Becoming a Digital Innovation Factory

Extraordinary times require extraordinary actions. Five months into the COVID-19 pandemic have shown that the world needs digital innovation more than ever. Not just to boost business and make it more responsive, to survive in a world where human contact is quite necessarily limited and kept brief when it occurs.

IDC published its Future of Digital Innovation framework in January, just a few weeks before the World Health Organization (WHO) sounded its alarm on the spread of the novel coronavirus, now known as COVID-19.

IDC’s report on this framework noted that software is “becoming a bigger piece of how every enterprise competes in the digital economy”. According to that report, enterprises need to become a ‘digital innovation factory’ in order to succeed. Organizations can accomplish this by “creating and distributing digital products and services with digital-native speed and scale. The Future of Digital Innovation framework guides organizations through this transition. That transition is vital to both business continuity and the access of these businesses’ clientele to the goods and services they offer.

Need for Transition

According to IDC, becoming a digital innovation factory “means that while organizations will continue to consume software such as ERP, CRM, manufacturing, finance, human resources, procurement, and other enterprise applications, they will also shift their priorities toward producing software that is embedded in their products and services, to compete in their own industry. Creating new value for their customers will be the focus of digital innovation”.

“We are now on the future path of digital innovation, where every company becomes a software producer,” IDC Program Vice President for Enterprise Applications and Digital Commerce Mickey North Rizza said. “The organizations with digital innovation supply chains focused on delivering digital products, services, and experiences will reshape our global economy in the coming years”.

From Software Consumer to Software Producer

Transitioning from software consumer to software producer—or digital innovation factory, if you will—“requires a solid and carefully thought out strategy and execution plan”. IDC’s definition of a digital innovation supply chain “is made up of four equally important characteristic steps: plan, source, develop, and distribute”.

IDC’s report on this notes that “following the digital innovation supply chain enables a very high level of business transformation digitally”. In a time when governments around the world are struggling to contain the COVID-19 pandemic and end it, digital innovation is a necessary next step, and businesses must take it to ensure continuity despite the new constraints on their workflows and organizational operations—not only can they make these changes, they must.

“When organizations understand they can completely change their operating model, creating more customer value and optimizing their business for success, it completely shifts the strategy and dynamics of their business plan and future vision,” the report stated. “But reaching this level of transformation will require a substantial commitment for most organizations”. It is time to make that commitment.

Making the Shift

On Jan. 17, IDC published a report in which it observed that “CEOs and business leaders are currently in the middle of a seismic shift in the way businesses view and use their business technology” from being technology consumers to being technology producers. In the same report, IDC predicted that, within three to five years, “every enterprise – regardless of industry – will shift into a ‘digital innovation factory’”. They will produce their own “business-critical software such as CRM, finance, HCM, procurement, and other enterprise applications”. Moreover,  their goal will be to meet growing customer needs, expectations, and experiences.

“New technology, developed in-house, will be embedded into the organization’s own products and services, to compete within their own industries”. This was IDC’s prediction just before the pandemic, and it is still very accurate, perhaps more so now. This new technology “will also be developed in-house to support operations internally and fulfilling the move from a manual long-tail business process to a digital one, enhancing the organization’s operations and profitability”.

The COVID-19 Effect

While software production is not easy, and requires a framework, guidance, resources, and pathways to help plan, source and develop it as well as to distribute it as a revenue generator, the shift must be made, especially with the duress COVID-19 is bringing to bear.

Businesses now need a strong and carefully thought-out strategy and execution plan. Additionally, they must possess strong skills and substantial agility in the IT department. IDC’s extensive research on the digital economy enabled the company to create another new methodology. The Digital Innovation Supply Chain (DISC) enables a very high level of business transformation in the digital sense.

Through planning, developing, sourcing, and distributing proprietary software, this framework helps companies become industry leaders within the new digital economy.

Becoming a Digital Innovation Factory

Here are IDC’s tips for making the shift from a technology consumer to digital innovation factory:

  • Embrace the growing requirement to create a “digital innovation factory” capability within your own organization. Your organization’s competitive advantage and future viability are depending on it.
  • Don’t reinvent the wheel. Look to existing peer examples of the many models and pathways for creating your own digital innovation supply chain. From planning to developers to sourcing pathways to distribution, there is a multitude of avenues for success.  There is also an abundance of research and advice to help you with the right strategy and execution.
  • Invest in your software development skills. This is a requirement that will mandate executive sponsorship and will require heavy investment. Expanding your development team may require the company to rethink existing policies. This includes how and where developers are hired, and how they are grown and groomed internally. Failure to invest here may, long term, be a death sentence for many organizations.
  • Move with urgency. By 2023, over half your competitors – the most capable ones – will be setting the competitive standards. This will include product/service functionality, customer experiences, the pace of innovation, and scale of distribution.
  • In order to remain competitive, your organization will require strong internal digital innovation capabilities, built around the new planning, sourcing, development, and distribution models and processes. This will be the “new normal” in the increasingly digitized economy.
An Optimistic Outlook for Digital Innovation Factories

By 2023, IDC forecasts enterprises’ ability to “rapidly develop their own digital innovations will be a core competitive requirement”. Furthermore, it projects that more than half of the world-wide economy will be digitally driven”.

By 2025, “over two-thirds of the G2000 will have become high-performance, large scale producers of software-based digital innovation”, it adds.  Most of this production of digital innovation will be focused on creating new value for customers. Some may augment internal digital work-streams.

IDC’s CIO research found that “75% of companies believe it is significantly important for them to refocus their product development programs”. This will involve shifting from digital innovation development to digital innovation delivery.

In June, IDC released an eBook entitled The Five Stages to Enterprise Recovery. It discusses how technology will enable organizations to emerge from the COVID-19 crisis more resilient and digitally fit. This pandemic has underscored the importance of digital transformation in the eyes of CEOs across all industries. Even more so as a global recession looms on the horizon.

Businesses have come to a critical decision point. Should they follow the same course of cost-cutting as all previous recessions have dictated? Or must they flatten their own organization’s recessionary curve by leveraging technology? The former choice is traditional but may bring mixed results. Innovation and the latter, however, may create a better and more sustainable option.