Scared to lose your job? afraid to be left behind? Learn to read through the digital revolution and how to keep your seat in the future!
Leveraging Innovation will be the most valuable human skill to keep a “producer” role in the digital age. Nothing to be scared of, no one will go belly up (in this “article” I explain why). The economy will still require “consumers” and there are odds that you will get paid for that; but if you want to be a “producer”, well, you need to understand what drives innovation, so to catch the low hanging fruits of our time and, by that, to feel more comfortable with the change we are going to live.
Technology, and in particular the current digital revolution, offers us a perfect lab to understand innovation and how to make it sustainable.
This article is also a call for innovation to three specific categories of “producers” that struggle to be ahead of the change:
Chief Information Officers, frustrated by reducing costs to the point of offshoring even themselves;
Entrepreneurs, building companies on the digital sands and finding themselves with scoop, bucket and not much more;
Marketers on the “social media running wheel” gasping for the next viral idea.
Mastering innovation will be more than ever a must for them as they need to address the financial challenge associated with innovation. Digging deep in the essence of the problem, this article provides a mental model to wisely invest and to gain new shares containing costs.
TVs, mobiles, computers, connectivity have all brought incredible functionalities while becoming cheaper over the years. It is a fact that under the effect of Moore’s law we can buy now with the cost of a coffee, what 20 years ago would have required a whole holiday budget.
Why our digital bill does not decrease and we should not look for that?
To answer the questions above, let’s have a look at innovation under its three composing forces.
The balance of Novelty, Informative and Transformative forces determines the innovative intensity and, therefore the advantage a product, a service or you might have to be ahead of the change: according to financial, technological, and business cycles, these forces sync and amplify their effect (phase quadrature) or compensate each other with minimum innovative results (phase opposition). What we experience in our (business and personal) life usually falls in between.
Although we are reducing our explanation of digital, this approach would work for different fields in life. Let’s have a closer look at all three of them to understand the role they play with innovation and how they can change our (business or personal), if controlled.
The Informative Force: “Repetita juvant” (Repeating helps).
“In-form” means into the “shape”, therefore this force promotes activity that leads to the essence of the topic, automating and standardizing outcomes.
The efficiency generated by the informative force decreases with time, with large gains at the beginning of the process and smaller toward the end.
This means that (from training for a marathon to issuing invoices) repeating the activities helps in gaining efficiency, making cheaper the overall effort spent. Although it is not possible to have an energy cost-free marathon, in the digital world costs might decouple from the usage (becoming a flat fee) and in some cases, the service might become completely “free of charge”.
Just to be very clear, that does not mean that there is no cost associated with digital transactions, but more than the ownership of some data generated by using the service creates value that suffices to generate margin for the service provider. In other words, if you don’t pay for something, you are the product.
Finally, yet importantly, automation reduces awareness. A bit like using a calculator with time reduces the ability to make simple arithmetic operations, each time the information force simplifies the effort on a specific (business or personal) topic, the awareness fades away and the dependency from the environment increases.
Summarizing, there are three important aspects of the Informative force to keep in mind when using it:
- It loses effectiveness with time
- Major saving happens at the beginning (increment around zero are the highest, always)
- With time it offsets awareness (hidden cost)
CIOs are the most exposed to the bias generated by this force. Especially during negative business cycles, companies generate savings by offshoring entire IT and business processes, losing company identity and knowledge. After a while, the organization will lose the ability to understand the difference from large transformations and a commodity, will start treating suppliers as vendors, not as partners, and entire departments will work around what is visible and not what is valuable for the company.
The transformative force: a constant challenge to the status quo
“Trans-form” means beyond (trans) the “shape” (from caterpillar to butterfly).
So how to “budget” the effect of force that will increase the cost with time?
There is only one way, old as the hills: you need to create an income, to set a self-financing mechanism.
Digital transformation is just like creating a business itself, as it requires a balance between cost control and revenue expansion. Therefore, within the time horizon, the transformation needs to generate a material income to finance the next phase. This income can be tangible or intangible but clearly valued by the stakeholders. With no clear business benefit, it is better to consolidate (using the informative force).
Summarizing, there are three important aspects of the transformative force to keep in mind, when using it:
- It increases investments with time (which implies costs increase as well)
- New understanding opens new gaps that require time to get filled.
- Nothing remains the same: It increases awareness with time (hidden benefit) that needs to be material enough to be factored in the financials.
Entrepreneurs usually struggle to master this force. Falling in love with their entrepreneurial idea, they discount all literature about the importance of understanding failure and they tend to privilege continuing or stopping their journey for the wrong reasons. Success is the right balance between resilience and growth.
