When was the last time you took a picture with an analog camera?
This question may appear to be the answer as to why camera technology pioneer Kodak filed for Chapter 11 bankruptcy in January 2012. It's easy to point to the emergence of the digital camera-- but what many don't realize is that in 1975, the first digital picture was taken in one of Kodak's labs.
And they did nothing with it, fearing that it would cannibalize their 90 percent share of the film market. Fujifilm, Kodak's longtime rival, restructured quickly and made cuts to the film business to focus on new business lines when it saw the emergence of digital technology in the 1980s.
Rosabeth Moss Kanter advised the firm. In a 2012 interview with The Economist, she said that Kodak executives “suffered from a mentality of perfect products, rather than the high-tech mindset of make it, launch it, fix it."
Business innovation strategy at large companies is difficult-- just search your local supermarket for Gerber's adult singles, Bic disposable underwear or Zippo women's perfume. The bureaucracy, inflexibility and demands of the job pose significant barriers to the entrepreneurial mindset needed to truly create innovative products and transform operations. Aligning the digital innovation strategy to the culture of the company is essential to surviving the digital innovation and disruption threat.
Determining Your Stage
Implementing a business innovation strategy for the digital age—when done correctly—goes hand in hand with major process and cultural changes, specifically with the value of information technology. Companies move from treating information technology as a service function for employees and a cost center to viewing information technology as a business enabler and agile response to competitive threats. This evolution typically follows five stages:
Stage 1: Information technology as utility. IT is treated as a customer service and cost center. The goal is to keep costs low while maintaining a high level of service to employees. Challenges are controlling the use of ‘DIY’ or ‘shadow’ IT where employees, used to working with personal devices, circumvent IT policies and problems arise.
Stage 2: Information technology as siloed project. As mindsets start to open to the role of digital businesses, the company pilots a few information technology-centric projects, for example, launching a consumer mobile app and collecting insights from users to inform product development. The challenge here is that the IT department is still expected to act as a service, even while these projects need resources as crucial proofs of digital innovation.
Stage 3: Information technology as participant. Information technology becomes a part of the business strategy. Companies in this stage recognize the value of information technology and innovation, and are beginning to bring information technology leaders out of their silos—but it’s only on a per project or invite basis. The value of information technology is still not widespread; most companies may begin with marketing and sales functions before examining operations and competitive positioning.
Stage 4: Information technology as partner. Information technology is a crucial point of leverage for all business lines in this stage and the company is starting to see benefits from a competitive advantage with information technology. The business line and information technology leaders share ownership of the infrastructure for digital innovation, which is now seen as crucial to the company’s future.
Stage 5: Information technology as enabler. Ownership of information technology has migrated into the business lines, which are now strategically using information technology to increase revenues and market share. As competitive threats and new user needs arise, the information technology infrastructure is agile enough to respond quickly and effectively. The CIO and information technology leaders are responsible for managing the migration and ownership by staying on top of emerging technologies, coordinating requirements and standards, and heavily informing business strategy.
As companies move through these stages, their competitive advantage multiplies as their new products, playing fields and competitive spaces transform their value proposition to customers. Gartner estimates that a lack of digital business competence will cause 25 percent of businesses to lose competitive ranking by 2017.