ENABLING TECHNOLOGY-ENABLED INNOVATION by Michael Ringel, Andrew Taylor, and Hadi Zablit

ENABLING TECHNOLOGY-ENABLED INNOVATION By Michael Ringel, Andrew Taylor, and Hadi Zablit

This article is an excerpt from The Most In- Multipurpose Platforms novative Companies 2015: Four Factors Technology-enabled innovation comes in that Differentiate Leaders (BCG report, De- many flavors. It can mean using advanced cember 2015), available at mic2015.bcgper- analytics to improve decision-making, em- spectives.com. ploying digital technologies to retool manufacturing, and harnessing mobile capabili- ew tools can make a big difference, ties to improve marketing, to name just a Nand across all industries, new technol- few. The crux in all cases is the creation of ogies, especially digital and data-based a platform that can be leveraged repeated- technologies, are powerful tools. At leading ly to deliver impact. In our experience, companies, technology is evolving from a technology platforms can bring benefits in functional silo to a foundation for break- at least four areas: cost and timeline reduc- through innovation in products, services, tion, often though automation; business and business models. transformation; the enhancement of process; and, most significant, business model In this year’s survey of the state of innova- innovation through the creation of new tion at companies worldwide, advances in types of products and services. technology platforms ranked as the most important factor driving innovation, and Take the example of General Electric, big-data analytics was not far behind. (See which used the new technology of additive the exhibit.) This isn’t just lip service: manufacturing (also known as 3-D print- more than half of those who see tech plat- ing) to reduce the cost of manufacturing forms and big data as having a big impact transducer probes, the most expensive are actively pursuing them as avenues of component in ultrasound equipment. This innovation. innovation resulted in both significant effi-

For more on this topic, go to bcgperspectives.com High Expectations for Technology Platforms and Big Data

WHICH OF THE FOLLOWING AREAS OF INNOVATION/PRODUCT DEVELOPMENT WILL HAVE THE MOST IMPACT ON YOUR INDUSTRY OVER THE NEXT THREE TO FIVE YEARS? % of respondents 60

50 49

40 36 35 34 33 32 31

26 26 26 25 23 20 18

0 Technology Operations Business Extension Marketing Speed Digital platforms process model of existing of adopting design products new technology New Customer Big-data New Mobile Extension Supporting products channel analytics service products/ of existing capabilities capabilities services

Source: BCG Global Innovation Survey, 2015.

ciencies and more flexible production lines, Internet access to rural and hard-to-reach driving down costs, which, in turn, led to areas in developing countries. uses of the technology where price had pre- viously been prohibitive, such as in inspec- tion equipment for industrial processes. GE How to Get There is now exploring how 3-D printing can be Companies that develop and innovate us- used in additional businesses, including jet ing technology platforms put several prac- engine manufacturing. tices in place. They regard functions such as IT and analytics as centers of value rath- All kinds of companies, in industries from er than of service or cost. They tend to cen- the most basic to the most advanced, are tralize innovation (44% of both strong and applying technology-enabled innovations disruptive innovators use a centralized in- with substantial effect. For example, IBM novation model), and they make sure to has created a $7 billion business through its have staff 100% dedicated to innovation. Smarter Planet initiative, which puts tech- They follow a structured approach rooted nology advances to work in everything from in a clear strategic vision; their organiza- installing smart grids for water conserva- tions enable innovation; and they are sup- tion to using big-data analytics to improve ported by specialist expertise. Their ap- urban services. A major cement maker used proach features tight alignment between a combination of digital, mobile, and geolo- the business functions and IT, sound sys- cation technologies to develop a delivery tem architecture, a partnership attitude model that reduced its fleet size by 35%; it (both internally and with external resourc- also enabled a step change in customer ser- es), and, more and more frequently, an ag- vice by narrowing delivery windows by 90% ile style of innovation development. and reducing missed deliveries by 97%. Google and Facebook are experimenting Adopting these practices is far from easy— with drones and balloons to bring mobile companies encounter a host of organiza-

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tional and cultural hurdles—and it typical- or add-on responsibility will not work. ly involves a journey that is measured in Establishing a cross-functional, dedicat- years. The challenges can be daunting: ed R&D lab is often a good way to start. breaking down organizational silos, shifting to an agile process, moving from a heavy IT •• Put in place appropriate incentives for architecture to modular systems, and over- individuals to pursue innovation. coming internal resistance. Organize innovation contests, provide rewards and recognition, and (where One of the most difficult—and import- appropriate) include innovation in job ant—organizational and cultural shifts is objectives. moving from a traditional “waterfall” approach to idea development, in which stop- •• Foster a test and learn, fail fast and ping a project is seen as tantamount to fail- fail cheap mentality. Encourage risk ure, to an agile approach that sets as many taking by actively reporting on both ideas racing as possible and quickly and successes and failures. Communicate happily kills off the ones that fail to show explicit approval of management’s potential. Companies that make this willingness to try and fail. change also become good at taking in ideas from all kinds of sources, including internal •• Encourage a collaborative approach idea labs, external scouting, thought leader between IT and business units. At monitoring, vendor relationships, crowd companies that are strong innovators, sourcing, and academic partnerships. IT is no longer in its own silo. Instead, technical talent is integrated into Companies that want to pursue more tech- business units and innovation teams. nology-enabled innovation can start by taking the following steps, distilled from the Technology-driven innovation is hard. But best practices of global leaders: the payoff is big—often extending well be- yond a single new product to a platform or •• Deliberately allocate budget and capability that can enable other innova- resources to technology innovation. tions for years to come. Approaching the challenge as an extra

About the Authors Michael Ringel is a senior partner and managing director in the Boston office of The Boston Consulting Group. You may contact him by e-mail at [email protected].

Andrew Taylor is a senior partner and managing director in the firm’s Chicago office. You may contact him by e-mail at [email protected].

Hadi Zablit is a senior partner and managing director in BCG’s Paris office. You may contact him by e-mail at [email protected].

For Further Contact If you would like to discuss this article, please contact one of the authors.

The Boston Consulting Group (BCG) is a global management consulting firm and the world’s leading advi- sor on business strategy. We partner with clients from the private, public, and not-for-profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 82 offices in 46 countries. For more information, please visit bcg.com.

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