The Novelty force: creating Attraction, Interest, Desire, Action.
A certain sense of unfamiliarity which requires always a new perspective to feel comfortable (and effective).
We are attracted by what is new, shining, and glittery. New is cool, and we like it so much that we like to bring it back from the past, just for the sake of “re-experiencing” that sense of conquering. “Fashion” is a sector that leverages this force the most (we all do, each time we brand something that embeds a feeling to the functionality).
Example of the force: iPhone 11 PRO got to the market with a price of 1200 USD, the same price of a small 0.9 carats diamond. One of the two will have no value in 10 years’ time. Guess where does the novelty force make the price?
This force is marketers’ cross and delight. Why a “spinner” goes viral all over the world in a couple of months? when something new becomes viral? The first who will put math behind viral marketing will become a hero. The advent of social media and the hyper-connectivity of the world we live in has created a huge buzz around what (immature) marketers call organic growth: with the prime to novelty, discounting the other forces,
Innovation: the balance among novelty, informative and transformative forces
Summarizing, the informative force applied to commodities fades out awareness and increases the dependencies from the environment, generating risks for the future.
The transformative force calls for greater energy with risks on sustainability.
It is true though, that the transformative force expands knowledge and awareness, pushing to new heights, adding new dimensions to the game.
The novelty force contains the cool effect, it exhilarates us.
In fact, Innovation is the balancing force that triggers from the break-point of the Innovation and Transformation and Novelty.
The solution for sustainable innovative growth is the coexistence of all three forces which moves innovation beyond the love for glittery (novelty force) stabilizing it within the continuous change (transformative force) in a constant search of providing more with less (informative force).
Finally, let us have a look at three key digital trends under this lens:
- Blockchain, in a decade from now, aims to the locus of IT from “how can I cut cost?” to “who can profit from my business?”. The transformation force pushes for the creation of an entire ecosystem and solutions, ideas, entire architectures proliferate around a volatile 250 BUSD investment market. The innovation force will kick in when blockchain solutions, beyond the hype, will start to efficiently address key customer’s needs. This will happen most likely only after the Information force will consolidate and standardize solutions (Infosys Blockchain Testing Framework and the open-source Blockchain Integration Framework by Accenture and Fujitsu are a clear expression of the information force).
- RPA (Robotic process automation) is another interesting “overrated phenomenon” from an innovation standpoint. Popular influencers spend a huge time talking about RPAs as the new grail for organizations. RPA is nothing more than automation at this stage, and we know that automation is a declination of the informative force, good to create efficiency, but not enough by itself to innovate. RPAs will become real innovation when they will be used to break the organization’s walls and for instance improve communications between organizations and create new business opportunities. Just as an example, innovative use of RPA could be an automated way of identifying, OEM Products in Alibaba based on Amazon’s product ranking, which can be automatically “branded” and sold on Amazon after running an “automated” Facebook campaign.
- When looking at Cloud services, Information force plays a role by seamlessly facilitating the access to the Cloud, but the innovation kicks in only when the transformation fully restructures the service offering around specific needs, just like it is happening in the education world.
Innovation is not an industrial process. Innovation is a creating act, it is about using existing things, farming ideas into something new, simple, and perfectly fitting a specific need.
Innovation embeds change. There is no receipt to make it static in a company and to make money from it always; innovation is not about how you can create other incomes composing Lady Gaga’s next song or Van Gog’s style paintings as a result of an AI algorithm.
Innovation contains informative, transformative, and novelty elements.
Sustainable innovation is the equilibrium between the respective three forces. In other words, if you want to reach a steady shift of your business (or your life) feeling comfortable with the change and eat of the low hanging fruits of your time, you need to look for something new, that transforms what you have with lower complexity.
Pursuing only one of these forces, it will end up with solutions that are not sustainable in the long term.
Only Informative force (major limit of CIOs): the simplification will be effective at the beginning but will offset knowledge and awareness without benefits in the long term. The risk of being left behind.
Only transformative force (major limit of entrepreneurs): it is always painful and tends to increase costs over time, therefore it carries the risk of not being successful in the long term. The risk of getting broke.
Only novelty force (major limits of marketers): not everything that is new can be defined as innovative. Novelty force by itself evaporates quickly, leaving nothing behind (how many real products are the outcome of hackathons?). The risk of being a flag in the wind.
Disclaimer: Views or opinions represented in this article are personal and belong solely to the article writer and do not represent those of people, institutions or organizations that the writer may or may not be associated with in professional or personal capacity, unless explicitly stated.