Pragmatic innovation: Is it an oxymoron?
INSIGHT ARTICLE |
In an increasingly competitive environment, innovation is a key differentiator for successful businesses and a significant driver of industry disruption. In fact, the International Data Corporation (IDC) predicts “by 2018, one-third of the top 20 in every industry will be disrupted by digitally transformed competitors” by innovation strategies. I don’t disagree with this IDC prediction. My question about the prediction is what should the rest of the world be doing?
Will every business and industry eventually be disrupted and reinvented by digital solutions? My answer to this question is a resounding no. Should these businesses just sit around and support the status quo and watch their digital talent exit the door? My answer to this question is a resounding and emphatic no.
What is pragmatic innovation?
A pragmatic approach to innovation can be a successful strategy to identify transformational opportunities with a more manageable financial commitment. This approach may be more attractive and workable for many middle market companies.
On the surface, the concept of pragmatic innovation may seem like an oxymoron. The Oxford Dictionary provides the following definitions:
- Pragmatic: “Dealing with things sensibly and realistically in a way that is based on practical rather than theoretical considerations”
- Innovation: “A new method, idea, product” which comes with significant, obvious improvements
- Oxymoron: “A figure of speech in which apparently contradictory terms appear in conjunction”
Common oxymorons include “a fine mess,” “an actual reenactment,” or for golfers, “metal woods.” Pragmatic innovation has been an oxymoron in the past, as noticeable technology changes required significant financial and resource investments and were out of reach for many organizations. However, as technology has advanced, truly pragmatic innovation is now possible and meaningful change is within reach for any budget.
Organizations can implement several strategies to increase innovation and enhance processes in a pragmatic manner. These are improvement actions that almost every company can implement. In this document, we will discuss several of these approaches and real-world examples of how they can provide value. Companies should ask the following questions to uncover potential strategies to innovate pragmatically.
Can I employ existing technologies that I already own that I never implemented?
In many cases, organizations may already own technologies that are not effectively implemented. Companies may have modules or features that they are not utilizing that can significantly enhance operations without additional investments. In some cases, companies can reduce costs and better fill their needs by utilizing features inherent in existing solutions and eliminating other platforms.
Example: A make-to-order window company faced significant inventory problems, as it routinely lacked the materials to fulfill orders. The company did not have a master production schedule, and instead was attempting to use a niche software solution for window manufacturers that ultimately did not meet its needs.
However, the company’s enterprise resource planning (ERP) platform, which was only utilized for financial management, had a master scheduling component that employees did not know about. After implementing the module, the company can fill orders more effectively by having the right inventory when they need it.
Can I re-implement technologies I already use more innovatively?
In many cases, a company implements an enterprise system, or a smaller point solution, but does not realize the full potential of that technology. Technology is often deployed to solve an immediate problem, or is utilized to address the needs of a small subset of the organization without considering how it could be used for the entire business. In the quest for pragmatic innovation, companies must consider how to make existing technology more valuable across the organization.
Example: A family office bought and implemented Microsoft SharePoint, but only utilized it for file storage. There was not much difference between how it used SharePoint, and how it could have used more simple applications such as File Explorer. However, with some assistance, the family office was able to more effectively deploy the platform, setting up an intranet site, and implementing workflow so documents automatically went through the right processes and received the right approvals.
Use of the SharePoint technology was expanded from just the accounting department to everyone in the enterprise. Instead of just a small subset of the company, the tax group, IT and the investments team now use SharePoint to utilize the document management workflow throughout the organization. The company was able to use functionality it did not take advantage of in its original implementation, rather than purchasing a completely new tool.
Can I implement new, digital technology solutions that I have never leveraged before?
The technology landscape is rapidly evolving, and companies can leverage several cost-effective solutions to enhance key business processes. For example, developing and implementing a mobile app can provide solid innovation and provide several benefits for customers and employees. In addition, implementing an internal mobility strategy can make employees more efficient, enabling employees to become more effective by providing accurate and real-time data when they need it to support strategic decisions.
Example: A shipping company’s business model connects people or businesses that need to ship products with independent truck operators. The company provides partial truck shipments, whereas many logistics companies only allow full truck shipments. To increase its reach and effectiveness, the company developed a mobile app to connect truckers to available partial loads in their area or along their existing route.
The company provides smartphones to each trucker it works with, and the preinstalled app allows truckers to report how full their truck is, where they are and where they are going. Through the app, drivers determine if they can pick up additional loads on their previously planned route. Ultimately, the solution increased company revenue dramatically, and the independent truckers, who can work for anyone, became more loyal to the company because it was easier and more profitable to work with them.
Can I afford to leverage new technologies without the same costs as in past years?
As technology advances, many solutions are becoming much more affordable for businesses of all sizes. More specifically, the cloud has greatly reduced the upfront costs for implementing several applications that can greatly enhance key business processes.
