What exactly is innovation? And how does it work in the business transformation context within ICT?
At Ericsson, we have talked about the fundamental digital transformation that is taking place across our entire society for many years, with particular focus on the new opportunities and challenges it brings.
This shift has matured recently: new businesses move from startup buzz to industry disruptor at lightning speed. Just take a look at the great impact on traditional businesses that companies such as Airbnb and Uber have had in their industries. This will only accelerate as more and more intelligence moves up in the cloud.
Just a short while ago, digital transformation was only on the agenda of the larger tech players. Now, it’s on everyone’s agenda. Businesses and organizations of all sizes in every industry understand that digital transformation is also affecting them and the way they do business both now and into the future. They are all aware that in this new world there might be a garage startup, either around the corner or on the other side of the globe, with ideas that will disrupt their current market by offering radically different propositions.
So, when there is awareness, what should traditional businesses and organizations do? Let’s begin by answering the questions I asked in the beginning of this post.
There are four different drivers in our innovation model, which you can see in the figure below:
- ‘Outside Drive’ (at the top) are areas outside of a company’s control. This could be changed laws or regulations, shifting consumer behaviors, or new disruptive technologies such as AI, VR or 5G.
- ‘Inside Control’ (at the bottom) are areas a company can control, such as definition of their core business, consolidation, scale gain opportunities or maturing technology.
- The left side of the model is evolution from where the business is today, to the right which is disruption.
To secure a good position in the future market of your business, you must be aware of what is happening in your broader industry related to the fields in the model. If we plot where innovation is happening, we can see that traditional businesses focus naturally on the left side of the model in value chain effectiveness and efficiency, while we often find the digital giants and startups on the right side of the model.
The lower left corner of the model is about using new technologies to innovate for better performance of current offerings. If we take the example of a car manufacturer, this could be using ICT to automate the flow and construction of cars in the factory. Basically: do what you do more efficiently than the competition. The upper left corner is about using ICT to innovate value chain efficiency and improve offerings to the current market. In the car industry, this is typically a connected car. Today’s connected cars are sold as any other car, but they make use of the connectivity to improve the offerings toward the car buyer. This could be to offer safety features like calling 112 automatically if an accident happens, or having built-in connected features like ‘find where I parked my car’.
The right side of the model is a typical industry that is populated with a lot of startups or digital giants that are coming up with completely new propositions compared to traditional businesses.
The lower right corner is about innovating the backend: to use something internal in the company and expose that across other industries to find synergies. An example of that – if we are going to stick with the car industry – is the Ericsson Connected Vehicle Cloud which would be located in this corner. It’s a global cloud-based solution making it possible to create new services across industries, so that vehicle manufacturers can deploy services such as telematics, infotainment, navigation, or fleet management.
If we look at the upper right corner, that’s typically the most crowded area in any industry. It’s where you find many startups or digital giants launching their ideas or coming out with profoundly new offerings that create entirely new markets. This is the corner where we find self-driving cars, car-sharing services, or collaborative coordination to mention a few.
This is what the landscape looks like. But what should you do as a traditional company to meet the challenges coming from this digital transformation?
The short answer, is to innovate.
At Ericsson, we know quite a lot about innovation. It has been our game for over 140 years: from the industrial era, via electrification, datafication, mobile telephony and mass consumption, to a new era in a truly connected world. We have launched some of the most fundamental innovations in human history in the area of communication. And while innovation is in our DNA, it’s interesting to now see that innovation is becoming just as essential for practically all businesses.
In my next blog post, I will review some of the findings of a study we call ‘Organizing for Innovation’, and we will take a deeper look into some of the areas businesses have to address to maximize their creative output – be sure to keep an eye out for it.
Want to know more about what Ericsson is doing in the technology innovation space? Discover how real-time connectivity is fundamentally changing the way we innovate, collaborate, produce, govern and live sustainably.