As people with technology background, we usually might have a tendency to look transformation and innovation heavily from technology perspective. And it has a very valid reason, advances in technology has been the biggest accelerator of the 21st century. But we should be also mindful that it is incorrect to assume that innovative business model did not exist in the past, in fact, purpose designed business models have been used throughout the 20th century. What has changed more recently has been the pace at which new business models are being introduced and used for transforming entire industries- very much beyond product and services innovations. The pace now has increased exponentially, in large because of the new technologies introduced. In other words, whether we are talking about product, services, customer experience or business model innovations, technology has been the biggest driver but not the only one. Last week, I wrote an article on “Organizational and Strategy perspectives in Three Horizon planning” and based on great feedback and questions, I decided to have an even broader picture how different disciplines contribute to theory of innovation and digital transformation and how we can build the bridges between those to drive successful transformation agenda. The cartoon at the headline of this article (one of my favorite cartoons from one of my favorite caricaturist Selcuk Erdem) is a great illustration of a common view of transformation and innovation from technology-only perspective which is not enough for the impact we are seeking in breakthrough and disruptive changes.
Whether it is microeconomy, marketing, engineering, design or any other discipline ; all of them has significant perspectives and contributions to the discipline of Digital Transformation and any DT/Innovation engagement wont be complete if they are not taking the holistic picture across disciplines and building the bridges among them. Hence the purpose of the article is to look innovation and digital transformation through the lens of each discipline along with their contributions and to build the bridges among them to create beautiful mosaics of breakthrough and disruptive transformations and innovations during the exponential and combinatorial times of change.
Economics: Any invention without economical foundation never becomes a disruptive transformation. On the other side, if the invention has the right economical foundations, the whole world changes. Technological change makes things cheap that were once expensive. The commercialization of computers made arithmetic cheap. The rise of internet was a drop in the cost of distribution, communication and search. And AI is making the cost of prediction cheap. With a very simple theory of economics, if the cost of an input drops, we use it more of it, we start to use it where we were not using it and it will impact the value of other things, increasing the value of complements and diminishing the value of substitutes. For example the great book “Prediction Machines” gives great insights on the economics of AI and gives a very clear roadmap on humans role in the AI world, very simply thru economics. As the cost of prediction will drop due to AI, the value of complements (Data, Judgment and Action) will increase and the value of substitutes (Human Prediction) will diminish. This is not a surprise but a very simple implication of basic microeconomics theory.
Or take the power of digital platforms. The success of digital platforms can be very easily explained with simple microeconomics concepts of supply and demand curves and the idea of complements. As powerful aggregators of both supply and demand; they are changing cost structures and improving how supply meets demand and building the of successful transformation thru platform economies. The key to many platforms is the power of two-sided networks, where decisions with one set of customers and products can profoundly affect demand by a different set of customers for a different set of products. (strongly recommend the book Machine -Platform -Crowd to understand the economics of Platforms). Just some examples of transformations where technology meet economical realities. Technology creates options for us, but in order to move from inventions we need to build them on top of right economical foundation. It is not a surprise that we call them Internet Economy, Platform Economy etc.
Human Resources/Organizational Behavior: Any change that doesn’t drive the people side of it is destined to fail. According to Prosci’s famous PCT triangle, the framework for change ( and large scale transformation) needs to give equal focus to leadership, project management and change management, the last focusing on human side and organizational behavior. Taking it beyond, when planning for Innovation or Digital Transformation; Human resources perspectives need to be taken into account to ensure the right organizational environments are created to promote innovation and to engage the workforce effectively to drive new digital transformation.
The contributions of Human Resources/Organizational Behavior discipline to the theory of Transformation and Innovation is very extensive and each requiring a detailed research. Some to mention include Management Innovation (how one organizes and leads to maximize innovativeness), Workplace Innovation (how one engages and treats people to maximize their propensity for transformation), Culture of Innovation (creating the cultures and environments which nurture) and Human Workplace (the principles of humanizing the language and practices of business so as them to make them feel human) and many more.. If we do not support and equip individuals transition, then our future state looks nothing like the future we expected.