Example: As little as five to 10 years ago, implementing a salesforce automation solution such as a customer relationship management (CRM) platform required significant hardware and manpower investments. For a CRM solution, a company needed on-premises servers, databases and laptops (if the field sales representatives did not have them), as well as bearing the full cost of buying licenses at the start of the project.
Now with the cloud, the hardware is not necessary, employees can access data from home computers, company laptops, smartphones or tablets. The large capital expenditure for licenses is no longer required. Cloud-based software as a service solutions (SaaS) allow companies to leverage complete solutions for a monthly expense based on usage.
Can I leverage new technologies to reach customers via an existing channel?
Companies can become more pragmatic by using technology to increase sales in a space they already operate. Making changes to existing technology can make the buying process easy and efficient for customers, and better align with current trends and demand.
Example: Many restaurants (Panera Bread is a good example) are changing how customers order and pick up food through their existing websites and mobile apps. They realize that a large part of their customer base values efficiency and would like to avoid unnecessary lines and interaction with employees. Therefore, many restaurants are making adjustments to their websites and mobile apps to allow customers to place an order, pay for it, and then pick up the order in a special area of the restaurant without ever standing in line or speaking with an employee of the restaurant.
The existing channel is the restaurant, but forward-thinking companies leverage technology to meet the needs of a new customer that does not want to purchase in a traditional way. These channel adjustments can increase efficiency and customer satisfaction, and ultimately, sales. Look for this same concept to be employed by brick-and-mortar retailers. For instance, large grocery chains like Kroger are using point of sale (POS) loyalty information to enable e-commerce shopping options for a customer’s grocery list with pick up in the parking lot.
Can I leverage new technologies to reach customers via a new channel?
Organizations have several options to leverage technology to create new sales channels. These include disintermediation, or the removal of brokering entities from your value chain. Additional options include partnering with someone that is already in your value chain and leveraging their channels, or creating an online presence or e-commerce site to allow people in other geographies or countries to purchase your products or services. Many organizations find partners that are already in their industry that are willing to open a new channel and resell products or services to their customers.
Example: The automotive aftermarket parts market has undergone a significant shift in recent years as technology better connects manufacturers to end consumers. In the past, companies sold parts through traditional brick-and-mortar stores. However, many companies have now expanded their reach by providing products through their own direct channel while also partnering with online retailers and companies with extensive mobile applications to make ordering the right part easy.
Am I exploring new technologies when a current technology reaches end of life?
All technology reaches a point where it simply becomes more of a hindrance than a benefit. Older technology will eventually lose support from vendors, and as those platforms become less efficient, new solutions can provide a significant boost in productivity. When technology reaches end of life, this is a critical time for companies to think about how they can gain an advantage over their competition; the objective is not only to replace what is at end of life, but to implement a solution that enables the company to leapfrog competitors that may still be using a suboptimal solution.
Example: A manufacturing company was using an older ERP solution that soon would no longer be supported by its vendor. This company experienced inventory management issues, and determined that a barcode scanning system would improve efficiency and accuracy. Of course, their legacy ERP vendor suggested an upgrade to the most recent version of its ERP platform, which would provide this capability. However, instead of doing the easy thing and upgrading its existing system, the organization did a formal software selection and found a new solution that provided the barcoding capability, as well as additional functionality that better supported many other areas of the organization. This solution ultimately better aligned with the company business strategy and goals.
Every organization has the potential to leverage innovation in a pragmatic manner. Innovation is not just small, incremental improvements; instead, it’s significant changes that bring immediate differences to key stakeholders. Businesses must assess their technology framework and solutions regularly to identify problems and opportunities to provide solutions that result in clear value to internal and external customers.
When adding projects to your technology road map in any of the scenarios listed earlier, view changes through the eyes of your customers (both external and internal) to determine what is truly different. Asking what will be possible after implementation of the new solution that could not be done before should be one of your first questions. At a minimum, determine how a task can be performed more efficiently than in the past. If this question can't be answered clearly, then why implement the solution in the first place?
The key point is that to be pragmatic, your organization must spend your limited investment dollars wisely. Avoiding investments that don’t provide significant innovation can free up funds for projects that can really make a difference.
There is no doubt that some businesses will require bold transformation strategies to survive. However, for other companies, pragmatic innovation is an effective strategy to realize real change and increase efficiency. By asking the questions listed above and challenging each solution’s advocate to clearly identify the real change it will provide, companies can gain a competitive advantage over rivals who have accepted the status quo.
 “Transform or Die: IDC’s Top Technology Predictions for 2016,” Forbes, accessed Dec. 5, 2016, http://www.forbes.com/sites/gilpress/2015/11/10/transform-or-die-idcs-top-technology-predictions-for-2016/#48da98117cec