Opportunities for
Professor Krsto Pandza Leeds University Business School
Digital Innovation at IBM
Advances in digital technology create opportunities to innovate across multiple industries. The need for digital transformation fundamentally changes the nature of relationships between information technology providers like IBM and their clients, moving from the traditional IT-vendor model to a digital-solution provider model. This transformation requires going beyond simply selling innovative IT products or services to clients’ IT departments and instead developing a capability for collaboration that responds to clients’ specific digital transformation strategies.
The question is, how does IBM as a leading digital solution provider become a trusted innovation partner?
IT-vendor versus digital solution provider model of client engagement
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Context
SALES DRIVEN IT VENDOR INNOVATION DRIVEN DIGITAL SERVICE PROVIDER Collaboration, innovation and co-creation CLIENT ENGAGEMENT Client Client Provider Learning about technology Learning about applications Innovation, partnership & sales Sales Innovation VENDOR
Four characteristics describe digital innovation:
Ubiquity
Digital technology penetrates deeply into the very core of products, services and operations of business processes.
Complexity
Combination of product, process, and business model innovation that often requires strategic transformation.
Multiplicity
Diverse innovation opportunitiesoften disruptive - drive exploration of new businesses characterized by technological and market uncertainties as well as evolving social acceptance.
Collaboration
Multiple organizations from different sectors contribute to innovation often organized around innovation platforms and ecosystems.
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Becoming a trusted innovation partner and successful digital solution provider requires a different view on innovation
Why is digital innovation special?
Large clients increasingly orchestrate their digital innovation ecosystems to drive innovation. These ecosystems are structured differently with different results according to the types of innovation required (better-performing business processes versus introduction of new products or services).
If clients are the main orchestrators of their digital ecosystems it is important that individual digital solution providers and vendors find a unique and central position within the clients’ ecosystem. The ability to drive different types of innovation may enable this central position. It will also require a different view on innovation.
INNOVATION IT-Vendor Digital solution provider
Vendor’s technology
Di erentiate a vendor and create benefits for clients
Improve client’s e ciency to compete in the market
Digitilisation of routine activities
Client’s product, process and business model
Di erentiate a client and create benefits for client’s customers
Create a unique source of competitive advantage for the client
Digitilisation of creative activities
Adapt to client’s needs
Client’s IT department
Shape innovation opportunities with client
Agents of innovation in the client’s teams
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Focus Di erentiation Competitive advantage Target Strategy Engagement
Client engineering as a core capability
Client Engineering supports a core organizational capability for becoming a trusted innovation partner. It provides a systematic, reliable and robust approach for collaborative innovation with clients. The team is already doing valuable work to unlock innovation with clients by bringing together engineers, architects, designers, consultants and data scientists to show clients how technology can help them achieve innovation goals.
Collaborative innovation as a core capability enables:
Differentiating IBM within the client digital innovation ecosystem
Systematic learning about applications of digital technology in different industrial and public sector environments
Developing a signature process for managing collaboration with the client that is hard to imitate
Building market leadership in strategic technological domains
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The core organizational capability for collaborative innovation is based on three main pillars:
COLLABORATIVE INNOVATION
Signature innovation process
Combining
Diversity of expertise
Each of the three pillars creates challenges for improving the organizational capability for collaborative innovation with clients.
Three things are required to achieve this model.
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Core organizational capabilities such as signature innovation processes could in time become core rigidities. The established ways of doing things often become the source of inertia. Hence, it is important to innovate the process by constantly making incremental improvements. This could be achieved by four strategic approaches:
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Continuously innovate the innovation process
Strategic leadership for innovation
Design Thinking with Agile software development and Lean startup principles to understand clients’ current challenges, future opportunities and ideate solutions together in stages.
Getting the right people together and ensuring they are committed to cocreation and driving meaningful change.
Ability to shape innovation opportunities by matching clients’ innovation strategies with IBM’s expertise and technology portfolio.
How to to develop organizational capability for co-creation
Strengthen organizational learning by sharing experience from different co-creation projects.
Sharing experience Learn from co-creation
Learn from rare and unique co-creation projects that differ from the average type.
Strike a right balance between bringing in new recruits with fresh expertise and sustaining best practices accumulated through organizational learning.
Balance expertise Learn from others
2. Navigation of client’s innovation landscape
Learn from the other organizations’ experience with similar innovation processes.
IT departments that source IT services and equipment are not the only driver of digital innovation at clients. Large companies increasingly reorganize their R&D in order to explore digital innovation opportunities. Corporate accelerators and business units dedicated to exploring highly uncertain innovation initiatives are important drivers of digital innovation.
Academic research suggests that the process of digital transformation is often led by individuals with experience of managing digital businesses (and not by IT professionals).
Therefore, becoming an effective innovation partner requires: navigating a client’s broad innovation landscape; identifying individuals that drive digital innovation and establishing close relationships with them; and increasing the diversity of client’s participation in collaborative processes.
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Innovation space Drivers of innovation Partners navigate all R&D Accelerators Business units Digital managers
3. Strengthen behavioral foundations for strategic leadership for innovation
Whilst signature innovation processes are critical for effective adaptation to the client’s needs, if IBM is to become a trusted innovation partner, strategic leadership for innovation is vital for a more ambitious shaping of the collaborative innovation journey. It requires strategic and entrepreneurial behavior to identify and evaluate innovation opportunities and mobilize resources to capture value from these opportunities.