Strategy: Michael Porter and many others build the school of strategy- focusing on building a sustainable competitive advantage, that is used across almost all businesses worldwide. Of course in application of those, there are companies holding an old-school version of it, viewing the external world as something out of one’s control and seeking statis. That model no longer works because all macro forces shaping the world and the changes technology is introducing. The ones adopting the new-school version of this understand the need to constantly renew and reinvent the business into something different from what it has been in the past. This view accepts the idea that the business can (and should) be a part of creating the future.
The new school of Business Management & Strategy discipline made great contributions to digital transformation & innovation discipline, including powerful frameworks such as innovation-driven growth strategies, business model innovation, business model canvas, go-to-market strategies, scenario planning, stress testing and many more. We need to take and utilize these frameworks if we want to move from inventions to impactful transformations
Marketing: I suppose everyone knows the famous quote of the godfather of contemporary management- Peter Drucker: “The business enterprise has two- and only two- basic functions: marketing and innovation; all the rests are cost”. This statement clearly shows how they are interrelated to each other; innovation creates the value propositions that markets wish to buy, marketing makes them aware of and interested in those value propositions by aligning them with buyer’s intrinsic needs and motivations. The marketing profession focus is how to best understand the customers and the market with their current and evolving needs, and deficiencies of current offerings toward resolving those needs- mainly the Strategic marketing discipline.
Based on the interrelation above and many more, there are various contribution of marketing discipline to digital transformation and innovation practice, some to mention include insights development, qualitative market research, quantitative market research, brand research, branding, brand innovation, futuring, and many more.
Finance: The question of how to invest capital in the most efficient manner possible to generate business growth and thus maximize the return on the investment has been the main focus area of Finance professions for many years. On similar lines, management accounting has been in play for many years of forward looking forecasting of adoption, revenues, costs and profits, including new business models.
As new school of thought has been introduced here too, mainly thru Silicon Valley and technology sector, an adapted version emerging recognizing the need to invest organically for today and potentially invest inorganically to capture the next wave of growth for tomorrow. With this new school of thought, various interaction happening between Finance and Innovation/DT discipline through vehicles like venture capital, corporate venturing, business incubators and business accelerator programs. Most of Digital Transformation projects cannot be successfully driven if the contribution of new school of thoughts of Finance profession is not taken into planning.
Entrepreneurialism: There is no doubt that much of the world’s perspectives on digital transformation has been, and continues to be greatly influenced by the contributions from the entrepreneurial world, whether start-ups or large corporations. We all see the contributions over the last years and everyone is looking forward what further contributions to come. The reason is very simple. The entrepreneurial mind sees the world is generally one of how to create something totally new and compelling that will unbundle or disrupt an existing industry. They look for a “problem worth solving” with a solution “people want to buy”, which greatly build the main ideas of many digital transformations we are seeing today. The Entrepreneurialism disciple introduced many contributions to the discipline of Innovation and Transformation, including the startup venture model, Eric Ries’ lean startup model, the minimum viable product (MVP) and massive ecosystem of startup communities across the world.
The list is not complete yet, there are further disciplines which have very strong interrelations and contributions to Digital Transformation and Innovation practice. Design Thinking, Psychology, Ethics, Science/Engineering, Anthropology just to name a few. To summarize, the purpose here is to start connecting the dots (and many more dots that need to be connected), to have the holistic perspective of Digital Transformation beyond technology. Technology is the biggest driver with very strong contributions from different disciplines and the big change will happen once these dots are connected.
This puts the biggest challenge for all of us. The ability and capability to look different perspectives and connecting the dots across those. We are completely moving to a new world and becoming the "Immigrants of the Future", in the new world shaped by disruption. We can learn from todays’ immigrants that in order to succeed in the new world and life; they learn and adapt across different areas, whether language, culture, work etc. So we do. We need to learn across perspectives, disciplines and professions in order to shape the future of ours and the world. None of the technology will succeed without understanding the economics behind it. None of the marketing initiatives will succeed if they don’t consider the psychology of the end users. None of the companies will be able to transform if they don’t consider the human resources and the organizational behavior. Artificial Intelligence might cause lots of undesired consequences if we don’t consider ethics. None of the enterprises will be able to compete if they don’t understand the entrepreneurship. The list goes on. The question is not whether the world will transform-yes it will-; the question is whether we will be able to shape and drive the change by driving holistic transformation considering all perspectives. Are we ready?