. Lead by example, creating fast wins and visibility for the new way of working.

This way of introducing startup mentality is walking on a tightrope, however. It may be the few chosen ones in your Lab-of-all-things-New are just going to be envied and hated by the rest of your staff. Chances are your agile vanguard will face a lot of resistance to change, possibly even leave, getting frustrated with the lack of progress.

So — co-create. Slowly involve everybody. Take baby steps and huge leaps at the same time.

The last of the truths: You always get what you measure. So measure the right things.

Team photo - South Lester Wheelers. Old Photo. Public domain.

4. [bonus] Create ideas in cross-functional team

In my 20+ years of inventing, designing, testing and developing new ideas for businesses I’ve made countless mistakes on how to develop ideas, seen even more mistakes being made. I’ve also learned the hard way some good habits. This Fourth bonus advice just might be the most important one.

Never try to make a new product/service/business with a homogenous group of people. If you have hackathons, you need more than coders. If you organize brainstorming sessions your marketing staff isn’t going to be enough on their own. Cross functional teams produce better results. And never forget your end-users and your front-line employees. They are the ones who interact with the market — your customers — every day.


In order to help businesses test their ideas and create new ones, we’ve started a new type of a consultancy. Our teams always include a minimum of three experienced seniors: professionals of Business Insight, Agile IT and User Experience Design. We call our method Digital Discovery.


 

How to start your digital business?

One says you should invest in the Internet of  Things ( IoT). Another consultant says you need to take agile methods in use. The third guy says it’s all about artificial intelligence (AI). Then comes a guru saying you need to take account the consumer experience.  And tomorrow there is an article that you should not listen to your customers because they do not know the opportunities (and then he refers to Steve Jobs) .You may also have heard about the culture of experimentation and fail-fast methods. It sounds nice but does not fit to your organisation. At least it requires an inspirational leader (which you are not).   And at the end of this, you continue to do business as usual. Because your boss expects you to make revenue and profit today and tomorrow. Why not bother to take risks of losing business today.

There is too much hassle about digitalisation and a lot of talk on various technologies. Sometimes it seems that the future is having only one ( hostile scenario) and only the organisations investing a lot of money are able to survive. We have interviewed many Finnish organisations from various industries and the positive message for you. Anyone can start developing and testing new digital business. It does not need all the fancy technologies. You can start with a small experiment, and this is even our recommendation.

The most critical things for the beginner is to identify the new ideas, then make pretos or protos and test them with potential customers.  You may make several testing before going to the investment phase. The positive side of this approach is that you may share the investment to various ideas instead of one. And you start to make the bigger investment after you know that the business case is valid. This could be done in weeks, not in years.  And the most critical is to have a vision and a business case. We have seen too many times that technical solutions are nice but the business case is either lacking or it is superimposed on a technical solution. It is always important to ask why we do this. However, you do not need to make a map of calculations, in many cases a light business model is enough.  

We encourage you to start to explore your business ideas, test and verify them with customers. Come and discover what we have for you and for your business.  

 

Agility- two approaches

We did a survey on digital innovations in January-March 2018. One of the findings was that most of the innovations were more or fewer results of an operational Agility. Operational Agility means making the existing products better, faster, cheaper for existing customers. For instance, you focus on developing cables and new features for them, but still, it is a cable. There’s nothing wrong with Operational Agility, but it usually doesn’t offer new markets for your products or services.

Quite seldom companies use strategic Agility which means creating new markets with new products or services that reach new customers or even market-creating innovation. To give you a concrete example, instead of making better DVD’s, we deliver web-based streaming such as Yle Areena or Netflix. Hence the whole ecosystem changes and there is an option to find new customers and markets.

Market-creating innovation deserves special attention because it is a result of cultural transformation on all levels. If a company is limiting its strategic thinking to what is happening only by top management it is unlikely to succeed. To be successful, it will need all capabilities and skills it can find—both inside and outside the organization. McKinsey (2018) reported that only 8 percent of companies they surveyed recently said their current business model would remain economically viable if their industry keeps digitising at its current speed and course. 

How to win this battle? The winners test and learn, launch early prototypes, and refine results in real time—cutting down the development time.  The organization needs to be ready to explore, discover, confirm and build them on all levels by teams, by business units, and by the management.  We believe that minimum viable products trump theoretical business cases.  