Strategic behaviour includes actions to:
Develop an in-depth understanding of the client’s business context and strategy.
Entrepreneurial behaviour includes actions to:
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Match the client’s strategy with IBM expertise to differentiate IBM capabilities and improve reputation.
Focus on the bigger picture, mobilize support and minimize resistance to change.
Think outside the box to identify innovation opportunities in emerging technology areas and be inspired by responding to big societal challenges. Leverage IBM’s Ecosystem and engage with IBM research or other Business Units. Inspire and influence innovation partners in a positive way to shape innovation.
Future challenges
With time the number of co-creation projects will grow and, as a consequence, the Client Engineering Team will increasingly have the opportunity to work with clients on projects characterized with higher innovation ambitions.
Hence the team’s overall success will more likely be achieved with a well balanced portfolio of projects that differs in their innovation ambitions. The Client Engineering Team will benefit from a co-creation management framework for classifying projects in order to:
achieve better balancing along the spectrum of risks and rewards;
avoid a one size fits all approach and adapt the signature innovation process to different types of collaborative projects;
ensure adequate diversity of participation and organise resources to align with a particular type of collaborative project.
The framework on page 10 acknowledges that complexity of implementing innovative solutions from a client perspective (on the x axis) and the ability to formulate an innovation challenge or opportunity (on the y axis) are a matter of degree.
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Formulation of an innovation challenge or opportunity
The formulation and framing of a problem is often more essential than its solution. It profoundly determines what challenge is addressed or which opportunity is explored. It also ultimately determines the quality of the solution.
HIGH
Uncertain and ambiguous challenge
More strategic leadership
Denotes a scenario where the opportunity space is ill-defined and there are different interpretations about the innovation challenge. This scenario will more likely emerge if the focus is on future oriented opportunities and less on present problems. Also, this scenario will emerge if the client has low expertise in digital technologies.
LOW HIGH
Well defined challenge
Denotes a scenario where both collaborative parties possess a clear understanding of a problem space. The client is capable of an unambiguous articulation of innovation challenges and alignment between partners’ expertise and strategy is high.
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Complexity of implementation
Complex challenge contains many interconnected aspects and implementation decisions, some of which may be unknown and change over time. Complexity of implementation is independent of the technological sophistication of the co-designed solution.
HIGH LOW HIGH
Low complexity scenario
Denotes a situation where innovative solutions could be implemented in a ‘plugand-play’ mode without changes across client’s business processes or departments.
More strategic leadership
High complexity scenario
Denotes a situation where implementation of an innovative solution requires multiple changes across client’s business processes and departments. Moreover, a change in one business process may have disproportionate and unforeseen outcomes for the other parts of the client’s organization. For example, a change in product may trigger changes in business processes or even require rethinking a current business model.
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Portfolio of co-creation projects
Upper right
Smaller number of projects that maximize learning about technology and exploration of future oriented innovation opportunities. The signature innovation process is robust enough to direct exploration. Moving towards the upper right increases the need for strategic leadership of innovation.
HIGH LOW HIGH
More strategic leadership
Lower left
Efforts will be made to effectively identify clients’ needs and select among multiple innovation challanges. Speedy development of a Minimum Viable Product builds client’s confidence in technology and strengthens the trust in innovation partnership.
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Strategic leadership for innovation builds trusted innovation partnerships
Strategic
Building
Mobilising ecosystem collaboration
Building strategic intimacy with clients
Establishing strategic intimacy is crucial to influence interpretation of innovation opportunities and increase its resonance for clients. Creating distinct social interactions with clients, which lead to mutual understanding of strategic directions and innovation opportunities will provide a fruitful context for driving multiple co-design engagements.
Framing is a process of constructing meaning around novel endeavors in an effort to influence the direction of innovation and focus attention on selected features. It also reduces uncertainty and creates a ring of plausibility for innovation. Capability for impactful framing of innovation is central to co-design processes and should be strengthened.
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strategic intimacy
HOW Use client’s business strategy as a central input for formulating Client Technical Strategies. Organize a set of distinct events with clients that increase mutual familiarity with strategic directions and innovation opportunities. Use IBM’s historical experience of strategic transformation to increase strategic intimacy (empathy and emotions).
Framing innovation opportunities leadership for innovation is built on three practices:
Framing innovation opportunities
HOW
Balance familiarity with novelty to show uniqueness for clients, increase resonance and reduce resistance.
Combine a visual approach with an innovation narrative to communicate with a client, to influence interpretation of innovation opportunities and strategic directions driving action.
Effectively shift from strategic vision towards more concrete opportunities in the client’s context with practical implementation steps.
Mobilising ecosystem collaboration
Higher complexity and uncertainty of some innovation opportunities will increase the need for integration of internal and external expertise and resources. Strategic leadership for innovation will require effective mobilization and coordination of multiple participants across the co-design process and beyond.
HOW
Bring together adequate expertise across IBM.
Expand interactions to non-IT professionals that drive innovation in clients’ teams. Integration of members of IBM innovation ecosystem into co-design process and beyond.
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Opportunities for Digital Innovation
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Professor Krsto Pandza | University of Leeds Designed by Nifty Fox Creative, 2022.