Steve Denning https://www.forbes.com/sites/stevedenning/2018/01/28/what-is-strategic-agility/

McKinsey https://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/why-digital-strategies-fail

How to setup your organisation for digital business success?

There are several approaches to organise digital innovation and business development activities. In our study, we found various models and here we describe some of them. There are around 40 Chief Digital Officers in Finland. This is quite a limited number if we think about the number of companies in Finland, statistics vary between 400 000 to 1 million. Hence, a CDO is not a necessary role to be able to start creating new digital business and revenue. The organisational models vary from totally centralised to totally distributed ones.

For a digital newcomer, one organizational solution is a digital innovation program. Thus a certain amount of resources are allocated to the program and all businesses may participate in the program. There might be internal Lion Caves including pitching and competition. In this model, the inspiration for digitalisation is in business. They do not need to change if there is no need for digitalisation. This is a typical model  at very early stages of transformation phase. The challenge of this model is that does not necessarily change your core business and execute the transformation at the organization level. This model was found in services and training sector.

More permanent model is a digital center often managed by CDO. Top management has allocated a lump sum to be allocated to digital development and innovation. Digital center thus manages the portfolio and is responsible for running the programs or even in some cases all operations in digital area from service design to execution of digital products.  The business unit takes part in the projects and their resources are needed in implementation. The benefit of this model is that knowledge and skills develop around the organisation. It also enables implementation even bold ideas to find new digital business and profits. The success of this model is on the capability of this centralised to coordinate with business units. This model we found in manufacturing and in the financial sector.

Another option is to start to digitalise one unit and then extend the digital operations to others later on. In this model one business unit find new business and others may continue business as usual. This approach includes tight business orientation. The risk I see is that all the actions are with minimum risks and hence activities are more focused on improvement of current products and services, not to bold ideas. At least this model requires aspirational managers for execution and in a business unit. This model was used in one service sector company.

The latter means that business units are responsible for creating digital business and there is light or even no coordination on digital projects. This could be called everyone’s digital organisation. However, this model requires a strong vision and systematically building agility and a lot of new skills i.e. service design and change management in all business units.  Typically this is a model for digitally mature organisations. In Finland, we found this model in manufacturing and in media sectors.

In Germany, there are companies that use this approach and establish joint-ventures with companies start digital activities. I called this model in the two worlds. The positive side of this approach is that you may continue the current business and the digital business may develop on its own.  The challenge comes when you need to combine these two later on.

In summary, there are various models to organise digital execution. No model is better than the other. The organisational structure needs to reflect the strategic outlines of the company while business participation, agility, transformation and new capabilities are always needed.

Why Digital Discovery was born

Digitalisation requires a cultural shift for most organisations. It’s not really only about technology, nor is it just a phase that will pass. It’s more about entire business ecosystems evolving faster becoming the new normal. In order to stay relevant organisations need to become more agile, enable more innovation and changing the organisation faster. Digital Discovery was founded to help organisations on this journey, we lead by example in real business development projects.

We are positioned in between management consultants, service designers and software companies. Our core is in agile business development: Discovering, confirming, and building new business. We iterate, prototype and learn quickly together with our customers. This is something that requires senior understanding equally in all three areas.

Unlike traditional management consultants we build new business hands on, keeping the user experience and technical possibilities in the focus from day one. At the same time we build the business plan iteratively, always making sure the investment for the next steps is justified.

Our process looks a bit like how modern software companies do product development or how design thinking is applied to the generation of new ideas. We apply the same principles in a larger scope, end-to-end for the business development process. This helps customers to get more benefits from the agile approach, and to evolve their own processes into ones that support the agile mindset.

Not having to worry about keeping 100s of programmers or designers busy allows us the flexibility to always recommend the best option for the customer. Unlike technical vendors or service designers our business doesn’t depend on the revenue of building the final solution. For us recommending killing a failing idea early is always an option. We encourage our customers to fail fast and learn. After all, this is all we do, not just a required supporting function to keep the primary business ticking.

Digital Discovery can help you to become a digital leader, we do this by helping you to:

  1. Discover new business from digitalisation, helping you to boost your growth.
  2. Confirm or kill business ideas quickly, find the key assumptions and testing them.
  3. Build a new business, helping to keep the business development process agile.

We believe there’s a lot of hidden potential in most organisations. Talk to us and we’ll help you discover it!